FTC Commissioner Calls for Vote on Section 5

FTC Section 5One of the conservative members of the FTC is pushing for a vote to clarify how the FTC will use its powers to police unfair business practices. Commissioner Joshua Wright in a recent speech called for an FTC vote that would define the scope of the agency’s authority under a century-old law that gives the commission the power to bring cases against companies that engage in unfair methods of competition. “Without a stable definition of what constitutes an unfair method, businesses must make difficult decisions about whether the conduct they wish to engage in will trigger an investigation or worse,” said Mr. Wright. Mr. Wright also said the uncertainty could chill a company from adopting practices that benefit consumers.  And when the FTC comes calling, businesses feel pressure to settle rather than trying to litigate against the agency in cases that proceed through the FTC’s own in-house trial system, he said.

Mr. Wright said he would make a motion at the FTC for a vote on three different proposals of what constitutes an unfair method of competition.  He said even a legal standard that is broader than the one he favors would be better than no standard at all. However, not everyone at the FTC shares Mr. Wright’s same opinions. During the same symposium, Jessica Rich, director of the FTC’s Bureau of Consumer Protection said Section 5 was “deliberately designed by Congress to enable the FTC to address a wide range of practices in an ever-changing economy.” She went on to discuss some of the wide-ranging ways in which the law has been used, and then specifically honed in on problems that Congress could not have imagined 100 years ago. “Congress recognized that enumerating a list of deceptive and unfair practices was an impossible task, and instead drafted language that would give the commission the flexibility it needed to respond to changing times,” she said. For example, she cited several data security cases and focused on the reasonableness principle that the agency used to decide if a company violated the law by not mitigating a foreseeable risk. And she discussed one privacy case that involved an alleged “revenge porn” site that posted intimate images of more than 1,000 individuals and then charged fees to remove them. Another case involved a data broker that bought financial information from payday loan applications to lenders and then sold the data to unscrupulous buyers, who used the data to allegedly loot individuals’ bank accounts. “Because of the flexible authority conferred though the FTC Act, defined through principles and not lists of specific business practices,” Rich concluded, “we are able to keep up with the changing times and different harms we see through the decades.”

Echoing the comments of Ms. Rich, the FTC’s Democratic chairwoman, Edith Ramirez, and others have expressed reservations about announcing a rigid legal standard, out of fear that it could be too limiting.  The FTC needs flexibility to address markets that are in constant flux, Ms. Ramirez said in a speech at George Mason University last year. Ms. Ramirez also said in the speech that businesses get guidance by learning from the enforcement actions the FTC brings. The commission, she said, uses a light touch in Section 5 cases, usually imposing only a cease-and-desist order on companies.

For now, it appears the FTC intends to hold its ground against any guidelines, and to continue expanding its authority under Section 5. However, will Congress now try to do what the agency won’t?

FTC and Section 5