Federal Trade Commission (FTC)
Federal Trade Commission (FTC)
The Federal Trade Commission (FTC) was established as an independent administrative agency pursuant to the Federal Trade Commission Act of 1914. The purpose of the FTC is to enforce the provisions of the Federal Trade Commission Act, which prohibits "unfair or deceptive acts or practices in commerce." The Clayton Antitrust Act (1914) also granted the FTC the authority to act against specific and unfair monopolistic practices. The FTC is considered to be a law enforcement agency, and like other such agencies it lacks punitive authority. Although the FTC cannot punish violators—that is the responsibility of the judicial system—it can issue cease and desist orders and argue cases in federal and administrative courts.
Today, the Federal Trade Commission serves an important function as a protector of both consumer and business rights. While the restrictions that it imposes on business practices often receive the most attention, other laws enforced by the FTC—such as the 1979 Franchise Rule, which directed franchisors to provide full disclosure of franchise information to prospective franchisees—have been of great benefit to entrepreneurs and small business owners. Basically, all business owners should educate themselves about the guidelines set forth by the FTC on various business practices. Some of its rules can be helpful to small businesses and entrepreneurs. Conversely, businesses that flout or remain ignorant of the FTC's operating guidelines are apt to regret it.
CREATION OF THE FTC
The FTC was created in response to a public outcry against the abuses of monopolistic trusts during the late 19th and early 20th centuries. The Sherman Antitrust Act of 1890 had proven inadequate in limiting trusts, and the widespread misuse of economic power by companies became so problematic that it became a significant factor in the election of Woodrow Wilson to the White House in 1912. Once Wilson assumed the office of the Presidency, he followed through on his campaign promises to address the excesses of America's trusts. Wilson's State of the Union Message of 1913 included a call for extensive antitrust legislation. Wilson's push, combined with public displeasure with the situation, resulted in the passage of two acts. The first was the Federal Trade Commission Act, which created and empowered the FTC to define and halt "unfair practice" in trade and commerce. It was followed by the Clayton Antitrust Act, which covered specific activities of corporations that were deemed to be not in the public interest. Activities covered by this act included those mergers which inhibited trade by creating monopolies. The FTC began operating in 1915; the Bureau of Operations, which had previously monitored corporate activity for the federal government, was folded into the FTC.
The FTC is empowered to enforce provisions of both acts following specific guidelines. The offense must fall under the jurisdiction of the various acts and must affect interstate commerce. The violations must also affect the public good; the FTC does not intervene in disputes between private parties. As noted, the FTC lacks authority to punish or fine violators, but if an FTC ruling—such as a cease and desist order—is ignored, the FTC can seek civil penalties in federal court and seek compensation for those harmed by the unfair or deceptive practices.
Since 1914 both the Federal Trade Commission Act and the Clayton Act have been amended numerous times, thus expanding the legal responsibilities of the FTC. Some of the more notable amendments are:
- Webb-Pomerene Export Trade Act of 1918—This act promoted exports by encouraging cooperative activities
- Robinson-Patman Act of 1936—This act strengthened the Clayton Act and addressed pricing practices of suppliers and wholesalers
- Wool Products Labeling Act of 1939—This act ensured the purity of wool products
- Lanham Trademark Act of 1946—This act required the registration and protection of trademarks used in commerce
- Fair Packaging and Labeling Act of 1966—This act legislated against unfair or deceptive labeling and packaging
- Truth in Lending Act of 1969—This legislation offered increased protection to consumers by requiring that companies provide full disclosure of credit terms and limit consumer liability concerning stolen credit cards; it also established regulations for advertising for credit services
- Fair Credit Reporting Act of 1970—This act established regulations and fair operating practices for credit reporting agencies
- Magnuson-Moss Warranty-Federal Trade Commission Improvement Act of 1975—This legislation expanded the authority of the FTC by allowing it to seek redress for consumers and civil penalties for repeat offenders. It also increased the FTC's authorization to pursue violations "affecting commerce" rather than violations "in commerce." This was an important distinction. Under the terms of the act, manufacturers are not required to warrant their products but if they do they must specify whether their warranties are "full" or "limited." The law also introduced rules requiring businesses to explain any limitations on warranties in writing
- FTC Franchise Rule of 1979—This rule requires franchisors to provide prospective franchisees with a full disclosure of relevant information about the franchise
- Telemarketing and Consumer Fraud and Abuse Prevention Act of 1994—This law, commonly referred to as the "Telemarketing Sales Rule," was put together in response to widespread consumer complaints about fraudulent and/or bothersome telemarketing practices. The act imposed meaningful curbs on such activities. Among the restrictions imposed by the legislation were specific identity disclosure requirements, prohibitions on misrepresentations, limitations on time during which telemarketers can make their calls, prohibitions on making calls to consumers who specifically ask not to be called, restrictions on sales of certain goods and services, and new recordkeeping requirements. The FTC and many consumer and business advocates, however, contend that FTC penalties for deceptive telemarketing practices are insufficient to meaningful curtail such activities. They are currently engaged in efforts to increase the size of FTC fines and support stiffer penalties (including jail time) for offending parties.
- The Children's Online Privacy Protection Act of 1998—This act protects children's privacy by giving parents the tools to control what information is collected from their children online. Under the act, operators of commercial Web sites and online services that include children as their intended audience, are obliged to carry out a list of actions meant to protect children and in some cases to assure parental knowledge of a child's online activity.
- Do-Not-Call Registry Act of 2003—This act authorizes the FTC, under sections of the Telemarketing and Consumer Fraud and Abuse Prevention Act, to implement and enforce a do-not-call registry to be established and run by the commission. The registry is nationwide in scope, applies to all telemarketers (with the exception of certain non-profit organizations), and covers both interstate and intrastate telemarketing calls. Commercial telemarketers are not allowed to call a number that is on the registry, subject to certain exceptions.
- Fair and Accurate Credit Transactions Act of 2003—This act's provisions are designed to improve the accuracy of consumers' credit-related records. It gives consumers the right to one free copy of their credit report a year from the credit reporting agencies, and consumers may also purchase for a reasonable fee a credit score along with information about how the credit score is calculated. The act also includes provisions to prevent and mitigate identity theft, to enable consumers to place fraud alerts in their credit files, and to grant consumers additional rights with respect to how their information is used.
In recent years, the Federal Trade Commission has been very attentive to developments related to e-commerce and online activities generally. With the growth of globalization and the information economy, the FTC is likely to continue exploring the ways in which these movements converge and impact consumer protection. This is the area most likely to see expanded FTC regulations in the future.
The FTC is administered by a five-member commission. Each commissioner is appointed by the President for a seven-year term with the advice and consent of the Senate. The commission must represent at least three political parties and the President chooses from its ranks one commissioner to be chairperson. The chairperson appoints an executive director with the consent of the full commission; the executive director is responsible for general staff operations.
Three bureaus of the FTC interpret and enforce jurisdictional legislation: the Bureau of Consumer Protection, the Bureau of Competition, and the Bureau of Economics.
Bureau of Consumer Protection
The Bureau of Consumer Protection is charged with protecting the consumer from unfair, deceptive, and fraudulent practices. It enforces congressional consumer protection laws and regulations issued by the Commission. In order to meet its various responsibilities, the Bureau often becomes involved in federal litigation, consumer, and business education, and conducts various investigations under its jurisdiction. The Bureau has divisions of advertising, marketing practices, credit, and enforcement.
Bureau of Competition
The FTC's Bureau of Competition is responsible for antitrust activity and investigations involving restraint of trade. The Bureau of Competition works with the Antitrust Division of the U.S. Department of Justice, but while the Justice Department concentrates on criminal violations, the Bureau of Competition deals with the technical and civil aspects of competition in the marketplace.
Bureau of Economics
The Bureau of Economics predicts and analyzes the economic impact of FTC activities, especially as these activities relate to competition, interstate commerce, and consumer welfare. The Bureau provides Congress and the Executive Branch with the results of its investigations and undertakes special studies on their behalf when requested.
APPLICATIONS FOR COMPLAINTS
The FTC becomes aware of alleged unfair or deceptive trade practices as a result of its own investigations or complaints from consumers, business people, trade associations, other federal agencies, or local and state governmental agencies. These complaints become known as "applications for complaints" and are reviewed to determine whether or not they fall under FTC jurisdiction. If the application does fall under FTC jurisdiction, the case can be settled if the violator agrees to a consent order. This is a document issued by the FTC after a formal—and in some cases—public hearing to hear the complaint. Consent orders are handed down in situations where the offending company or person agrees to discontinue or correct the challenged practices. If an agreement is not reached via a consent order, the case is litigated before an FTC Administrative Law Judge. After the judge has handed down his or her decision, either the FTC counsel or the respondent can appeal the decision to the Commission. The Commission may either dismiss the case or issue a cease and desist order. If a cease and desist order is issued, the respondent has sixty days to take all necessary steps to obey the order or launch an appeal process through the federal court system.
For further information on the FTC, its various responsibilities, and its impact on small business owners, contact the agency at one of the following addresses: Federal Trade Commission, CRC-240, Washington, D.C. 20580, or online at http://www.ftc.gov/.
Holt, William Stull. The Federal Trade Commission: Its History, Activities, and Organization. AMS Press, 1974.
Hoover, Kent. "FTC Faces Tough Task Stemming Tide of Fraudulent Sales." Tampa Bay Business Journal. April 14, 2000.
Labaree, Robert V. The Federal Trade Commission: A Guide to Sources. Garland, 2000.
"Online Enforcement Efforts Outlined." New York Times. November 1, 2000.
U. S. Federal Trade Commission. National Do Not Call Registry. Available from http://www.ftc.gov/donotcall/. Retrieved on 23 February 2006.
Hillstrom, Northern Lights
updated by Magee, ECDI
"Federal Trade Commission (FTC)." Encyclopedia of Small Business. . Encyclopedia.com. (January 12, 2019). https://www.encyclopedia.com/entrepreneurs/encyclopedias-almanacs-transcripts-and-maps/federal-trade-commission-ftc
"Federal Trade Commission (FTC)." Encyclopedia of Small Business. . Retrieved January 12, 2019 from Encyclopedia.com: https://www.encyclopedia.com/entrepreneurs/encyclopedias-almanacs-transcripts-and-maps/federal-trade-commission-ftc
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Federal Trade Commission
FEDERAL TRADE COMMISSION
FEDERAL TRADE COMMISSION. The Federal Trade Commission (FTC) emerged from Progressive Era reformers' search for better means to manage large-scale industrial capitalism and to combat monopoly. By 1912 reformers agreed on the need for a new government agency to regulate big business. They disagreed, however, over the purposes of such an agency. One faction, including Woodrow Wilson and Louis Brandeis, sought a trust-busting commission that would dismantle big business in order to promote a more competitive market of small firms. Another group, centered around Theodore Roosevelt, envisioned an agency that would cooperate with business to help plan economic behavior.
The Federal Trade Commission Act of 1914 fulfilled both visions. The act created a five-person commission to oversee and investigate all commerce but banking and common carriers, empowered this commission with subpoena powers and also to issue cease and desist orders against "unfair" competitive practices, and instructed the agency to report to Congress to assist in legislation. A complementary bill, the Clayton Antitrust Act of 1914, enumerated FTC jurisdiction by specifying unfair practices, among them anticompetitive mergers and acquisitions. Compromise between antitrust and cooperative reformers ensured passage of the Clayton and FTC acts, but it gave the new commission a contradictory mandate to serve as both adversary and advisor to big business. The two bills also bestowed the FTC with uncertain authority and independence by dividing antitrust enforcement between the commission and the Justice Department and by subjecting the FTC to review by the president, Congress, and the courts. In the face of ambiguities the agency proceeded with diffidence. At first the commission issued antitrust orders and prosecutions with hesitation, electing instead to hold information conferences with industry. Following America's entry into World War I the government, with the help of the FTC, suspended antitrust laws and encouraged business combination. When the FTC did seek to pursue antitrust enforcement, as in its investigation of the meatpacking industry for price-fixing and lack of competition, its congressional foes countered by weakening the commission's authority and jurisdiction.
External Search for Limits, 1919–1935
Congressional restriction of the FTC following the meat-packing investigation inaugurated an era in which the legislature, president, and courts would resolve the contradictions in the FTC's regulatory mandate by limiting the commission's antitrust activity. The Supreme Court presented the greatest challenge to the FTC. The Court's ruling in FTC v. Gratz 253 U.S. 421 (1920) restricted "unfair practices" to those understood at the time of the 1914 legislation, a standard that prevented the commission from innovating its tactics and resulted in a string of legal defeats for the agency. The appointment by Republican presidents Harding and Coolidge of commissioners hostile to antitrust enforcement and amenable to business interests also restrained the FTC's regulatory activities.
Responding to these limits, FTC policy became cautious and reactive during the 1920s. The commission's number of cease and desist orders and antitrust cases dropped, and the agency instead turned to fostering consensus between government and industry, and association between firms within an industry, through trade practice conferences, which promoted the planning of production costs and prices.
In the depression years prior to 1935, the Hoover and Roosevelt administrations continued the associationalist and consensual model of regulation and furthered external limits on FTC action. New Deal policies undermined the commission's antitrust efforts and codified associationalism and restraint of competition as federal policy. At the same time, the Supreme Court continued to undermine FTC jurisdiction and enforcement powers. In FTC v. Raladam, 283 U.S. 643 (1931), the Court raised the commission's burden of proof by requiring it to show that real injury to competitors had occurred from a suspect trade practice.
Expansion and Consolidation, 1935–1969
Shifts in court opinion sparked an expansion in the powers of the FTC. A series of Supreme Court rulings overturned restrictions placed on the agency and allowed the commission an active role in regulation. In FTC v. Keppel & Brothers, Inc., 291 U.S. 304 (1934), the Court reversed Gratz and enabled the FTC to broadly interpret the meaning of "unfair practices." The Court's ruling in Humphery's Executor v. United States, 295 U.S. 602 (1935), reinforced the commission's independence from presidential coercion. And the Schechter Poultry Corporation v. United States, 295 U.S. 495 (1935), decision declared unconstitutional the New Deal programs that had advocated anticompetitive policies.
The FTC also benefited from a resurgence of antitrust and procompetition ideas among New Deal policymakers that favored extending the FTC's authority and oversight. The Robinson-Patman Act of 1936 increased the commission's powers over price discrimination by retailers and suppliers. The Wheeler-Lea Act of 1938 reversed the burden of proof standards established in Raladam and broadened the FTC's mandate to include the protection of consumers against deceptive and unfair practices. The commission's investigations now found a receptive audience in congress and spurred new regulatory legislation like the Securities Exchange Act of 1934 and the Public Utility Holding Company Act of 1935.
Although the federal government suspended antitrust enforcement during World War II, the trend of FTC expansion and consolidation continued into the postwar era. The agency won a major victory against price-fixing in the cement industry in 1948 and again in 1950 when a presidential veto defeated the industry's congressional allies. A 1949 review of the commission, chaired by former President Hoover, recommended increasing the FTC chairman's authority and restructuring the agency to facilitate enforcement efforts; Congress institutionalized these recommendations in the FTC Reorganization Act of 1950. That same year the Celler-Kefauver Act broadened the commission's jurisdiction over mergers and combined assets. In the early 1960s the FTC began issuing trade rules to entire industries and increasingly scrutinized advertisements for their effect on competition and consumer interests. FTC activity during the period of expansion reflected the commission's responsiveness to evolving economic realities and its increasing attention to structural barriers to competition.
Reform, Activism, and Reaction, 1969–1990
The consolidation and expansion of the FTC raised concern during the 1960s that the agency had become complacent and ineffective. In 1969 a report issued by consumer advocate Ralph Nader criticized the FTC for failing to fulfill its antitrust and consumer protection duties. When an American Bar Association report of that same year agreed, the Nixon administration responded by reorganizing and reorienting the commission towards more energetic regulation.
These reforms inaugurated the FTC's greatest period of activism. The commission's caseload boomed in the 1970s and included ambitious prosecutions of anti-competitive practices in the breakfast cereal and petroleum industries. Congress widened the commission's jurisdiction and enforcement powers with the Magnuson-Moss Warranty/FTC Improvement Act of 1975, which empowered the commission to issue consumer protection rules for entire industries, and the Hart-Scott-Rodino Antitrust Improvement Act of 1976, which enhanced the FTC's ability to scrutinize mergers by requiring advance notice of such action.
Support for FTC activism began to wane by the late 1970s and fell precipitously following the commission's efforts in 1978 to regulate television advertisements aimed at children. Critics of the FTC argued that the commission had become too independent, too powerful, and heedless of the public good. Congressional critics sought new limits on FTC activity, and in 1979 they temporarily shut off FTC appropriations. The FTC Improvement Act of 1980 restored the agency's funding but enacted new congressional restrictions.
The Reagan administration further targeted the FTC. Executive Order 12291, issued 17 February 1981, placed the reform of regulatory commissions under the control of the president, and the FTC's actions soon turned from aggressive regulation to cooperation with business interests. The agency abandoned cases with sweeping structural implications, emphasized consumer fraud over antitrust enforcement, and liberalized its merger guidelines. The commission's Competition Advocacy Program, for example, championed promarket, probusiness regulatory policies before other state and federal agencies.
The 1990s and Beyond
During the 1990s the FTC increased its enforcement activities in consumer protection and antitrust while attempting to recast regulation to meet the challenge of an increasingly global and technology-driven economy. Adapting quickly to the development of the Internet and computer industry, the commission tackled consumer protection issues such as online privacy, e-commerce, and intellectual property rights, and issued guidelines for advertisements on the Internet. The agency launched fact-finding studies to formulate a regulatory policy for the high-tech sector and held hearings to educate consumers and industry about new enforcement standards. The FTC also adapted its antitrust activities to the new economy: in 1997 the commission launched an investigation of Intel for anticompetitive practices, and in 2000 it arbitrated the merger of America Online with Time Warner.
The FTC's efforts outside the technology economy also displayed innovation and renewed assertiveness. The commission successfully sued the tobacco industry to end cigarette advertisements that appealed to children. And in the face of the decade's merger wave, the FTC either blocked or negotiated a number of high-profile mergers, including the successful mergers of Boeing and McDonnell Douglas in 1997 and Exxon and Mobil in 1999.
Beginning with the appointment of a new chairman in 2001, the FTC retreated from the enforcement pattern of the 1990s. The commission announced its intent to tailor antitrust enforcement to the interests of the economy by exploring the benefits, especially to the consumer, of mergers and by promoting market solutions to problems of competition.
Davis, G. Cullom. "The Transformation of the Federal Trade Commission, 1914–1929." Mississippi Valley Historical Review 49 (1962): 437–455.
Hawley, Ellis W. The New Deal and the Problem of Monopoly: A Study in Economic Ambivalence. Princeton, N.J.: Princeton University Press, 1966.
Jaenicke, Douglas Walter. "Herbert Croly, Progressive Ideology, and the FTC Act." Political Science Quarterly 93 (1978): 471–493.
Murphy, Patrick E., and William L. Wilkie, eds. Marketing and Advertising Regulation: The Federal Trade Commission in the 1990s. Notre Dame, Ind.: University of Notre Dame Press, 1990. Contains several noteworthy essays on the history and development of the FTC.
Wagner, Susan. The Federal Trade Commission. New York: Praeger, 1971.
"Federal Trade Commission." Dictionary of American History. . Encyclopedia.com. (January 12, 2019). https://www.encyclopedia.com/history/dictionaries-thesauruses-pictures-and-press-releases/federal-trade-commission
"Federal Trade Commission." Dictionary of American History. . Retrieved January 12, 2019 from Encyclopedia.com: https://www.encyclopedia.com/history/dictionaries-thesauruses-pictures-and-press-releases/federal-trade-commission
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Federal Trade Commission
FEDERAL TRADE COMMISSION
The Federal Trade Commission (FTC) is an independent federal regulatory agency charged with the responsibility of promoting fair competition among rivals in the marketplace by preventing unfair and deceptive trade practices and restraining the growth of monopolies that tend to lessen free trade.
The Federal Trade Commission was established on September 26, 1914, by the Federal Trade Commission Act (15 U.S.C. 41 et seq). Created by Congress at the urging of President woodrow wilson, the FTC was designed to regulate trusts and prevent unfair competition in interstate commerce. The FTC succeeded the Bureau of Corporations as the federal agency in charge of regulating unfair and non-competitive trade practices.
The FTC's creation was supported both by anti-monopolists seeking to halt "unfair competition" that resulted from the trust building actions of larger corporations and by businessmen seeking "fairness" as a basis for greater order and stability in the marketplace.
The FTC is composed of five commissioners appointed by the President of the United States, with the advice and consent of the Senate, for a term of seven years. Not more than three of the commissioners may be members of the same political party. One commissioner is designated by the president as chairman of the commission and is responsible for its administrative management.
Generally speaking, the FTC is bestowed with the power to oversee, issue, and enforce federal rules, regulations, and laws governing unfair competition among businesses in the United States. Under the sherman antitrust act (15 U.S.C. § 1) and clayton antitrust act (15 U.S.C. § 18), the FTC is charged with the duty of applying the so-called "Rule of Reason" to disputes of unfair competition. Under this rule, restraints of trade are deemed unlawful only to the extent they are "unreasonable."
Specifically, the FTC's functions include:(1) promoting competition through the prevention of general trade restraints such as price-fixing agreements, boycotts, illegal combinations of competitors, and other unfair methods of competition; (2) stopping corporate mergers, acquisitions, or joint ventures that substantially lessen competition or tend to create a monopoly; (3) preventing interlocking directorates (an interlocking director is a director who simulaneously serves on the boards of two or more corporations that deal with each other or have allied interests.) that may restrain competition;(4) preventing the dissemination of false or deceptive advertisements of consumer products and services; (5) ensuring the truthful labeling of products; (6) promoting electronic commerce by stopping fraud on the internet and developing policies to safeguard online privacy of personal information; (7) stopping fraudulent telemarketing schemes and protecting consumers from abusive and deceptive telephone tactics; (8) requiring creditors to disclose in writing certain cost information, such as the annual percentage rate, before consumers enter into credit transactions; (9) protecting consumers against circulation of inaccurate or obsolete credit reports and ensuring that credit bureaus, consumer reporting agencies, credit grantors, and bill collectors exercise their responsibilities in a manner that is fair and equitable; (10) educating consumers and businesses about their rights and responsibilities under FTC rules and regulations; and (11) gathering factual data concerning economic and business conditions and making it available to the Congress, the president, and the public.
The FTC discharges many of these responsibilities by holding hearings, soliciting public and expert feedback, and conducting investigations in areas of concern to consumers. Based on the formal testimony and other informal information provided at these hearings and gathered during investigations, the FTC will issue a temporary or proposed rule, after which it will normally solicit more feedback either in writing or again through additional hearings. If a significant portion of the public disapproves of the temporary or proposed rule, the FTC may modify the rule to accommodate the public's concerns. Otherwise, the FTC will issue a subsequent order making the temporary or proposed rule a final regulation.
The commission ensures compliance with its rules and regulations by systematic and continuous review of business practices in the marketplace and by issuing cease-and-desist orders when violations are discovered. All respondents against whom such orders have been issued are required to file reports with the FTC to substantiate their compliance. In the event compliance is not obtained, or the order is subsequently violated, civil penalty proceedings may be instituted.
Compliance is also ensured through voluntary and cooperative action by private companies in response to miscellaneous FTC guidance procedures, including non-binding staff advice, formal advisory opinions, and policy statements delineating legal requirements as to particular business practices. Through these procedures, business and industry may obtain authoritative direction and a substantial measure of certainty as to what they may do under the laws administered by the FTC. As a result, smart businesses can plan ahead to prevent being found in violation of federal trade laws.
FTC investigations may originate through complaints made by a consumer or a competitor, the Congress, or from a federal, state, or municipal agency. The commission itself may also initiate an investigation into possible violations of the laws it administers. No formality is required in submitting a complaint. A letter giving the facts in detail, accompanied by all supporting evidence in possession of the complaining party, is sufficient.
As a last resort, the FTC will commence formal litigation. Formal litigation is instituted either by issuing an administrative complaint or by filing a federal district court complaint charging a person, partnership, or corporation with violating one or more of the laws administered by the commission. If the charges leveled in an administrative complaint are not contested or are found to be true after a contested case, the FTC may issue an order requiring discontinuance of the unlawful practices.
In addition to or in lieu of an administrative proceeding initiated by a formal complaint, the FTC may request that a U.S. district court issue a preliminary or permanent injunction to halt the use of allegedly unfair or deceptive practices, to prevent an anticompetitive merger from taking place or to prevent violations of any statute enforced by the commission.
As with actions taken by most other federal agencies acting pursuant to federal administrative law, parties aggrieved by an FTC action may seek review in a U.S. district court. In evaluating the lawfulness of action taken by the FTC, federal district courts have alternatively applied various standards of review, including the abuse of discretion, arbitrary and capricious, and substantial evidence standards.
Federal Trade Commission. Available online at <www.ftc.gov> (accessed November 20, 2003).
U.S. Government Manual Website. Available online at <www.gpoaccess.gov/gmanual> (accessed November 10,1993).
Young, Stephanie J. 2003. "Federal Trade Commission: Resources and Information." Legal Reference Services Quarterly 22 (winter).
"Federal Trade Commission." West's Encyclopedia of American Law. . Encyclopedia.com. (January 12, 2019). https://www.encyclopedia.com/law/encyclopedias-almanacs-transcripts-and-maps/federal-trade-commission
"Federal Trade Commission." West's Encyclopedia of American Law. . Retrieved January 12, 2019 from Encyclopedia.com: https://www.encyclopedia.com/law/encyclopedias-almanacs-transcripts-and-maps/federal-trade-commission
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Federal Trade Commission
Federal Trade Commission (FTC), independent agency of the U.S. government established in 1915 and charged with keeping American business competition free and fair. The FTC has no jurisdiction over banks and common carriers, which are under the supervision of other governmental agencies. It has five members, not more than three of whom may be members of the same political party, appointed by the President, with the consent of the Senate, for seven-year terms. The act was part of the program of President Wilson to check the growth of monopoly and preserve competition as an effective regulator of business.
Duties of the FTC
The duties of the FTC are, in general, to promote fair competition through the enforcement of certain antitrust laws; to prevent the dissemination of false and deceptive advertising of goods, drugs, curative devices, and cosmetics; and to investigate the workings of business and keep Congress and the public informed of the efficiency of such antitrust legislation as exists, as well as of practices and situations that may call for further legislation.
The commission's law-enforcement activities have to do with the prevention of unfair methods of competition and false advertising (in accordance with the Federal Trade Commission Act of 1914 and the Wheeler-Lea Act of 1938); with administration of provisions restricting tying and exclusive dealing contracts, acquisition of capital stock, interlocking directorates, and price discriminations (in accordance with the Clayton Antitrust Act of 1914 and the Robinson-Patman Act of 1936); and with administration of the Webb-Pomerene Act of 1918, which permits associations to engage in export trade without incurring the penalties of the Sherman Antitrust Act. In 1946 the FTC was given the right to cancel faulty trademarks. The FTC also enforces the provisions of the Truth in Lending Act of 1968 over creditors (e.g., finance companies, retailers, and nonfederal credit unions) not specifically regulated by another government agency. The act was designed to ensure that a potential borrower can obtain meaningful information about the actual cost of consumer credit.
To enforce antitrust legislation, the commission is empowered to issue cease-and-desist orders upon ascertaining to its satisfaction that the laws are being violated. These orders, to be effective, usually must have court sanction, and the commission must, therefore, in various instances prove its case in court. In deciding such cases the courts have interpreted and applied the phrase "unfair methods of competition." Many of the judicial decisions have frustrated the work of the commission in restricting the growth of monopoly and also, to some degree, the intent of the antitrust laws. Yet the commission has done much toward ridding the business world of vicious competitive practices.
The commission may undertake special investigations at the order of Congress, the President, or upon its own initiative. In its investigatory work, the commission was delegated the power to require information from any corporation in interstate commerce. Many companies, however, gave only partial access to their records, and others gave none. A decision by the Supreme Court declared that access to records of private business, except where substantial proof is submitted as to a specific breach of the law, is a violation of the Fourth Amendment. Despite the fact that the commission's investigatory power was thus greatly limited, it has made and published a notable series of investigations. After the checks rendered by the courts, the commission tended more and more to carry out its recommendations through trade-practice conferences, at which representatives of an industry might voluntarily adopt regulations to control competition in that industry.
"Federal Trade Commission." The Columbia Encyclopedia, 6th ed.. . Encyclopedia.com. (January 12, 2019). https://www.encyclopedia.com/reference/encyclopedias-almanacs-transcripts-and-maps/federal-trade-commission
"Federal Trade Commission." The Columbia Encyclopedia, 6th ed.. . Retrieved January 12, 2019 from Encyclopedia.com: https://www.encyclopedia.com/reference/encyclopedias-almanacs-transcripts-and-maps/federal-trade-commission
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Federal Trade Commission
Federal Trade Commission
What It Means
The Federal Trade Commission (or FTC) is an independent agency of the U.S. government. Its purpose is to guard against business practices that interfere with competition in the marketplace and to protect American consumers from various kinds of fraud and deception. A free-market economy, such as the American economy, is founded on the idea that if companies are forced to compete with one another for consumer dollars, they will have to offer goods and services of the highest possible quality for the lowest possible prices, both of which are good for the consumer. Competition between companies also benefits the consumer by making a wide variety of choices available in the market.
Anticompetitive business practices are those in which a company or companies gain an unfair advantage in the market, making it difficult or impossible for other companies to compete with them. As a result, the dominant company may be able to profit without providing the best product or the best prices, because the consumer can no longer choose a better option. Some examples of business practices that can be anticompetitive include: price fixing, in which two or more companies conspire to set prices as they please, so that market forces no longer work; tie-in sales, in which two products are sold in a bundle, so that the consumer cannot buy one without the other; exclusive dealership agreements, in which a retailer or wholesaler is required to buy from a certain supplier or manufacturer; interlocking corporate directorships, in which one individual serves as director of two or more companies that are supposed to compete with each other; and mergers or acquisitions, in which two or more companies join together (or consolidate), becoming substantially more powerful than any of their competitors. When one company gains exclusive control over the market for a particular product or service (meaning that it has eliminated its competitors), it is called a monopoly.
Consumer fraud or deception can be any form of cheating in which a company falsely represents itself or its product, enticing consumers to pay for something they do not receive. In cases of false advertising, for example, a consumer may pay for an expensive product that promises a “miracle cure” for baldness—only to find that his hair continues to fall out. Other common forms of fraud include telemarketing (making sales over the telephone) scams, such as when a consumer agrees to divulge personal financial information (like a credit card number) over the phone in exchange for a fantastic prize that does not actually exist. In addition to cheating consumers out of their money, such frauds may also make consumers less confident about buying things, even from lawful businesses, in the future. If consumers lose faith in the market and stop spending their money, the whole economy suffers.
The FTC’s job is to enforce laws prohibiting consumer fraud and business practices that severely limit competition, to investigate cases where these laws may have been violated, and, when appropriate, to bring these cases to federal court. The FTC also seeks to prevent fraud and anticompetitive practices by educating consumers and businesses about what these issues mean and how to identify and avoid them.
When Did It Begin
In the 1880s and 1890s the American marketplace saw a wave of corporate mergers in which it was common for five or more companies to consolidate to form a business “trust.” Known today as a cartel, this kind of trust is a business that seeks to create a monopoly in the market. The widespread rise of these trusts in such industries as railroads, oil, coal, steel, sugar, tobacco, and meatpacking touched off a period of intense national debate over the issue of fair competition in business. On one hand consolidated businesses could run more efficiently and thus compete more effectively in the international marketplace. On the other hand these giant companies ruled the domestic market; smaller companies could no longer compete, and consumers were at the mercy of the big companies’ prices. Free and fair competition, and the right of average citizens to build their own small businesses, were seen as core American values that needed to be protected.
Passed in 1890, the Sherman Antitrust Act formed the foundation of antitrust legislation, enabling Presidents Theodore Roosevelt (1858–1919) and William Howard Taft (1857–1930), successively, to sue and enforce the breakup of dozens of trusts. Perhaps the most notorious of these trusts was Standard Oil Company, owned by John D. Rockefeller (1839–1937). In 1911 the Supreme Court ruled that Standard Oil must be broken up into 36 smaller companies that would compete with one another.
But the Sherman Act failed to define anticompetitive practices in specific terms, and without an independent agency to investigate possible antitrust cases, the law was difficult to enforce. Upon winning the election of 1912, Woodrow Wilson (1856–1924) made antitrust reform central to his New Freedom Program. In 1914 Congress passed both the Federal Trade Commission Act, which established the FTC, and the Clayton Antitrust Act, which outlawed specific business practices that substantially lessened competition, such as those described above.
The FTC Act has been amended numerous times since its passage. Two key amendments were the Wheeler-Lea Amendment of 1938, which prohibited false advertising of foods, drugs, cosmetics, and therapeutic devices; and the Magnuson-Moss Warranty Act of 1975, which protects consumers against misleading warranty practices (a warranty is a guarantee offered by the seller or manufacturer of a product, promising repair if the product breaks within a certain time after purchase).
More Detailed Information
The Federal Trade Commission is run by a bipartisan (including both Republicans and Democrats) body of five commissioners, each of whom is nominated by the president and confirmed by the Senate for a seven-year term. One of these commissioners is chosen by the president to act as chairman. The bulk of the FTC’s work is carried out by three bureaus: the Bureau of Consumer Protection, the Bureau of Competition, and the Bureau of Economics.
The Bureau of Consumer Protection (BCP) is dedicated to protecting consumers against unfair or deceptive business practices, including false advertising, telemarketing fraud, insurance scams, and privacy violations. Consumers may file complaints directly with the BCP if they feel they have been victimized by these or other unfair practices. In 2004 an FTC survey found that the most frequently reported types of consumer fraud were advance-fee loan scams, in which consumers paid up-front fees for “guaranteed” loans or credit cards that they never received; instances in which consumers were billed for buyers’ club memberships or publication subscriptions they did not order; and scams involving fake offers of credit card insurance (a safety net in case you are unable to make your credit card payments because of job loss or other life events). The BCP investigates such complaints and may bring actions to federal court. In some consumer protection matters the FTC may work in conjunction with the U.S. Department of Justice. In addition to general enforcement of laws and regulations, the BCP also promotes consumer and business education.
The Bureau of Competition (BOC) is the antitrust division of the FTC. Its mission is to protect healthy competition in the marketplace so that consumers have access to a broad array of products and services at the lowest possible prices. To accomplish this the BOC investigates possible violations of antitrust law and, when necessary, takes rule breakers federal court. The BOC shares responsibility for enforcing antitrust laws with the Antitrust Division of the Department of Justice (DOJ). One of the most well-known antitrust cases of the late twentieth century involved allegations against software giant Microsoft of anticompetitive practices. The central question of the case, which began as an FTC investigation in 1991 and was eventually taken to trial by the DOJ in 1998, was whether Microsoft’s monopoly in the PC operating system market was the result of illegally blocking competition or of simply earning market dominance through superior innovation and competition. Although the DOJ and Microsoft reached a proposed settlement in 2001, controversy continued over Microsoft’s practices. In addition to its enforcement capacity, the bureau also conducts research and develops policy on competition issues.
The Bureau of Economics is in charge of evaluating how the FTC’s actions and other government regulations affect the economy. It also studies various market processes (such as changes in prices or employment levels) as they relate to competition and consumer protection. This bureau’s analyses may influence the FTC’s decisions in consumer protection and antitrust cases; it may also affect proposed legislation by Congress. For example, when gas prices soared in 2006, Congress asked the Bureau of Economics to comment on proposed legislation against price gouging (the practice of setting unfairly high prices during a supply shortage). After conducting extensive investigations the Bureau recommended against the legislation. As with the FTC’s other main bureaus the Bureau of Economics’ ultimate goal is to ensure healthy competition and ample consumer choice in the American marketplace.
One of the most successful FTC measures in recent decades is the Do-Not-Call Registry, a free national service designed to help consumers limit the number of unwanted phone calls they receive from telemarketers. The registry is the result of the Do-Not-Call Implementation Act of 2003 (based on the 1994 Telemarketing and Consumer Fraud and Abuse Prevention Act), which is jointly enforced by the FTC and the FCC (the Federal Communications Commission, which regulates interstate and international communications by radio, television, wire, satellite, and cable). Once a consumer has submitted his or her phone number to the Do-Not-Call Registry, most telemarketers are required to delete that number from their call lists.
With the rapid rise of internet commerce in the late twentieth and early twenty-first centuries, the FTC faces a vast new realm of consumer protection issues. Not only have scam artists found countless ways to swindle consumers over the Internet, but also consumers have become increasingly vulnerable to privacy violations and identity theft. The FTC has begun to investigate many of these issues and is making a major effort to educate consumers about the dangers of the Internet by publishing information about invasive spyware programs, spam, identity theft, kids’ privacy, online auctions and shopping, electronic banking, and other topics. The FTC is also involved in various efforts to protect and promote fair competition in e-commerce (business conducted over the Internet). As Internet applications continue to multiply and change, the challenge of regulating the virtual world remains significant.
"Federal Trade Commission." Everyday Finance: Economics, Personal Money Management, and Entrepreneurship. . Encyclopedia.com. (January 12, 2019). https://www.encyclopedia.com/finance/encyclopedias-almanacs-transcripts-and-maps/federal-trade-commission
"Federal Trade Commission." Everyday Finance: Economics, Personal Money Management, and Entrepreneurship. . Retrieved January 12, 2019 from Encyclopedia.com: https://www.encyclopedia.com/finance/encyclopedias-almanacs-transcripts-and-maps/federal-trade-commission