Dissenting Statement of Commissioner Christine S. Wilson Regarding the “Policy Statement Regarding the Scope of Unfair Methods of Competition Under Section 5 of the Federal Trade Commission Act” (Federal Trade Commission, November 10, 2022)

Summary

Commissioner Christine S. Wilson dissented on November 10, 2022 from the Federal Trade Commission's Policy Statement Regarding the Scope of Unfair Methods of Competition Under Section 5 of the FTC Act (Commission File No. P221202). She writes that the Commission withdrew its bipartisan 2015 Statement of Enforcement Principles in July 2021 without issuing new guidance, and that the new Policy Statement leaves businesses unable to map the line between lawful and unlawful conduct. In her words, it adopts an "I know it when I see it" approach built on a list of adjectives, and after labeling conduct "facially unfair" the Commission plans to skip an in-depth examination of it. She cites the Second Circuit's statement that the Commission owes a duty to define the conditions under which conduct would be unfair, and concludes: "Consequently, I dissent."

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Full text

UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
WASHINGTON, D.C. 20580

Dissenting Statement of Commissioner Christine S. Wilson

Regarding the “Policy Statement Regarding the Scope of Unfair Methods of Competition
Under Section 5 of the Federal Trade Commission Act”

Commission File No. P221202

November 10, 2022

In July 2021, the newly-minted majority at the Commission abruptly withdrew the
bipartisan Statement of Enforcement Principles Regarding “Unfair Methods of Competition”
Under the FTC Act (“2015 Statement”). 1 The 2015 Statement had been adopted on a bipartisan
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basis by the Commission six years prior because it embodied a sound approach to antitrust law
that reflected decades of legal precedent and economic learning. I dissented from the decision to
rescind the 2015 Statement not only because it reflected a repudiation of the consumer welfare
standard and the rule of reason, but also because withdrawing the 2015 Statement without
issuing new guidance left businesses in the dark on how to structure their conduct to avoid a
challenge by the Commission. 2 Due process demands that the lines between lawful and unlawful
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conduct be drawn clearly; 3 this interest is heightened when the enforcer at issue promises a new
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era of aggressive action. 4 3F

Today, the Commission issues a Policy Statement Regarding the Scope of Unfair
Methods of Competition Under Section 5 of the Federal Trade Commission Act (“Policy
Statement”). Unfortunately, instead of providing meaningful guidance to businesses, the Policy

1
See Statement of the Commission on the Withdrawal of the Statement of Enforcement Principles Regarding
“Unfair Methods of Competition” Under Section 5 of the FTC Act (July 9, 2021),
https://www.ftc.gov/system/files/documents/public_statements/1591706/p210100commnstmtwithdrawalsec5enforce
ment.pdf.
2
See Noah Joshua Phillips & Christine S. Wilson, Comm’rs, Fed. Trade Comm’n, Dissenting Statement on the
“Statement of the Commission on the Withdrawal of the Statement of Enforcement Principles Regarding ‘Unfair
Methods of Competition’ Under Section 5 of the FTC Act” (July 9, 2021),
https://www.ftc.gov/system/files/documents/public_statements/1591710/p210100phillipswilsondissentsec5enforcem
entprinciples.pdf.
3
See Connally v. Gen’l Construction Co., 269 U.S. 385 (1926).
4
See Lina M. Khan, Chair, Fed. Trade Comm’n, Memorandum to [Federal Trade] Commission Staff and
Commissioners regarding Vision and Priorities for the FTC, (Sept. 22, 2021),
https://www.ftc.gov/system/files/documents/public_statements/1596664/agency_priorities_memo_from_chair_lina_
m_khan_9-22-21.pdf

1
Statement announces that the Commission has the authority summarily to condemn essentially
any business conduct it finds distasteful.

In the past, both the FTC and its sister agency, the Antitrust Division of the Department
of Justice, have issued clear and constructive guidance on enforcement policies and practices. 5 4F

The Policy Statement that the Commission issues today takes a very different approach. Instead
of a law enforcement document, it resembles the work of an academic or a think tank fellow who
dreams of banning unpopular conduct and remaking the economy. It does not reflect the thinking
of litigators who know that legal precedent cannot be ignored, case-specific facts and evidence
must be analyzed, and the potential for anticompetitive effects must be assessed. It does not
reflect the approach of experienced policy makers who recognize the necessity of considering the
business rationales for, and benefits of, conduct so that agency action does not harm consumers
and the economy. And it does not exhibit the input of those with counseling and in-house
experience who understand the need to provide workable rules so that “honest businesses” 6 can 5F

map the boundaries of lawful conduct.

The Second Circuit explained that “the Commission owes a duty to define the conditions
under which conduct . . . would be unfair so that businesses will have an inkling as to what they
can lawfully do rather than be left in a state of complete unpredictability.” 7 Instead of heeding
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this admonition, the Policy Statement adopts an “I know it when I see it” approach premised on a
list of nefarious-sounding adjectives, many of which have no antitrust or economic meaning. It
provides no methodology to explain which adjectives may apply in any given set of
circumstances. The only crystal-clear aspect of the Policy Statement pertains to the process
following invocation of an adjective: after labeling conduct “facially unfair,” the Commission
plans to skip an in-depth examination of the conduct, its justifications, and its potential
consequences. The instructions in the iconic Monopoly game provide an apt analogy: the
respondent essentially will be told, “Go to jail. Go directly to jail. Do not pass go. Do not collect
$200.” 8 7F

But these concerns are only the tip of the iceberg. As explained below in more detail, the
Policy Statement affirmatively takes several steps with sweeping implications.

5
Fed. Trade Comm’n & U.S. Dep’t of Just., Horizontal Merger Guidelines (Aug. 19, 2010),
https://www.ftc.gov/sites/default/files/attachments/merger-review/100819hmg.pdf; Fed. Trade Comm’n & U.S.
Dep’t of Just., Vertical Merger Guidelines (June 30, 2020), https://www.ftc.gov/system/files/documents/reports/us-
department-justice-federal-trade-commission-vertical-mergerguidelines/vertical_merger_guidelines_6-30-20.pdf;
Fed. Trade Comm’n & U.S. Dep’t of Just., antitrust Guidelines for International Enforcement and Cooperation (Jan.
13, 2017), https://www.ftc.gov/system/files/documents/public_statements/1049863/
international_guidelines_2017.pdf; Fed. Trade Comm’n & U.S. Dep’t of Just., Statements of Antitrust Enforcement
Policy in Health Care (Aug. 1996), https://www.ftc.gov/system/files/attachments/competition-policy-
guidance/statements_of_antitrust_enforcement_policy_in_health_care_august_1996.pdf.
6
Memorandum from Chair Lina M. Khan to [Federal Trade] Commission Staff and Commissioners, supra note 4, at
1.
7
E.I. du Pont de Nemours & Co. v. F.T.C., 729 F.2d 128, 139 (2d Cir. 1984) (“Ethyl”).
8
The analogy is imperfect, as the FTC does not have criminal authority. But I trust that the reader gets the point.

2
• First, the Policy Statement abandons the rule of reason, which provides a structured
analysis of both the harms and benefits of challenged conduct. The majority prefers a
near-per se approach that discounts or ignores both the business rationales underlying
challenged conduct and the potential efficiencies that the conduct may generate.

• Second, the Policy Statement repudiates the consumer welfare standard and ignores the
Supreme Court’s admonition that antitrust “protects competition, not competitors.” 9 The 8F

Commission will now seek to advance the welfare of inefficient competitors, “workers,”
and other unnamed but politically favored groups – at the expense of consumers.

• Third, the Policy Statement rejects a vast body of relevant precedent that requires the
agency to demonstrate a likelihood of anticompetitive effects, consider business
justifications, and assess the potential for procompetitive effects before condemning
conduct.

In other words, the Policy Statement abandons bedrock principles of antitrust that long have been
accepted by the Commission, the courts, the business community, and enforcers across the globe.

It is also necessary to consider what the Policy Statement does not do.

• First, as noted in the preceding paragraphs, the Policy Statement does not provide clear
guidance to businesses seeking to comply with the law.

• Second, the Policy Statement does not establish an approach for the term “unfair” in the
competition context that matches the economic and analytical rigor that Commission
policy offers for the same term, “unfair,” in the consumer protection context.

• Third, the Policy Statement does not provide a framework that will result in credible
enforcement. Instead, Commission actions will be subject to the vicissitudes of prevailing
political winds.

• Fourth, the Policy Statement does not address the legislative history that both demands
economic content for the term “unfair” and cautions against an expansive approach to
enforcing Section 5.

On a procedural note, I believe the Policy Statement should be issued for public comment
rather than adopted as a final Commission policy at this time. Chair Khan announced a
commitment to foster transparency and democratize the FTC. 10 Obtaining public input on the
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9
Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 488 (1977) (quoting Brown Shoe Co. v. United
States, 370 U.S. 294, 320 (1962) (the antitrust laws “were enacted for the protection of competition, not
competitors”)).
10
See Prepared Statement of the Federal Trade Commission Before the United States Senate Committee on the
Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights, “Oversight of the Enforcement of
the Antitrust Laws” 14-15 (Sept. 20, 2022), https://www.ftc.gov/system/files/ftc_gov/pdf/
P210100SenateAntitrustTestimony09202022.pdf, (describing FTC efforts to prioritize public participation);

3
new Policy Statement would be consistent with that commitment. The majority likely will point
out that when the now-rescinded 2015 Statement was issued, the Commission did not solicit
public comment. But there are significant differences between the 2015 Statement and today’s
Policy Statement that warrant a different procedure. The 2015 Statement described the
enforcement approach that the Commission had followed for many decades; it was consistent
with long-standing Commission practice, as well as legal precedent and economic learning. In
contrast, the Policy Statement announced today represents a radical departure from the
Commission’s recent enforcement efforts, and a dramatic expansion of the agency’s purported
authority. Given these circumstances, hearing from the public is essential.

Below, I first explain the enforcement approach laid out in the Policy Statement. I then
elaborate on my concerns about the affirmative steps that the Policy Statement takes. I close with
a discussion of the four tasks the Policy Statement does not accomplish.

For all of these reasons, I dissent.

I. The Policy Statement’s Framework

The Policy Statement establishes a framework to identify unfair methods of competition
under Section 5 of the FTC Act. First, under the Policy Statement, conduct must be “a method of
competition,” defined as conduct by a marketplace actor that implicates competition, even if only
indirectly. Second, the method of competition must be “unfair,” defined as going beyond
competition on the merits.

To determine whether the method of competition is “unfair,” the Policy Statement
provides two relevant criteria. Under the first criterion, conduct may be “coercive, exploitive,
collusive, abusive, deceptive, predatory, or involve the use of economic power of a similar
nature,” or “otherwise restrictive or exclusionary.” 11 Under the second criterion, “the conduct
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must tend to negatively affect competition conditions” by “affecting consumers, workers or other
market participants.” 12 These two criteria are weighed using a sliding scale. When conduct is
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labeled “facially unfair” pursuant to the first criterion, the second criterion is rendered essentially
irrelevant. If conduct is not labeled “facially unfair,” pursuant to the second criterion, the
conduct must be shown to have a “tendency to negatively affect market conditions.”

But the Policy Statement explains how little is needed to satisfy the second criterion; in
fact, it expressly rules out what must be shown. There need be no showing of actual effects; it is
enough to assert that there is a “tendency” for the conduct to generate negative consequences. 13 12F

Also, that “tendency” need not be attributable to the particular conduct at issue, or even the
conduct of the particular market actor under investigation; the tendency for negative
“consequences may arise when the conduct is examined in the aggregate along with the conduct

Memorandum from Chair Lina M. Khan to [Federal Trade] Commission Staff and Commissioners, supra note 4, at
2.
11
Policy Statement at 9.
12
Id.
13
Id. at 10.

4
of others . . ., or when the conduct is examined as a part of the cumulative effect of a variety of
different conduct by the respondent.” 14 Finally, it is unnecessary to show market power, 15 a
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common tool in antitrust cases to predict or infer likely effects from conduct.

After a prima facie case has been established, the respondent has little recourse. 16 Under 15F

the Policy Statement, the Commission will not employ a rule of reason analysis, 17 which 16F

provides a well-defined framework to analyze competitive impact. A respondent can assert a
justification for the conduct but, according to the Policy Statement, the Commission’s “inquiry
would not be a net efficiencies test or a numerical cost benefit analysis” 18 and “the more facially
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unfair or injurious the harm, the less likely it is to be overcome by a countervailing justification
of any kind.” 19 For a respondent to be heard, the justification must show that the benefits of the
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conduct redound to market participants other than the respondent, 20 those benefits must be in the
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same market where the harm occurs 21 (even though market definition is unnecessary to find
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competitive harm 22), and the respondent has the “burden to show that the asserted justification
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for the conduct is legally cognizable, that it is nonpretextual, and that any restriction used to
bring about the benefit is narrowly tailored to limit any impact on competitive conditions.” 23 22F

II. The Policy Statement Rejects Longstanding Antitrust Policies and Legal Precedent,
Instead Embracing an Unstructured “I Know It When I See It” Approach

A. The Policy Statement Replaces the Rule of Reason With an Open-Ended and
Near-Per Se Approach

The Policy Statement abandons the structured analysis of the rule of reason because, it
asserts, Section 5 has “distinctive goals” and was enacted to overcome concerns in 1914 about
the application of the rule of reason. 24 When it withdrew the 2015 Statement, the Commission
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majority explained that the rule of reason “hamstrings [the FTC’s] enforcement mission with an
approach that poses significant administrability concerns” because courts assess whether

14
Id.
15
Id.
16
Id. at 10 (When “conduct prima facie constitutes an unfair method of competition, liability normally ensues under
Section 5 absent additional evidence.”).
Id. at 10 (“Given the distinctive goals of Section 5, the inquiry will not focus on the ‘rule of reason’ inquiries
17

more common in cases under the Sherman Act”).
18
Id. at 11.
19
Id.
20
Id.
21
Id. at 12.
22
Id. at 10.
23
Id. at 11-12.
24
Id. at 10.

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procompetitive effects outweigh anticompetitive harm. 25 Put plainly, too many practices can be
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justified by legitimate business rationales and procompetitive effects. But, as described below,
the rule of reason played a role in Section 5’s legislative history and benefits sound enforcement
by providing a structured framework for examining challenged conduct. 26 Moreover, contrary to
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the concerns expressed by the Commission majority, most rule of reason cases are decided at the
early stages of the analysis, sparing the court the need to balance procompetitive benefits against
anticompetitive effects. 27 26F

Eschewing the structured approach of the rule of reason, the Policy Statement instead
adopts an open-ended inquiry. Under the new framework, the Commission will consider the
effects of conduct on consumers, labor, competitive rivals, and unnamed others. The Policy
Statement provides no content for the list of adjectives that may signal the presence of “unfair”
methods of competition. There is no methodology for the adjective-labeling exercise. Ultimately,
there is no meaningful guidance for courts and businesses to analyze unfair methods of
competition.

The Policy Statement not only abandons the rule of reason, it applies a quick look
analysis that approximates per se condemnation. Specifically, the Policy Statement advances a
framework that condemns conduct with little showing necessary to establish a prima facie case
while also ruling out meaningful consideration of efficiencies and other benefits or justifications.
This approach is inconsistent with antitrust principles. Per se rules are reserved for conduct that
is so inherently and commonly understood to be unreasonable that courts dispense with a rule of
reason analysis. 28 Although courts have eliminated the dichotomy between per se and rule of
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reason analysis, and endorsed abbreviated analysis, 29 courts have not summarily condemned
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conduct without considering likely competitive effects in some manner. As the Commission has
explained, an abbreviated analysis is reserved for conduct that is “inherently suspect owing to its
likely tendency to suppress competition. Such conduct ordinarily encompasses behavior that past
judicial experience and current economic learning have shown to warrant summary
condemnation.” 30 29F

Prudential concerns abound. Summary condemnation should require experience;
academic learning, empirical insights, and judicial experience should be demanded. Here,
however, the Policy Statement provides that merely labeling conduct with an appropriate
adjective can establish liability. Even when conduct is found to be unfair based on a tendency for

Statement of the Commission on the Withdrawal of the Statement of Enforcement Principles Regarding “Unfair
25

Methods of Competition” Under Section 5 of the FTC Act 5, supra note 1.
26
See Ohio v. American Express Co., 138 S. Ct. 2274, 2284 (2018). The plaintiff has the initial burden of proving
that conduct has had or is likely to have a substantial adverse effect on competition. If this burden is met, the burden
shifts to the defendant to produce evidence of procompetitive benefits. If there is such evidence, the plaintiff must
show that the conduct is not reasonably necessary to achieve the objective or that the anticompetitive effects
outweigh the benefits. Id.
27
See Michael A. Carrier, The Rule of Reason: Bridging the Disconnect, 1999 BYU L. Rev. 1265, 1364 (1999).
28
See, e.g., Northern Pac. Ry. Co. v. United States, 356 U.S. 1 (1958).
29
See, e.g., California Dental Ass’n v. Fed. Trade Comm’n, 526 U.S. 756 (1999).
30
Polygram Holding, Inc., 136 F.T.C. 310, 344-45 (2003).

6
anticompetitive effects, the Policy Statement is silent regarding whether accepted scholarly
support or judicial experience must undergird the claim that there is a tendency for harm (after
all, actual harm need not be shown). In fact, the concern is greater because the Policy Statement
expressly states that it is willing to disregard judicial experience. 31 In other words, under the
30F

Policy Statement, the Commission majority will challenge as “unfair methods of competition”
practices that courts previously, and repeatedly, have found to be legal. In these cases, the
Commission’s invocation of nefarious-sounding adjectives and conclusory assertions of a
“tendency” for harm will trump sometimes substantial judicial experience regarding the
likelihood of competitive harm.

The unbounded application of Section 5 that is heralded by the Policy Statement is
inconsistent with the Commission’s authority to impose a broad set of remedies. The Policy
Statement discusses the balance struck by Congress in the FTC Act: namely, while the FTC Act
enables the Commission to challenge a broader range of conduct than that covered by the
Sherman and Clayton Acts, it did not create a private right of action and it limited the preclusive
effect of FTC enforcement in private antitrust cases. 32 In fact, the bargain went further than the
31F

Policy Statement acknowledges; Commission remedies were limited to cease-and-desist orders
in exchange for the ability to challenge this broader range of conduct. It is appropriate to attach
severe remedies to well-defined prohibitions, and less severe remedies to more amorphous
prohibitions. But it is inappropriate to couple a broad range of remedies with the authority to
challenge a broad (and nebulously defined) universe of conduct. For this reason, I have explained
that any Congressional response to the Supreme Court’s decision in AMG 33 must include 32F

guardrails to limit the range of conduct subject to disgorgement or restitution. 34 33F

B. The Policy Statement Rejects the Consumer Welfare Standard to Protect and
Reward Politically Favored Groups

The Policy Statement abandons the long- and widely-accepted consumer welfare standard
and instead adopts a standard that seeks to pursue multiple goals. Enforcement decisions are not
predictable in a regime that seeks to advance many goals, including potentially conflicting ones,
simultaneously. 35 Under the consumer welfare standard, enforcers and businesses understood
34F

31
Policy Statement at 13-14 (explaining that Commission’s analysis regarding liability “may depart from prior
precedent based on the provisions of the Sherman and Clayton Acts” and identifying conduct that is not currently
illegal under the antitrust laws that will be subject to challenge as unfair methods of competition as violations of “the
spirit of the antitrust laws”).
32
Policy Statement at 5.
33
AMG Cap. Mgmt, LLC v. FTC, 141 S. Ct. 1341 (2021).
34
For instance, the limitations on the use of monetary equitable remedies in competition cases provided by the
Commission’s 2003 Policy Statement are appropriate. See Policy Statement on Monetary Equitable Remedies in
Competition Cases, 68 Fed. Reg. 45,820 (Aug. 4, 2003),
https://www.ftc.gov/system/files/documents/public_statements/410451/030804policystatementequitable.pdf.
35
See Christine S. Wilson, Thomas J. Klotz & Jeremy A. Sandford, Recalibrating the Dialogue on Welfare
Standards: Reinserting the Total Welfare Standard into the Debate, 26 Geo. Mason L. Rev. 1435, 1454 (2019) (“if
the list of goals and the weights assigned to each is indeterminate, then firms contemplating particular conduct will
not be able to predict reliably whether antitrust enforcement is likely in a particular case. . . . The indeterminacy of

7
that there was one goal – enforcement protected consumers – and the analysis followed accepted
economic theory and principles. The Policy Statement emphasizes that when it enacted Section
5, “Congress wanted to give the Commission flexibility to adapt to changing circumstances.” 36 35F

Ironically, the very tools that the Policy Statement rejects, the consumer welfare standard and the
rule of reason, facilitate a flexible approach to assessing conduct that adapts to changing markets,
emerging technologies, new business models, and evolving economic analysis – while still
providing clarity and consistency in enforcement.

In contrast, the Policy Statement establishes a model that will provide neither clarity nor
consistency in enforcement. Conduct may be challenged as an unfair method of competition if it
might negatively impact consumers, workers, competitors, and other market participants. No
clarity is provided regarding which other market participants may be considered, or how this
array of interests will be prioritized or balanced. And it is mathematically impossible to
maximize more than one value, so the pursuit of one goal will require tradeoffs that adversely
impact other competing interests. Oddly, the Commission majority claims that the rule of reason
is not administrable because it requires balancing, but the approach embodied in the Policy
Statement is far worse. It requires balancing among multiple goals without identifying the
complete array of special interests to be protected, or the weights to be assigned to any of them.
In short, the lack of identified priorities and rules for balancing interests means that enforcement
will be subject to the whims and political agendas of sitting Commissioners. 37 But this outcome
36F

is consistent with Chair Khan’s assertion that all enforcement decisions are political. 38 37F

Equally important, the Policy Statement’s abandonment of the consumer welfare standard
demonstrates that the Commission majority will support higher prices for consumers so that it
may protect or reward political favorites. The consumer welfare standard protects consumers,
resulting in lower prices, higher quality, and more innovation. 39 Efforts to protect other groups,
38F

including inefficient rivals and labor, necessarily will require tradeoffs that will harm consumers.
Simply put, it is impossible to serve two masters. Protecting inefficient firms or labor will be
“broadly redistributive, although consumers are not the beneficiaries. Rather the benefits flow to
smaller firms or those that are wed to older technologies that have been displaced or threatened

the goals and weights inherent in a multiple goals standard would make antitrust enforcement more susceptible to
political whims and influence.”).
36
Policy Statement at 3.
37
1 PHILLIP AREEDA & DONALD TURNER, ANTITRUST LAW 25 (1978) (antitrust enforcement that seeks to pursue
conflicting interests “would involve courts in essentially political decision-making for which there are no
appropriate legal criteria and in a regulatory, supervisory role for which they are ill-suited.”)
38
Fox Business Networks, Break Up Amazon as a Monopoly?, YOUTUBE (June 23, 2017),
https://youtu.be/VI_DEYqWxqs (Varney asks Lina Khan at the 2:33 mark: “To go after Amazon would be a
political decision. Not a market decision. Not an economic decision. A politician would have to instigate this.” Khan
replies, “I think all decisions are political in so far as government agencies are bringing them.”).
39
Herbert Hovenkamp, Is Antitrust’s Consumer Welfare Principle Imperiled, 45 J. Corp. L. 101, 103 (2019)
(“Antitrust’s consumer welfare principle is best regarded as taking a ‘middle man’ approach to markets, reacting
aggressively to unambiguous harms . . . and more circumspectively to single-firm conduct or other practices that
have a significant potential to benefit consumers. The overall goal is clear, however, which is to encourage markets
in which output, measured by quantity, quality, or innovation, is as large as possible consistent with sustainable
competition.”).

8
by newer ones[.]” 40 American consumers are unlikely to support antitrust enforcement that
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chooses to eliminate low prices, whether in the interest of protecting small businesses that wish
to charge higher prices or to protect jobs at firms that are acknowledged to be inefficient.

The Policy Statement does not justify the rejection of the consumer welfare standard with
references to existing case law. Like the enforcement decisions that will flow from this Policy
Statement, it is a political decision.

C. The Policy Statement Rejects Precedent

Although the adjectives that the Policy Statement uses to signal the existence of “unfair
methods of competition” can be found in cases, it is worth noting that those adjectives generally
do not provide the basis for the holdings in those cases. 41 Instead, courts indicate that the
40F

conduct at issue is not described by those adjectives; courts then proceed to examine evidence of
anticompetitive effects and procompetitive justifications for the challenged conduct. In other
words, modern cases are diametrically opposed to the approach adopted by the Policy Statement;
they reject labels and instead look to the evidence to consider liability. Moreover, even the old
cases cited by the Policy Statement do not adopt the array of shortcuts in the Policy Statement,
including foregoing the need to show anticompetitive harm and ignoring the role of
procompetitive justifications. A fair reading of the cases reveals that the approach of the Policy
Statement is inconsistent with the law.

1. The Policy Statement Ignores Precedent Regarding the Need to
Demonstrate Anticompetitive Effects

When enforcement of Section 5 would require a showing of anticompetitive effects under
the second criterion because the conduct is not facially unfair, the Policy Statement minimizes
the necessary showing. The Policy Statement asserts that Section 5 “analysis is purposely
focused on incipient threats to competitive conditions” and focuses the analysis on “whether the
respondent’s conduct has a tendency to generate negative consequences.” 42 It further claims that
41F

it is unnecessary to prove actual harm, market power, or market definition, 43 but admits that the
42F

“size, power, and purpose of the respondent may be relevant.” 44 As a consequence, the Policy
43F

Statement discounts the showing of anticompetitive effects required to allege a law violation.

In support of this claim that only a limited showing is necessary, the Policy Statement
and Explanatory Guide point only to the legislative history and the Commission’s 1941 case

40
Id. at 117.
41
See E.I. du Pont de Nemours & Co. v. FTC, 729 F.2d at 140 (“in the absence of proof of a violation of the
antitrust laws or evidence of collusive, coercive, predatory, or exclusionary conduct, business practices are not
‘unfair’ in violation of § 5 unless those practices either have an anticompetitive purpose or cannot be supported by
an independent legitimate reason” and finding “no evidence of coercive or predatory conduct.”).
42
Policy Statement at 9-10.
43
Id. at 10
44
Id.

9
against the Fashion Originators Guild of America. 45 But in Fashion Originators Guild of
44F

America v. FTC, the Supreme Court determined that the Commission found that there was
market power and that the challenged conduct excluded manufacturers and distributors, which
“tend[ed] to create . . . a monopoly in the said industries.” 46 In short, the Court determined that
45F

the Commission found evidence of anticompetitive effects.

The Policy Statement also ignores the showing of competitive effects demanded by later
cases. In Boise Cascade Corp. v. FTC, 47 the Ninth Circuit found that a Section 5 violation was
46F

not supported by substantial evidence when “the Commission . . . provided [the court] with little
more than a theory of the likely effect of the challenged . . . practices. 48 The Ninth Circuit found
47F

that “[t]here is a complete absence of meaningful evidence in the record that price levels . . .
reflect an anticompetitive effect” 49 and data on costs and profits were not informative because
48F

they were “largely a deduction from the Commission’s reasoning about the tendencies of the
challenged practice.” 50 Despite the Commission’s argument that a greater showing was not
49F

required because Section 5 addressed incipient conduct, the court concluded, “where there is a
complete absence of evidence implying overt conspiracy, to allow a finding of a [S]ection 5
violation on the theory that the mere widespread use of the practice makes it an incipient threat
to competition would be to blur the distinction between guilty and innocent commercial
behavior.” 51 50F

The decision in Boise Cascade is not an anomaly. The Commission enforces Section 7 of
the Clayton Act, which employs an incipiency standard for merger enforcement. 52 While courts 51F

generally do not require proof of actual effects for unconsummated mergers, courts expect
evidence of likely anticompetitive effects, perhaps shown by evidence of market power and
market definition. 53 The Commission’s experience challenging anticompetitive mergers counsels
52F

against the discounted showing of likely competitive effects that the Policy Statement envisions.

45
Fashion Originators’ Guild of America, Inc. v. FTC, 312 U.S. 457 (1941).
46
Id. at 466-67.
47
Boise Cascade Corp. v. FTC, 637 F.2d 573 (9th Cir. 1980).
48
Id. at 578.
49
Id. at 579.
50
Id. at 580.
51
Id. at 582.
52
The Policy Statement asserts that Section 5 enables the Commission to challenge incipient violations of the
antitrust laws. Incipient violations of Section 7 of the Clayton Act would constitute an incipient violation of an
incipiency standard, which is nonsensical. Unfortunately, the Policy Statement indicates that the Commission will
use Section 5 to challenge mergers and acquisitions that do not violate the antitrust laws.
53
See, e.g., FTC v. Thomas Jefferson Univ., 505 F.Supp.3d 522, 528 (E.D. Pa 2020) (“To establish its prima facie
case, the Government must put forth enough evidence to prove that the insurers would not avoid a price increase in
any one of the government’s proposed markets by looking to hospitals outside those markets. The government has
not met this burden.”); FTC v. RAG-Stiftung, 436 F.Supp.3d 278, 287 (D.D.C. 2020) (“the FTC has not made out its
prima facie case, which requires it to show undue concentration for a particular product in a particular geographic
area, and it has not otherwise shown a likelihood that the proposed . . . merger will substantially harm
competition.”).

10
Also, the Policy Statement’s position that incipiency allegations negate a need to
demonstrate likely anticompetitive effects is inconsistent with Commission opinion. The
Commission expressly refused to rely on an incipiency standard for its findings about
competitive effects in General Foods Corp. 54 The Commission rejected the argument that
53F

Section 5 could prohibit conduct by a firm with market power even when there was no dangerous
probability that the firm could obtain monopoly power. 55 In short, the Commission found that
54F

the showing of likely anticompetitive effect required under Section 5 is no lower than the
showing required to prove allegations of attempted monopolization under the Sherman Act.

2. The Policy Statement Ignores Precedent Requiring Consideration of
Business Justifications

The Policy Statement hedges on whether business justifications for conduct will be
considered. 56 It points to language from cases decided in the 1960s and early 1970s to suggest
55F

there is no role for business justifications in the analysis of unfair methods of competition. This
language is inconsistent with subsequent cases and modern analysis. In all recent cases,
justifications – even if rejected – were considered; the Commission and courts do not
affirmatively choose to ignore relevant evidence. 57 In fact, courts expressly have identified
56F

business justifications as part of the test for unfair methods of competition. 58 For instance, the
57F

Second Circuit in Ethyl summarized its test, “in the absence of proof of a violation of the
antitrust laws or evidence of collusive, coercive, predatory, or exclusionary conduct, business
practices are not ‘unfair’ in violation of § 5 unless those practices either have an anticompetitive
purpose or cannot be supported by an independent legitimate reason.” 59 58F

54
General Foods Corp., 103 F.T.C. 204 (1984).
55
Id. at 365-66 (“To distinguish between an attempt to monopolize and an incipient attempt on the basis of potential
market power is to engage in such fine distinctions as to challenge the legal philosopher, let alone the competitor
trying to conform its conduct to the law. If the conduct at issue here cannot reach the early threshold of doubt under
the Sherman Act, we will not condemn it under the FTC Act.”).
56
Policy Statement at 10 (“There is limited caselaw on what, if any, justifications may be cognizable in a standalone
Section 5 unfair methods of competition case.) (emphasis added).
57
See, e.g., Valassis Communications, Inc., File No. 051-0008, complaint at ¶14 (2006), https://www.ftc.gov/sites/
default/files/documents/cases/2006/04/0510008c4160valassiscomplaint.pdf; Intel Corp., File No. 061-0247,
complaint at ¶¶ 91, 96 (2010), https://www.ftc.gov/sites/default/files/documents/cases/091216intelcmpt.pdf; Boise
Cascade Corp. v. FTC, 637 F.2d 573, 580-81 (9th Cir. 1980 (conduct explained by “common-sense proposition”
regarding pricing practice as a “natural competitive response to buyer preference”); Official Airlines Guides, Inc. v.
FTC, 630 F.2d 920, 923 (2d Cir. 1980) (Commission reversed ALJ on 2 counts, “holding that [respondent] had
sufficient business justification for” challenged conduct).
58
Consequently, despite any instruction from the Commission in the Policy Statement, courts will consider business
justifications.
59
E.I. du Pont de Nemours & Co. v. FTC, 729 F.2d at 140. See also id. at 139 (noting that “before business conduct
in an oligopolistic industry may be labelled ‘unfair’ within the meaning of § 5 a minimum standard demands that,
absent a tacit agreement, at least some indicia of oppressiveness must exist such as (1) evidence of anticompetitive
intent or purpose on the part of the producer charged, or (2) the absence of an independent legitimate business
reason for its conduct. and finding, on the facts of the case that “the evidence is overwhelming and undisputed . . .
that each petitioner independently adopted its practices for legitimate business reasons.”).

11
Precedent establishes that conduct may not be labelled “unfair” without considering
whether there is an absence of a business justification; that is, a business justification is not
considered only to be a defense. Even cases cited by the Policy Statement do not suggest that
conduct may be declared unfair without considering the legitimate business justifications.
Atlantic Refining Co. v. FTC only acknowledged the unremarkable principle that defendants may
not justify anticompetitive conduct by showing “economic benefit to themselves.” 60 In Fashion 59F

Originators Guild of America v. FTC, the Court held that the FTC did not need to consider
justifications in light of the egregious facts of that case where the guild had “aim[ed]” for the
“intentional destruction of one type of manufacture and sale which competed with Guild
members.” 61 60F

In addition, there are important reasons to consider business justifications for conduct.
Business rationales for undertaking challenged practices not only provide context for those
choices, but also illuminate the likely competitive effects of the practices at issue. Particularly
when the Commission is examining conduct in its incipiency – in other words, before
competitive outcomes are known – business explanations and justifications for the practices at
issue constitute important predictors of the likely outcomes. As the Supreme Court and the
Commission have explained in numerous opinions, while intent generally does not constitute an
element of most antitrust violations, it is informative concerning the likely effects on the
market. 62 61F

Finally, in Section 5 of the FTC Act, the Commission is instructed to bring cases only
when they are in the public interest. 63 Consequently, it is essential that the Commission consider
62F

the business justification, potential efficiencies, and other procompetitive outcomes of the
challenged conduct. The Policy Statement’s position that the Commission will not consider
whether conduct yields net benefits means the Commission likely will challenge conduct that is
beneficial to consumers and the U.S. economy, merely to protect the interests of politically
favored groups. That approach is inconsistent with the FTC Act, as well as with principles of
good government.

60
Atlantic Refining Co. v. FTC, 381 U.S. 357, 371 (1965).
61
Fashion Originators’ Guild of Am. v. FTC, 312 U.S.at 467-68.
62
Chicago Board of Trade v. United States, 246 U.S. 231, 238 (1918) (J. Brandeis) (“the history of the restraint, the
evil believed to exist, the reason for adopting the particular remedy, the purpose or end sought to be attained, are all
relevant facts. This is not because a good intention will save an otherwise objectionable regulation or the reverse;
but because knowledge of intent may help the court interpret facts and to predict consequences.”); In re McWane,
Inc. 157 F.T.C. 108, 144 n.11 (2014) (quoting United States v. Microsoft, 253 F.3d 34, 59 (D.D.C. 2001) (“while
our aim is to ascertain the effect of McWane’s [conduct], evidence of McWane’s intent is relevant ‘to the extent it
helps us understand the likely effect of [McWane’s] conduct.’”).
63
15 U.S.C. § 45(b) (“Whenever the Commission shall have reason to believe that any such person, partnership, or
corporation has been or is using any unfair method of competition . . . in or affecting commerce, and if it shall
appear to the Commission that a proceeding by it in respect thereof would be to the interest of the public, . . .”).

12
III. The Policy Statement Fails to Provide a Predictable, Credible Enforcement
Approach for Unfair Methods of Competition

A. The Policy Statement Does Not Provide Guidance to Businesses That Seek to
Comply with the Law

The framework described by the Policy Statement cannot be turned into workable rules
for businesses. The list of adjectives that may be invoked to establish facially unfair competition
is lengthy, and includes “coercive,” “exploitive,” “collusive,” “abusive,” “deceptive,”
“predatory,” “restrictive,” and “exclusionary”. 64 These labels require subjective interpretation,
63F

and frequently lack established antitrust or economic meanings. But the Policy Statement does
not provide content to the adjectives. Consequently, identifying whether conduct falls under one
of the labels depends on the whims and political worldviews of three sitting Commissioners. As
the composition of the Commission changes, so too will the application of Section 5. The
subjective nature of the labeling process to determine liability means that it is not possible for
businesses to know in advance whether their conduct will be considered unfair. In other words,
the approach articulated in the Policy Statement does not allow businesses to structure their
conduct to avoid possible liability.

Not only does the Policy Statement withhold meaningful guidance, it significantly
increases uncertainty for businesses. When the Commission decides that particular conduct
“tends to cause potential harm similar to an antitrust violation” – despite contrary precedent – the
Policy Statement provides that the “analysis may depart from prior precedent based on” the
antitrust laws. 65 In other words, conduct that courts repeatedly have refused to condemn may
64F

now be subject to summary condemnation under the Commission’s open-ended approach. Newly
condemned conduct may include tacit coordination; parallel conduct; price discrimination not
covered by the Robinson-Patman Act; de facto tying, bundling, exclusive dealing, and loyalty
rebates; mergers that do not violate the Clayton Act; and interlocking directorates not covered by
the Clayton Act. 66 Which precedent will be embraced, and which precedent will be rejected, is
65F

unclear, and will vary depending on the composition of the Commission. Businesses are left with
no navigational tools to map the boundaries of lawful and unlawful conduct.

Also, as previously described, the Policy Statement rejects the consumer welfare standard
in favor of pursuing multiple (and sometimes competing) goals. When enforcement decisions
may be premised on the furtherance of many and sometimes conflicting interests, and no
guidance is provided regarding how those potential goals will be balanced, enforcement
outcomes will be unpredictable. Businesses cannot know how to structure their conduct when
they do not know which interest(s) will drive a Commission decision in any particular
circumstance.

64
Policy Statement at 9.
65
Policy Statement at 13.
66
See id. at 13-15.

13
Courts have been unwilling to find violations of Section 5 beyond the limits of the
Sherman, Clayton, and Robinson-Patman Acts 67 when the Commission’s theory of liability
66F

cannot be turned into workable rules or standards that can guide the conduct of businesses. In
Ethyl, 68 the Second Circuit explained that when conduct “does not violate the antitrust or other
67F

laws and is not collusive, coercive, predatory or exclusionary in character, standards for
determining whether it is ‘unfair’ within the meaning of § 5 must be formulated to discriminate
between normally acceptable business behavior and conduct that is unreasonable or
unacceptable. Otherwise the door would be open to arbitrary or capricious administration of §
5[.]” 69 Consequently, the Second Circuit explained that “the Commission owes a duty to define
68F

the conditions under which conduct . . . would be unfair so that businesses will have an inkling
as to what they can lawfully do rather than be left in a state of complete unpredictability.” 70 69F

Accordingly, the court explained that “[r]eview by the courts was essential to assure that the
Commission would not act arbitrarily or without explication but according to definable standards
that would be properly applied.” 71 Sadly, today’s Policy Statement does not offer definable
70F

standards.

Similarly, in Official Airlines Guides, Inc. v. FTC, the Second Circuit recognized the
practical difficulty of applying the Commission’s expansive theory of liability in that case and
refused to endorse an FTC order challenging an alleged monopolist’s conduct. The Second
Circuit explained that “enforcement of the FTC’s order . . . would give the FTC too much power
to substitute its own business judgment for that of the monopolist in any decision that arguably
affects competition in another industry. Such a decision would permit the FTC to delve into . . .
‘social, political, or personal reasons’ for a monopolist’s” conduct. 72 In explaining its decision,
71F

the appeals court said it was “weighing benefits to competition in the other field [where the firm
did not operate] against the detrimental effect of allowing the Commission to pass judgment on
many business decisions of the monopolist that arguably discriminate among customers in some
way.” 73 The concerns of the Second Circuit are magnified under the Policy Statement. In
72F

Official Airlines Guides, the respondent was arguably a monopolist. In contrast, the Policy
Statement’s approach will be applied to all businesses regardless of market status, because the
emphasis is on foreclosing growth and evidence of market power is unnecessary.

Despite this concern by courts that firms be given “an inkling as to what they can
lawfully do rather than be left in a state of complete unpredictability,” the Policy Statement

67
It is striking that the Policy Statement proposes to use Section 5 as a gap-filler for the much-maligned Robinson-
Patman Act. Not satisfied with resuscitating Robinson-Patman enforcement, the majority now seeks to expand the
scope of that law beyond Congressional intent.
68
E.I. du Pont de Nemours & Co. v. F.T.C., 729 F.2d 128 (2d Cir. 1984).
69
Id. at 138.
70
Id. at 139.
71
Id. at 136.
72
Official Airlines Guides, Inc. v. FTC, 630 F.2d 920, 927 (2d Cir. 1980).
73
Id. (explaining that the FTC’s theory of liability would enable the FTC to require a supermarket that was the only
grocery in town to stock a particular brand of frozen vegetables if the Commission found that brand had been
competitively disadvantaged when the supermarket chose to stock a different brand).

14
provides a subjective inquiry that leaves businesses in the dark. In fact, the Policy Statement
utterly fails to deliver on its promise that it will “assist the public, business community, and
antitrust practitioners by laying out the key general principles that apply to whether business
practices constitute unfair methods of competition under Section 5 of the FTC Act.” 74 73F

B. The Policy Statement Fails to Provide the Rigor Demonstrated by the
Approach to the Term “Unfair” for Challenging Unfair and Deceptive Acts
and Practices Under Section 5 of the FTC Act

The term “unfair” appears in Section 5 more than once; Section 5 also prohibits “unfair
and deceptive acts and practices” 75 to address consumer protection issues. The Commission’s
74F

current interpretation of “unfair” in its consumer protection mission has been lauded for its
flexibility to address a myriad of harmful practices while still providing businesses clarity and
certainty about the boundaries of lawful conduct. The Policy Statement does not offer that level
of rigor and clarity regarding unfair methods of competition.

Consider the intentional approach to defining the boundaries of unfairness for consumer
protection purposes under Section 5, and contrast it with today’s Policy Statement. Before the
current interpretation of “unfairness” for consumer protection issues was adopted, the
Commission interpreted “unfair” to have few restraints, and Congress responded. Before 1980,
the Commission attempted to condemn a wide variety of conduct by asserting that a practice was
unfair – as a consumer protection offense – when it offended public policy. 76 The Commission
75F

engaged in numerous rulemaking efforts in the 1970s in which it relied on public policy as a
substitute for analysis and evidence. 77 This rulemaking crusade nearly led to the demise of the
76F

agency. 78 The misuse of unfairness drove Congress to shut down the agency for several days,
77F

decline to reauthorize the agency for fourteen years, and pass the Federal Trade Commission
Improvements Act of 1980, which imposed additional procedural obligations on trade regulation

74
Policy Statement at 2.
75
15 U.S.C. § 45, as amended by the Wheeler-Lea amendment, 52 Stat. 111 (1938).
76
A footnote in FTC v. Sperry & Hutchinson Co., appeared to adopt the Commission’s articulation of unfairness
from the Statement of Basis and Purpose for Unfair or Deceptive Advertising and Labeling of Cigarettes in Relation
to the Health Hazards of Smoking Trade Regulation Rule. The rule posed three factors the Commission considers
when determining whether a practice that neither violates the antitrust laws nor is deceptive is nonetheless unfair:
“(1) whether the practice, without necessarily having been previously considered unlawful, offends public policy as
it has been established by statutes, the common law, or otherwise—whether, in other words, it is within at least the
penumbra of some common-law, statutory, or other established concept of unfairness; (2) whether it is immoral,
unethical, oppressive, or unscrupulous; (3) whether it causes substantial injury to consumers (or competitors or other
businessmen).” 405 U.S. 233, 244 n.5 (1972).
See TIMOTHY J. MURIS & HOWARD BEALES, III, THE LIMITS OF UNFAIRNESS UNDER THE FEDERAL TRADE
77

COMMISSION ACT 13 (1991).
78
The Commission explored a broad swath of trade regulation rules in the 1970s, including proposing rules that
regulated warranty terms and performance of mobile home manufacturers, required detailed disclosures in food
advertisements that discussed a product’s nutritional characteristics, required antacid advertising disclosures,
mandated that over-the-counter drug advertising mirror the precise language on FDA-approved labels, and required
free trial periods for purchased hearing aids. The FTC also proposed rules based on public policy arguments, to ban
all advertising directed to children. Id. at 3, 12-15.

15
rulemaking efforts. 79 That is, legislative history shows that Congress rejected an open-ended
78F

interpretation of “unfair” in the Commission’s consumer protection enforcement efforts.

Congress not only retaliated against the FTC broadly, it codified a more limited
interpretation of “unfair” for consumer protection matters. Congressional condemnation of the
FTC’s overreaching rulemaking proposals of the 1970s led to the Commission’s 1980 Unfairness
Policy Statement that clarified the reach of the unfairness theory in consumer protection matters.
The Unfairness Policy Statement declared that “[u]njustified consumer injury is the primary
focus of the FTC Act” 80 and developed a three-part test to determine whether a consumer injury
79F

is unfair. 81 A subsequent 1982 Commission letter to Senators Bob Packwood and Bob Kasten
80F

recommended codifying a definition of unfair practices and clarified that public policy was not
an independent basis for a finding of unfairness. 82 The Commission emphasized that consumer
81F

injury is the proper focus for unfairness and that public policy served “as an important check on
the overall reasonableness of the Commission’s action.” 83 The three-part analysis that requires
82F

clear consideration of consumer injury was codified into law in 1994, establishing a precise test
with factors to weigh. 84 For consumer protection purposes, the unfairness test provides
83F

guardrails based on a quantitative cost-benefit analysis. 85 84F

This history of unfairness for consumer protection issues provides context that is relevant
for evaluating “unfair” methods of competition. First, Congress rejected an expansive
interpretation of unfairness that relied on general public policy considerations. Second, the
Commission explained that the term “unfair” has economic content and is focused on consumer
79
J. Howard Beales, III, Director, Bureau of Consumer Protection., Fed. Trade Comm’n, The FTC’s Use of
Unfairness Authority: Its Rise, Fall, and Resurrection (June 2003), available at https://www.ftc.gov/news-
events/news/speeches/ftcs-use-unfairness-authority-its-rise-fall-resurrection; Dissenting Statement of
Commissioners Christine S. Wilson & Noah Joshua Phillips regarding the “Commission Statement on the Adoption
of Revised Section 18 Rulemaking Procedures” (July 9, 2021), https://www.ftc.gov/system/files/documents/
public_statements/1591702/p210100_wilsonphillips_joint_statement_-_rules_of_practice.pdf
80
FTC Policy Statement on Unfairness, Letter from Michael Pertschuk, Chairman, Fed. Trade Comm’n to Wendell
H. Ford, Chairman, and John C. Danforth, Ranking Minority Member, S. Comm. on Commerce, Science, and
Transp., Consumer Subcomm. (Dec. 17, 1980), reprinted in Int’l Harvester Co., 104 F.T.C. 949, 1070-76 (1984)
(typically referred to as the FTC’s Unfairness Statement).
81
“It must be substantial; it must not be outweighed by countervailing benefits to consumers or competition that the
practice produces; and it must be an injury that the consumers themselves could not reasonably have avoided.” Id.
82
Letter from James C. Miller, Chairman, FTC to Bob Packwood, Chairman, Comm. on Commerce, Sci., and
Trasnp., and Bob Kasten, Chairman, SubComm. On Consumer Comm. on Commerce, Sci., and Transp. (Mar. 5,
1982), reprinted in Antitrust & Trade Reg. Rep. (BNA) No. 1055, at 568-70 (Mar. 11, 1982).
83
Id. at 8.
84
Federal Trade Commission Act Amendments of 1994, Pub. L. No. 103-312, 108 Stat. 1691 (1994), codified at 15
U.S.C. § 45(n).
85
Even with the unfairness test, this Commission is seeking to apply the standard in novel ways, ignoring the
rigorous analytical framework. See Dissenting Statement of Commissioner Noah Joshua Phillips regarding FTC v.
Passport Automotive Group, Inc. File No. 2023199 (Oct. 14, 2022) (rejecting the inclusion of an unfairness count to
expand the FTC Act’s coverage to discrimination); Dissenting Statement of Commissioner Noah Joshua Phillips
regarding the “Commercial Surveillance and Data Security Advance Notice of Proposed Rulemaking” (Aug. 11,
2022) (discussing FTC overreach), https://www.ftc.gov/system/files/ftc_gov/pdf/
Commissioner%20Phillips%20Dissent%20to%20Commercial%20Surveillance%20ANPR%2008112022.pdf.

16
injury, which Congress endorsed. Third, unfairness is based on quantitative cost-benefit analysis,
requiring enforcement decisions to evaluate and balance both harms and benefits. Despite this
history and accepted interpretation of the term “unfair” in the same statutory provision, today’s
Policy Statement repudiates economic content for “unfair methods of competition,” rejects the
weighing and balancing of anticompetitive effects and procompetitive benefits, and adopts an
expansive “I know it when I see it” approach that seeks to protect interests beyond those of
consumers. In short, the Policy Statement takes a far different approach to unfairness in the
competition context than it does for the antitrust arena.

C. The Policy Statement Fails to Provide a Framework for Credible
Enforcement Decisions

The Policy Statement’s approach – invoking an adjective to establish liability – will lead
to enforcement decisions that are not credible. Enforcement is credible when it yields results
consistent with legal, economic, and societal norms. When outcomes conflict with established
and accepted norms, or when government policy leads either to systematic underenforcement or
overenforcement, public respect for antitrust enforcement is eroded. 86 Under the Policy
85F

Statement, the Commission may find liability merely by selecting an adjective and then limiting
the defenses of the respondent. Consequently, when the Commission brings a case under Section
5, the cards are stacked so the Commission should always win. The Commission’s Part 3
administrative adjudication process is already under attack as unfair to respondents. This Policy
Statement will only add to the critique of the Commission’s processes. In addition, the Policy
Statement instructs that the Commission’s determination regarding what practices constitute an
unfair method of competition deserve judicial deference and “great weight” on appeal. 87 The 86F

framework embodied in the Policy Statement violates expectations of fairness, and consequently
will undermine the credibility of antitrust enforcement.

D. The Policy Statement Fails to Consider the Full Legislative History
Regarding Section 5 of the FTC Act

There is no dispute that Congress intended Section 5 of the FTC Act to reach beyond
then-existing expectations about the scope of the Sherman Act. 88 There is also no dispute that
87F

Congress left it to the Commission to determine what conduct fell within the broader scope of
“unfair methods of competition” rather than articulating a finite list of practices to be
condemned. 89 It is similarly undisputed that Congress envisioned that Section 5 would address
88F

86
See Wilson, Klotz & Sandford, supra note 35, at 1452-53.
87
See Policy Statement at 7.
88
See, e.g., 51 Cong. Rec. 12,454 (1914) (Sen. Cummins) (“That is the only purpose of Section 5 – to make some
things punishable, to prevent some things, that can not [sic] be punished or prevented under the antitrust law.”).
89
See S. Rep. No. 597, 63d Cong. 2d Sess., at 13 (1914) (“The committee gave careful consideration to the question
as to whether it would attempt to define the many and variable unfair practices which prevail in commerce and to
forbid [them] . . . or whether it would, by a general declaration condemning unfair practices, leave it to the
commission to determine what practices were unfair. It concluded that the latter course would be better, for the
reason . . . that there were too many unfair practices to define, and after writing 20 of them into law it would be quite
possible to invent others.”).

17
incipient conduct before its perpetrator could become a monopolist. 90 These uncontroversial
89F

facts from the legislative history, however, do not translate directly into the expansive
enforcement policy the majority announces today. That more than 100 years have elapsed since
these legislative statements were made and the FTC Act was enacted makes clear that today’s
expansive Policy Statement is not the natural outcome of the legislative history. In addition, there
is more to the legislative history than the undisputed principles recounted in the Policy
Statement; taking into account that fuller history reveals that, for at least three reasons, Congress
intended a different path for Section 5 than what is unveiled today.

First, Congressional expectations in 1914 that the reach of the Sherman Act would be
limited turned out to be inaccurate. As William Kovacic and Marc Winerman explain, “the
Sherman Act proved to be a far more flexible tool for setting antitrust rules than Congress
expected in the early 20th century.” 91 Today, “courts recognize the Sherman Act’s expanded
90F

reach, with extensive precedent developed through actions by the antitrust enforcement
authorities, including the FTC, and private parties.” 92 In fact, the scope of the Sherman Act is
91F

still expanding; just two weeks ago, the Antitrust Division obtained a guilty plea arising from
criminal prosecution of an invitation to collude under Section 2 of the Sherman Act. 93 Until this 92F

guilty plea, invitations to collude had been prosecuted as stand-alone Section 5 violations. 94 93F

Congressional statements from 1914 must be interpreted in light of the current application of the
Sherman Act.

Second, a closer look reveals that Congress designed Section 5’s “unfair methods of
competition” prohibition to have economic content. Among Senators debating the legislation,
there was substantial discussion about the meaning of “unfair methods of competition,” 95 but no 94F

senator propounded the list of adjectives that the Policy Statement now identifies as
characteristic of unfair methods of competition. All legislative history analyses must be taken
with a grain of salt, 96 but there is evidence that the author of Section 5 believed that “unfair” had
95F

economic content, consistent with the consumer welfare standard and the rule of reason.

90
See Policy Statement at 4-5.
91
William E. Kovacic & Marc Winerman, Competition Policy and the Application of Section 5 of the Federal Trade
Commission Act, 76 Antitrust L. J. 929, 934 (2010) (“Several factors explain why Section 5 has played so small a
role in the development of U.S. competition policy principles. Probably the most important is that the Sherman Act
proved to be a far more flexible tool for setting antitrust rules than Congress expected in the early 20th century.”).
92
Maureen K. Ohlhausen, Commissioner, Fed. Trade Comm’n, Remarks on Section 5: Principles of Navigation 4
(July 25, 2013), https://www.ftc.gov/sites/default/files/documents/public_statements/section-5-principles-
navigation/130725section5speech.pdf.
93
United States v. Zito, CR22-113-BLG-SPW (D. Mont. Sept. 19, 2022, https://www.justice.gov/opa/press-
release/file/1543701/download.
94
See In Re Quality Trailer Products Corp., 115 F.T.C. 944 (1992) (consent); In re Valassis Communs., Dkt. C-
4160, 2006 FTC LEXIS 25 (2006) (consent); In re A.E. Clevite, 116 F.T.C. 389 (1993) (consent); In re YKK
(USA), 108 F.T.C. 628 (1993) (consent); In re Precision Moulding Co., 122 F.T.C. 104 (1996) (consent); In re Stone
Container Corp., 125 F.T.C. 853 (1998) (consent); In re U-Haul Int’l, Inc., File No. 081-0157, 6 (2010) (consent).
95
See Gilbert Holland Montague, Unfair Methods of Competition, 25 Yale L.J. 20 (1915).
96
See INS v. Cardoza-Fonseca, 480 U.S. 421, 452–53 (1987) (Scalia, J., concurring) (“Judges interpret laws rather
than reconstruct legislators’ intentions. Where the language of those laws is clear, we are not free to replace it with
an unenacted legislative intent.”); Thompson v. Thompson, 484 U.S. 174, 191–92 (1988) (Scalia, J., concurring)

18
As Congress was considering legislation that would become the FTC and Clayton Acts,
President Woodrow Wilson and Louis Brandeis asked a lawyer and one-time member of the
Progressive Party, George Rublee, to serve as liaison between the White House and Congress. 97 96F

Rublee determined that pending legislation that would create a federal trade commission should
include a provision that would give the Commission enforcement authority and power to issue
orders challenging unfair methods of competition. 98 A commission with enforcement authority
97F

diverged from the “sunshine agency” model that was contained in earlier versions of the
legislation, and that was preferred by Wilson and Brandeis. 99 But at a White House meeting with
98F

President Wilson and Brandeis, Rublee persuaded them to endorse his approach. 100 99F

In subsequent correspondence to President Wilson describing legislative developments,
another contemporary of Brandeis reported that:

[Representative Ray Stevens of New Hampshire] has introduced the bill which
was really drawn up by Mr. Rublee . . . The Stevens Bill declares unfair
competition to be unlawful, and empowers the Commission, whenever it has
reason to believe that a corporation is using any unfair method of competition, to
hold a hearing, and if it is of [the] opinion that the method of competition in
question is unfair to restrain the use thereof by injunction. 101 100F

In a memo prepared for President Wilson, Rublee – the author of the “unfair method of
competition” prohibition 102 – explained the difference between fair competition and unfair
101F

competition. “Fair competition is competition which is successful through superior efficiency.
Competition is unfair when it resorts to methods which shut out competitors who, by reason of
their efficiency, might otherwise be able to continue in business and prosper.” 103 102F

A similar description of unfair competition – focused on efficiency among rival
companies – was provided by key senators during debate. Senator Henry F. Hollis “who in the

(“Committee reports, floor speeches, and even colloquies between Congressmen, are frail substitutes for bicameral
vote upon the text of a law and its presentment to the President.”).
97
See THOMAS K. MCCRAW, PROPHETS OF REGULATION: CHARLES FRANCIS ADAMS, LOUIS D. BRANDEIS, JAMES M.
LANDIS, ALFRED E. KAHN, location 1625 of 5271 on Kindle (1984); see also William Kolasky, The FTC’s Recission
of Its 2015 Policy Statement on Section 5: If Not Consumer Welfare and the Rule of Reason, What?, Washington
Legal Foundation Critical Legal Issues Working Paper Series 112 at 28-35 (July 2021),
https://www.wlf.org/2021/07/26/publishing/the-ftcs-rescission-of-its-2015-policy-statement-on-section-5-if-not-
consumer-welfare-and-the-rule-of-reason-what/.
98
Kolasky, supra note 97, at 11-12.
99
McCraw, supra note 97, at Location 1633 of 5271.
100
Id. at Location 1650 of 5271.
101
Id. at Location 1640 of 5271.
102
Kolasky, supra note 97, at 13.
103
George Rublee, Memorandum Concerning Section 5 of the Bill to Create a Federal Trade Commission 3 (July
10, 1914) (unpublished memorandum), https://www.wlf.org/wp-content/uploads/2021/07/Rublee-1914-Memo-to-
Lobby-for-the-Passage-of-Section-5.pdf.

19
later stages of the debate upon the floor of the Senate was one of the chief sponsors for the
provision regarding ‘unfair competition’”, 104 repeated the language of the Rublee memo. 105 In
103F 104F

short, for the author of Section 5 and one of its chief sponsors, unfair competition has economic
content; unfair competition is defined by efficiency, not the list of adjectives provided in the
Policy Statement.

Third, the legislative history explains that unfair competition must adversely affect
consumers, not merely weaker rivals. That is, the legislative history does not support abandoning
the consumer welfare standard. Senator Cummins explained that Section 5 is concerned “not
merely with unfairness to the rival or competitor” but instead requires a finding that “the
unfairness must be tinctured with unfairness to the public.” 106 105F

Moreover, it is worth noting that Congressional activity regarding Section 5 of the FTC
Act did not end in 1914 when the statute originally was enacted. As previously described, in
1938, Congress amended Section 5 to add the prohibition of “unfair and deceptive acts and
practices.” When the FTC pursued an expansive use of Section 5 through unfairness rulemaking
in the 1970s, Congress expressed its disapproval by shutting down the agency for several days,
failing to reauthorize the agency for fourteen years, and imposing additional procedural obstacles
on trade regulation rulemaking for the FTC. 107 And in 1994, Congress made clear that there is
106F

economic content to Section 5’s use of the term “unfair” for consumer protection issues, when
Congress codified the Commission’s Unfairness Statement that is based on a quantitative cost-
benefit analysis.

The full history of Section 5 that was omitted from the Policy Statement – the intended
meaning of “unfair methods of competition” described by George Rublee and Senator Hollis in
1914 and Congressional action on Section 5 in the 1980s and 1990s – demonstrates that
Congress did not envision the approach to “unfair methods of competition” that is described in
today’s Policy Statement.

IV. Conclusion

For the foregoing reasons, I do not support the approach that the Policy Statement
describes for enforcement pursuant to Section 5’s “unfair methods of competition” authority.
Consequently, I dissent.

104
Montague, supra note 95, at 28.
51 Cong. Rec. 12,146 (1914). (“Fair competition is competition which is successful through superior efficiency.
105

Competition is unfair when it resorts to methods which shut out competitors who, by reason of their efficiency,
might otherwise be able to continue in business and prosper.”).
106
51 Cong. Rec. 11,105 (1914) (Sen. Cummins).
107
See Beales, supra note 79.

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