Chevron and the Limits of Administrative Antitrust

Abstract

Section 5 of the Federal Trade Commission Act makes "unfair methods of competition" illegal and gives the FTC authority to enforce this proscription. The term "unfair method of competition" is undefined by the statute – indeed, Congress deliberately left the term ambiguous in order that judicial construction of the term would not prevent the FTC from restraining such conduct. Ordinarily, one would expect that courts would defer to agency interpretations of such inherently and deliberately ambiguous terms – this is a very clear case for Chevron deference.

Remarkably, however, the FTC has relied exclusively upon judicial construction of the term (viz., that proscription of "unfair methods of competition" allows the FTC to enforce antitrust laws as defined by the Sherman and Clayton Acts). Indeed, there is widespread consensus within the antitrust bar that Chevron does not apply to FTC interpretations of Section 5. This article explores the origins of this folk knowledge – how the antitrust bar has gotten things so wrong – and the implications this has for FTC enforcement of Section 5.

In so doing, this article makes three distinct contributions. First, it explains that Chevron does apply to FTC interpretations of Section 5. This is practically very important today due to ongoing debate over the proper scope of Section 5, particularly in the high-technology and information industries. Understanding that Chevron largely allows the FTC to define this scope is important for participants on both sides of this debate. Second, this article argues normatively that Chevron deference compounds already serious jurisprudential questions about the agency’s recently aggressive and informal approach to competition issues, and considers possible limits on a Chevron-supercharged Section 5. And third, this article provides a useful case study in how misunderstandings of the law propagate, and serves as a stark reminder of the need for different groups of lawyers – especially those who are highly specialized – to know the limits of their own expertise.