Federal Trade Commission (FTC) Commissioner Joshua Wright continues to press for a “policy statement” that would define, and perhaps limit, the scope of the FTC’s authority to police unfair methods of competition under Section 5 of the FTC Act.  Commissioner Wright first advanced his proposed policy statement in June 2013.  A lively debate has ensued, with contributions from his fellow Commissioners as well as leading academics and practitioners.  Commissioner Wright published additional comments in November and also spoke on the issue in December during testimony before the House Subcommittee on Commerce, Manufacturing and Trade.

Commentators have long noted the vagueness inherent in Section 5’s prohibition of “unfair” methods of competition.  Some see this vagueness as a virtue that allows the Commission the potential to police activities that fall outside the reach of other tools of antitrust enforcement.  Others, however, view Section 5 as creating significant uncertainty for businesses subject to the law.

In his remarks entitled “Recalibrating Section 5: A Response to the CPI Symposium,” Commissioner Wright argues that this uncertainty is magnified by the “administrative process advantages” enjoyed by the FTC. For Wright, “the institutional framework that has evolved around the application of Section 5 cases in administrative adjudication is quite different than that faced by Article III judges in federal court in the United States.”  Wright points to empirical observations which show that, over the past 20 years, defendants in FTC proceedings face far less likelihood of success than they do against private plaintiffs in the federal courts of appeal:  “In other words, in 100 percent of cases where the administrative law judge (ALJ) ruled in favor of the FTC, the Commission affirmed; and in 100 percent of the cases in which the ALJ ruled against the FTC, the Commission reversed.”  According to Wright, private plaintiffs on appeal are likely to win only about 50 percent of the time.

Wright suggests that the agency’s institutional and procedural advantages, coupled with the vague nature of the Commission’s Section 5 authority leads to over-enforcement. Faced with the ambiguities of Section 5 and the Commission’s “perfect” record, many firms will prefer settlement of questionable Section 5 claims to the expense of lengthy administrative litigation.

In testimony before the House Subcommittee on Commerce, Manufacturing and Trade in early December, Wright echoed these concerns and again pushed for the Commission to issue guidelines on the application of Section 5. Wright’s fellow Commissioners have not shown signs that they are ready to pursue establishment of any Section 5 guidelines, but it appears this topic is likely to remain a subject of debate that bears watching.