[Federal Register Volume 73, Number 168 (Thursday, August 28, 2008)]
[Notices]
[Pages 50818-50819]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-20008]
[[Page 50818]]
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FEDERAL TRADE COMMISSION
Public Workshop Concerning the Prohibition of Unfair Methods of
Competition In Section 5 of the Federal Trade Commission Act
AGENCY: Federal Trade Commission.
ACTION: Notice of Public Workshop
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SUMMARY: The Federal Trade Commission will hold a public workshop on
October 17, 2008, in Washington, D.C., to explore the scope of the
prohibition of ``unfair methods of competition'' in Section 5 of the
FTC Act, 15 U.S.C. Sec. 45. In particular, the workshop will consider
the appropriate scope of Section 5 in light of legal precedent,
economic learning and changing business practices in a global and hi-
tech economy. The Commission seeks the views of the legal, academic,
and business communities on the issues to be explored at the workshop.
This notice poses a series of questions relevant to those issues for
which the Commission seeks comment. The agency will consider these
comments as it prepares for the workshop. Prior to the workshop, the
Commission will publish an agenda on its website.
DATES: The workshop will be held October 17, 2008, in the Conference
Center of the FTC office building at 601 New Jersey Avenue, N.W.,
Washington, D.C. Comments must be received on or before October 24,
2008.
ADDRESSES: Any interested person may submit written comments responsive
to any of the topics identified in this Federal Register notice or in
any subsequent announcement. Respondents are encouraged to provide
comments as soon as possible, but no later than October 24, 2008.
Comments should refer to ``Section 5 Workshop, P083900'' to facilitate
the organization of comments. Comments containing material for which
confidential treatment is requested must be filed in paper form, must
be clearly labeled ``Confidential,'' and must comply with Commission
Rule 4.9(c).\1\ Because paper mail in the Washington area, and
specifically to the Federal Trade Commission, is subject to delay due
to heightened security screening, please consider submitting your
comments in electronic form. Comments filed in electronic form should
be submitted by using the following weblink: (https://secure.commentworks.com/ftc-Section5workshop) (and following the
instructions on the web-based form). To ensure that the Commission
considers an electronic comment, you must file it on that web-based
form. If this notice appears at http://www.regulations.gov, you may
also file an electronic comment through that Web site. The Commission
will consider all comments that www.regulations.gov forwards to it. A
comment filed in paper form should include the ``Section 5 Workshop,
P083900'' reference both on the first page of the text and on the
envelope, and should be mailed or delivered to the following address:
Federal Trade Commission/Office of the Secretary, Room H-135 (Annex C),
600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The Commission
requests that any comment filed in paper form be sent by courier or
overnight service, if possible, because, as noted above, postal mail in
the Washington area and at the Commission is subject to delay due to
heightened security precautions.
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\1\ The comment must be accompanied by an explicit request for
confidential treatment, including the factual and legal basis for
the request, and must identify the specific portions of the comment
to be withheld from the public record. The request will be granted
or denied by the Commission's General Counsel, consistent with
applicable law and the public interest. See Commission Rule 4.9(c),
16 CFR 4.9(c).
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The FTC Act and other laws the Commission administers permit the
collection of public comments to consider and use in this proceeding as
appropriate. The Commission will consider all timely and responsive
public comments that it receives, whether filed in paper or electronic
form. Comments received will be available to the public on the FTC
website, to the extent practicable, at http://www.ftc.gov. The workshop
will be transcribed; the transcript will be placed on the public
record; and any written comments received will also be placed on the
public record. The Commission will consider whether to issue a report
following the conclusion of the workshop. As a matter of discretion,
the FTC makes every effort to remove home contact information for
individuals from the public comments it receives before placing those
comments on the FTC website. More information, including routine uses
permitted by the Privacy Act, may be found in the FTC's privacy policy,
at (http://www.ftc.gov/ftc/privacy.shtm.)
FOR FURTHER INFORMATION CONTACT: Neil Averitt, Office of Policy and
Coordination, Bureau of Competition, 600 Pennsylvania Avenue, N.W.,
Washington, D.C. 20580; telephone 202-326-2885; e-mail,
[email protected]. A detailed agenda and schedule for the
workshop will be available on the FTC website (http://www.ftc.gov), and
can be located through the website's search function.
SUPPLEMENTARY INFORMATION: When Congress created the FTC in 1914, it
empowered the agency to prevent ``unfair methods of competition''
through Section 5 of the FTC Act, 15 U.S.C. Sec. 45. Under Section 5,
the Commission may condemn conduct that violates the Sherman Act, 15
U.S.C. Sec. 1-7.\2\ But based on its review of the FTC Act's
legislative history, the Supreme Court has stated that Section 5 also
reaches beyond violations of the Sherman Act to broader categories of
conduct.\3\
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\2\ See, e.g., FTC v. Motion Picture Advertising Service Co.,
344 U.S. 392, 395 (1953).
\3\ See, e.g., FTC v. Sperry & Hutchinson Co., 405 U.S. 233,
239, 244 (1972) (``section 5 empower[s] the Commission to define and
proscribe an unfair competitive practice, even though the practice
does not infringe either the letter or the spirit of the antitrust
laws.''); FTC v. Motion Picture Advertising Service Co., 344 U.S.
392, 395 (1953) (``The `unfair methods of competition,' which are
condemned by Sec. 5(a) of the Act, are not confined to those that
were illegal at common law or that were condemned by the Sherman
Act'').
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The precise reach of Section 5 and its relationship to other
antitrust statutes has long been a matter of debate. The Supreme Court
has observed that the ``standard of `unfairness' under the FTC Act is,
by necessity, an elusive one, encompassing not only practices that
violate the Sherman Act and the other antitrust laws but also practices
that the Commission determines are against public policy for other
reasons.''\4\ In the early 1980s, however, lower courts were critical
of efforts by the FTC to enforce a reading of Section 5 that captured
conduct falling outside the Sherman Act. In striking down the FTC's
orders, those courts expressed a concern that the Commission's theory
of liability failed ``to discriminate between normally acceptable
business behavior and conduct that is unreasonable or
unacceptable.''\5\
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\4\ FTC v. Indiana Fed'n of Dentists, 476 U.S. 447, 454 (1986)
(dicta) (upholding a violation of Sherman Act Section 1).
\5\ E.I duPont de Nemours & Co. v. FTC (``Ethyl''), 729 F.2d
128, 138 (2nd Cir. 1984); see also, Boise Cascade Corp. v. FTC, 637
F.2d 573 (9th Cir. 1980) (FTC theory ``blur[red] the distinction
between guilty and innocent commercial behavior''); Official Airline
Guides v. FTC, 630 F.2d 920, 927 (2nd Cir. 1980) (``enforcement of
the FTC's order here would give the FTC too much power to substitute
its own business judgment for that of the monopolist in any decision
that arguably affects competition in another industry'').
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The great majority of FTC non-merger cases enforce the Sherman Act.
Beginning in the early 1990s, however, the Commission reached a number
of consent agreements in matters involving invitations to collude;\6\
practices that
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facilitate collusion or collusion-like results in the absence of an
agreement;\7\ and misconduct relating to standard setting.\8\ Because
the complaints in these matters did not allege all the elements of a
Sherman Act violation, the Commission's theory of liability rested on a
broader reach of Section 5. As consents, none of these matters have
been reviewed by a court.
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\6\ See, e.g.,Valassis Communications, Docket No. C-4160 (April
28, 2006); FMC Corp., 133 F.T.C. 815 (2002); Stone Container Corp.,
125 F.T.C. 853 (1998); Precision Moulding Co., 122 F.T.C. 104
(1997); YKK (U.S.A.) Inc.,116 F.T.C. 628 (1993); AE Clevite, Inc.,
116 F.T.C. 389 (1993); Quality Trailer Products,115 F.T.C. 944
(1992); FTC v. Mead Johnson & Co., Civ. No. 92-1366 (D.D.C. June 11,
1992), press release available at (http://www.ftc.gov/opa/predawn/F93/mead-ahp24.htm.)
\7\ This category is illustrated by the cases involving minimum
advertised prices for CDs. See BMG Music, Docket No. C-3973 (Aug.
30, 2000); Capital Records, Docket No. C-3975 (Aug. 30, 2000); Sony
Music Entertainment, Docket No. C-3971 (Aug. 30, 2000); Time-Warner,
Inc., Docket No. C-3972 (Aug. 30, 2000); Universal Music and Video
Distribution, Docket No. C- 3974 (Aug. 30, 2000). See also FTC v.
Mead Johnson & Co., supra.
\8\ Dell Computer Corp., 121 F.T.C. 616 (1996)
(misrepresentation of patent rights to a standard-setting body);
Negotiated Data Solutions (``N-Data''), File No. 051-0094 (press
release Jan. 23, 2008) (provisionally accepting consent subject to
public comments) (reneging on prior commitment made to a standard
setting body).
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The workshop will examine three topics: (1) the history of Section
5, including Congress's enactment, the FTC's enforcement, and the
courts' response; (2) the range of possible interpretations of Section
5; and (3) examples of business conduct that may be unfair methods of
competition addressable by Section 5. The Commission particularly seeks
the input of the business community in preparing this last topic.
The Commission invites public comment on questions relevant to
these topics, including:
1. What principles concerning the scope of Section 5 can be
garnered from Supreme Court and appellate court decisions?
2. What legal, economic, and policy concerns are important when
interpreting Section 5's prohibition against ``unfair methods of
competition?'' What is the role of Section 5 in protecting nonprice
competition?
3. Is Section 5 coterminous with the Sherman Act? How has the
courts' development of the Sherman Act over time altered its
relationship to Section 5? Does the Sherman Act encompass all conduct
that is truly harmful to competition?
4. Does Section 5 authorize the FTC to fill technical gaps in the
coverage of the other antitrust statutes?
5. Can Section 5 reach externally-defined business torts where they
threaten to bring about a future lessening of competition?
6. Should Section 5 be interpreted to reach practices that pose at
least a moderate threat to competition and few offsetting benefits to
consumers, (e.g., reduced costs, improved products, or other
efficiencies), where enforcement is limited to the FTC and relief is
limited to an injunction prohibiting or undoing the challenged
conduct?\9\
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\9\ II P. Areeda & H. Hovenkamp, Antitrust Law ] 302h (2\nd\ ed.
2000 Supp. 2007) (proposing this interpretation of Section 5).
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7. Does the FTC's use of Section 5, independent of the Sherman Act,
make it less likely that treble damages could be assessed in follow-on
actions? If so, should that fact influence the interpretation of
Section 5's scope, or its application?
8. What limiting principles should be applied to the definition of
``unfair methods of competition?'' How can ``unfair methods of
competition'' under Section 5 be defined to avoid capturing benign or
procompetitive conduct while allowing for sufficient guidance and
predictability for business?
9. If Section 5 captures conduct falling outside the Sherman Act,
what economic evidence and analysis would be useful in identifying
violations? What economic evidence and analysis would be useful in
identifying the proper limiting principles for the enforcement of
Section 5?
10. Was the Commission's use during the last two decades of Section
5 claims in settled complaints that did not allege all the elements of
a Sherman Act violation beneficial and principled or harmful and
unbounded? How might courts have evaluated these claims?
11. What are examples of business conduct that may be unfair
methods of competition addressable by Section 5? How does that conduct
harm competition and consumers?
By direction of the Commission.
Richard C. Donohue,
Acting Secretary.
[FR Doc. E8-20008 Filed 8-27-08: 8:45 am]
BILLING CODE 6750-01-S