For the first time in its more than 100-year history, the Federal Trade Commission yesterday issued first-of-its-kind guidance on what it considers “unfair” competition.

The FTC’s “Statement of Enforcement Principles” describes the underlying antitrust principles that guide the Commission’s application of its statutory authority to take action against “unfair methods of competition” prohibited by Section 5 of the FTC Act but not necessarily by the Sherman or Clayton Act. “The statement formally aligns Section 5 with the Sherman and Clayton Acts,” said FTC Chairwoman Edith Ramirez.

The guidance is a welcome development for companies, particularly for tech giants like Google, Intel, and Qualcomm, which have faced antitrust enforcement actions by the FTC in the past. Now companies have at least some idea as to what activity could potentially result in a FTC investigation, legal experts say.

In remarks made earlier this year, FTC Commissioner Joshua Wright echoed that sentiment. “Without a stable definition of what constitutes an ‘unfair method of competition,’ businesses must make difficult decisions about whether the conduct they wish to engage in will trigger an investigation or worse," he said.

"Such uncertainty inevitably results in the chilling of some legitimate business conduct that would otherwise have enhanced consumer welfare but for the firm’s fear that the Commission might intervene and the attendant consequences of that intervention," said Wright. 

Guidance Details

The guidance explains that, consistent with FTC precedent, the Commission will adhere to the following principles when deciding whether to use its standalone authority under Section 5 of the FTC Act to challenge unfair methods of competition:

The Commission will be guided by the public policy underlying the antitrust laws, namely, the promotion of consumer welfare;

The act or practice will be evaluated under a framework similar to the rule of reason, that is, an act or practice challenged by the Commission must cause, or be likely to cause, harm to competition or the competitive process, taking into account any associated cognizable efficiencies and business justifications; and

The Commission is less likely to challenge an act or practice as an unfair method of competition on a standalone basis if enforcement of the Sherman or Clayton Act is sufficient to address the competitive harm arising from the act or practice.

The Commission voted 4-1 to approve the Statement of Enforcement Principles, with Commissioner Maureen Ohlhausen voting “no.” In her dissenting statement, Ohlhausen said the competition policy statement is “too abbreviated in substance and process for me to support.” She added that what little substance it does offer “ultimately provides more questions than answers, undermining its value as guidance.”

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