The Perils of Excessive Discretion: The Elusive Meaning of Unfairness in Section 5 of the FTC Act
James C. Cooper
George Mason University School of Law - Law & Economics Center
February 25, 2014
George Mason Law & Economics Research Paper No. 13-61
Section 5 of the Federal Trade Commission (FTC) Act gives the FTC an undefined mandate to prosecute "unfair methods of competition." For nearly 100 years, the Commission has searched tirelessly for the meaning of this amorphous concept. Since 1992, the FTC has continued to define Section 5 through a series of consent decrees. Absent any external constraint, the FTC appears to have broad discretion to define the reach of Section 5 beyond the Sherman Act. This discretion causes uncertainty, which is likely to deter beneficial conduct. It also creates incentives to divert resources from productive to redistributional purposes. The recent FTC investigation of Google illustrates the FTC’s discretion to define the reach of Section 5. This paper suggests that the FTC issue a binding statement making Section 5 coterminous with the Sherman Act or limiting Section 5 to conduct that clearly harms consumers through adverse effects on competition, and that would not otherwise fall under the antitrust laws.
Number of Pages in PDF File: 46
Keywords: antitrust, competition policy, markets, industrial organization, Section 5, Federal Trade Commission, administrative law, law & economics, public choice, Google, standard essential patents
JEL Classification: K21, K23, L51, H10
Date posted: November 12, 2013 ; Last revised: February 26, 2014
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