FTC Commissioner Calls for Section 5 ‘Reform’ as Former Officials Launch Yearlong FTC Discretion Review
The FTC’s “vague and ambiguous” Section 5 authorities are a “worthy target of reform” and the agency “has the tools needed” to take on net neutrality issues if need be, said Commissioner Joshua Wright Monday at a TechFreedom event. The event coincided with the release of a lengthy report (http://bit.ly/1heY3r5) -- compiled by TechFreedom, attorneys, academics and former FTC officials, directors and commissioners, including one former chairman, Republican Timothy Muris, who served from 2000-2004 -- asking a “series of questions” about the commission’s exercise of its discretion in data security, privacy and unfair-competition cases, said TechFreedom President Berin Szoka at the event. “Both of these cases involved the core question of how to define unfairness under Section 5 of the FTC Act,” the report said. Future reports during the yearlong project will answer the questions and provide recommendations for the FTC, Szoka said.
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Wright has been a critic of what he calls the FTC’s ill-defined Section 5 authority in previous speeches and testimony before Congress. Section 5 “generates a process for cheap and easy consents,” Wright said Monday. The FTC can bring “stand-alone claims” under Section 5 for what it considers unfair methods of competition even if there is no “traditional show of harm” as defined under the Clayton and Sherman antitrust laws, Wright said. Too many of the FTC’s stand-alone claims never reach the federal courts and thus are rarely challenged, he said, leaving businesses in the dark about what conduct is lawful.
"I do not think it is the case that any sober assessment,” Wright said, “would allow the conclusion that” the vagueness of Section 5 “has been a positive contribution” to the agency’s work on competition issues. Left unaddressed, “the commission runs a serious risk” that either an appeals court will step in on a case and “define the statute for us” or “legislative action will take the step on its own,” said Wright. Lawmakers such as House Commerce, Manufacturing and Trade Subcommittee Chairman Lee Terry, R-Neb., have urged the FTC to clarify its authority (CD Dec 4 p5). But FTC Chairwoman Edith Ramirez has defended the FTC’s Section 5 enforcement actions (CD Nov 18 p17).
Section 5 itself is not worthless, Wright said -- it can protect consumers and generate substantial consumer savings. And there’s already “a broad consensus surrounding Section 5,” he said. “Most agree” on three elements, he said: Section 5 is broader than traditional antitrust laws; Section 5 general guidelines would be helpful; and one requirement of Section 5 should be a traditional show of harm as defined under antitrust laws. Wright mostly agreed with these elements, saying he would also like Section 5 cases to require “zero cognizable efficiencies.” Those are defined as “merger-specific efficiencies that have been verified and do not arise from anticompetitive reductions in output or service,” said the Justice Department’s website (http://1.usa.gov/1dHo1B6).
Wright acknowledged that his last requirement “is more debated.” But “75 percent of the cases we've brought over the last 20 years satisfy my standards,” he said: “In that other 25 percent of cases, it’s not whether the FTC can bring them,” but in which court the commission should bring the case. “We can walk into court, file a complaint and go win the case,” he said. “We do that. We do it often, and we do it incredibly well.”