Bringing Antitrust's Economic and Institutional Limits to the FTC's Consumer Protection Authority

Abstract

The FTC oversees nearly every company in America. It polices competition by enforcing the antitrust laws. It tries to protect consumers by punishing deception and practices it deems “unfair.” It’s the general enforcer of corporate promises made in privacy policies and codes of conduct generated by industry and multi-stakeholder processes. It's the de facto regulator of the media, from traditional advertising to internet search and social networks. It handles novel problems of privacy, data security, online child protection, and patents, among others.

But perhaps most importantly, the Federal Trade Commission has become, for better or worse, the Federal *Technology* Commission, and technology creates a special problem for regulators.

Inherent limitations on anyone’s knowledge about the future nature of technology, business, and social norms caution skepticism as regulators attempt to predict whether any given business conduct will, on net, improve or harm consumer welfare. In fact, a host of factors suggests that even the best-intentioned regulators may tend toward overconfidence and the erroneous condemnation of novel conduct that benefits consumers in ways that are difficult for regulators to understand.

One thing is certain: A top-down, administrative regulatory model of regulation is ill-suited for technology, and this technocratic model of regulation is inconsistent with the regulatory humility required in the face of fast-changing, unexpected—and immeasurably valuable—technological advance.

In assessing the FTC, three themes emerge as being crucial to the Agency’s continued success: humility, institutional structure, and economic rigor. Together these three elements serve the essential function of restraining this powerful Agency’s discretion.

This essay discusses how these constraints have operated (or failed to operate) in the past, and offers some suggestions for reform to improve their operation in the future.

Keywords: FTC, Federal Trade Commission, consent decrees, Section 5, unfairness, UDAP, technology, institutional structure, economic analysis, antitrust, consumer protection, privacy, data security

JEL Classification: K21, K23, L51, O38