The Perils of Excessive Discretion: The Elusive Meaning of Unfairness in Section 5 of the FTC Act

Journal of Antitrust Enforcement, Vol. 3, No. 1, pp. 87-132, April 2015

George Mason Law & Economics Research Paper No. 13-61

47 Pages Posted: 12 Nov 2013 Last revised: 9 Apr 2015

See all articles by James C. Cooper

James C. Cooper

George Mason University - Antonin Scalia Law School, Faculty

Date Written: February 25, 2014

Abstract

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.

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

Suggested Citation

Cooper, James C., The Perils of Excessive Discretion: The Elusive Meaning of Unfairness in Section 5 of the FTC Act (February 25, 2014). Journal of Antitrust Enforcement, Vol. 3, No. 1, pp. 87-132, April 2015, George Mason Law & Economics Research Paper No. 13-61, Available at SSRN: https://ssrn.com/abstract=2350452 or http://dx.doi.org/10.2139/ssrn.2350452

James C. Cooper (Contact Author)

George Mason University - Antonin Scalia Law School, Faculty ( email )

3301 Fairfax Drive
Arlington, VA 22201
United States
703-993-9582 (Phone)

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