Why the FTC is Powerless When it Comes to Competition Rulemaking

In 1914, the Federal Trade Commission (FTC) was created when President Woodrow Wilson signed the Federal Trade Commission Act into law. Since its founding, the FTC has held a unique and multifaceted role in the U.S. administrative state and the economy.

As designed, the FTC’s core statute gives the agency a dual purpose: it is tasked with enforcement against unfair methods of competition (antitrust) and unfair and deceptive practices (consumer protection) when such conduct arises in the marketplace. However, Congress intentionally avoided articulating precisely what qualifies as a violation under either prong of the FTC’s authority.

Instead, Congress gave the FTC broad authority to investigate and, on a case-by-case basis, determine violations. This open-ended power allowed the FTC to shape the law by bringing various cases that established fact-patterns that the marketplace over time would need to take into consideration. Where the FTC sees conduct it believes to be a violation of the law, it brings the case, and the courts provide a check and balance, but only on appeal, to ensure the FTC does not overreach.

Outside this case-by-case approach, the FTC was never granted legislative style rulemaking to determine what is and what is not an unfair method of competition or an unfair and deceptive practice. The FTC, given its status as an administrative body, already serves as prosecutor, judge, and jury. Congress, instinctively, has understood the problem of extending rulemaking powers to the agency allowing the agency to write the rules it is empowered to enforce. Such a super concentration of power is ripe for abuse, as an agency empowered to write the rules it enforces severely limits the scope of judicial review.

Today, some have suggested the FTC should aggressively pursue unfair methods of competition rulemaking. The FTC is powerless to do so, as explained in the U.S. Chamber of Commerce’s white paper on “Pushing the Limits? A primer on FTC competition rulemaking.” The paper, authored by Maureen Ohlhausen, former Acting Chair of the Federal Trade Commission and James Rill, former Assistant Attorney General for Antitrust at the Department of Justice, finds:

1. The FTC has a troubling history of rulemaking overreach, one that the courts and Congress have both stepped in to limit.
2. Congress has never explicitly granted legislative style rulemaking authority to the FTC related to either prong of its core legislative mandate.
3. Congress has only provided the FTC explicit, but limited rulemaking authority for unfair and deceptive acts and practices through specific procedures commonly referred to as “Magnuson-Moss authority”.
4. Congress has made no grant for unfair methods of competition rulemaking, instead empowering FTC to exclusively undertake case-by-case administrative adjudication of competition cases to shape the law.

Efforts by the agency to engage in competition rulemaking ignore the clear limits of its statutory authority. The agency would be better served to be mindful of its history and make effective use of its ability to prosecute unfair methods of competition on a case-by-case basis.

About the authors

Sean Heather

Sean Heather is Senior Vice President for International Regulatory Affairs and Antitrust.

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