Overview:
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The Federal Trade Commission (FTC) is responsible for policing business practices across the nation and making sure competition remains fair. When the FTC was created in 1914, its purpose was to prevent unfair methods of competition in commerce as part of early government efforts to break up large trusts and prevent them from dominating industries. Over the years, Congress has passed additional laws giving the FTC greater authority to police anticompetitive practices. Today, the commission administers a wide variety of other consumer protection laws. Some of the recent issues the FTC has dealt with include truthful advertising practices and price fixing. The commission also provides workshops, hearings, and conferences and creates educational programs for both consumers and businesses. Recent controversies involving the high-tech, drug, insurance, telecommunications, and social networking sectors have kept the agency busier than ever.
History:
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The FTC was created in 1914 to help prevent unfair competitive advantages in the marketplace. This came as a result of lawmakers, as well as President Woodrow Wilson, attempting to “bust the trusts,” or break apart monopolies that discouraged competition from smaller and less powerful businesses. The original legislation creating the agency was called the Federal Trade Commission Act.
The Clayton Act, another key legislation from this period (it was signed on October 15, 1914), provided a framework for the new commission. This law sought to prevent anticompetitive business practices and built upon the stipulations of the Sherman Antitrust Act of 1890, including conduct, exemptions, and remedies.
In 1938, Congress passed the Wheeler-Lea Amendment, which made it illegal to engage in unfair or deceptive acts in business.
Other legislation affecting the work of the FTC includes the Telemarketing Sales Rule, the Pay-Per-Call Rule and the Equal Credit Opportunity Act.
In 1975, Congress passed the Magnuson-Moss Act, also known as the Federal Lemon Law, which allowed the FTC to adopt trade regulation rules to define deceptive acts and practices.
The House passed the Energy Price Gouging Prevention Act in 2007. This law allows the FTC to investigate and punish businesses that artificially inflate the price of energy, including gasoline.
In July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (pdf) was signed into law. Among its provisions was an expansion of FTC power in the areas of rule-making authority and enforcement capabilities, replacing standards that had been set by the Magnuson-Moss Act. It also exempted “consumer financial products or services” from FTC oversight and shifted this responsibility to the new financial regulatory body, the Consumer Financial Protection Bureau (CFPB).
In December 2010, the Truth in Fur Labeling Act (pdf) was signed into law, eliminating the FTC’s authority to exempt certain fur products from its regulations, and to seek public comment on the matter. At the same time, the Red Flag Program Clarification Act of 2010 (pdf) became law, amending the Fair Credit Reporting Act (pdf) as it pertains to identity theft (Red Flags) guidelines to creditors.
What it Does:
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The FTC is an independent agency of the federal government responsible for providing consumer protection and making sure business practices remain fair. The FTC deals with complaints that are filed regarding unfair business practices such as scams, deceptive advertising and monopolistic practices. It reviews these complaints to determine if businesses are in fact engaging in harmful practices. The FTC is also responsible for reviewing business mergers to ensure that they do not hurt competition in the market and potentially harm consumers. Generally speaking, the FTC does not have the ability to directly enforce its rulings, but it can go to the courts to have them enforced.
The Commission is comprised of several bureaus that help it carry out its duties. Among those bureaus are:
The Bureau of Competition, which is charged with preventing anticompetitive mergers and other practices. It can enforce various competition laws, and it provides guidance to businesses on how to comply with these laws. Major areas of concentration include: energy, prescription drugs and healthcare, food, and high-tech industries.
The Bureau of Economics, which assists the FTC in determining the economic impact of its actions.
The Bureau of Consumer Protection, whichguards consumers from unfair, fraudulent, or deceptive business practices. It enforces a number of consumer protection laws, as well as trade regulation rules. This bureau can also become involved in litigation, investigations, rulemaking proceedings, and educational efforts. The Bureau of Consumer Protection oversees the United States National Do Not Call Registry, and is divided into these seven divisions:
The Division of Advertising Practices enforces truth-in-advertising laws in areas such as food, drugs, dietary supplements, weight loss, marketing directed at children, performance claims for high-tech products and computers, alcohol and tobacco, and children’s privacy.
The Division of Consumer and Business Education develops and implements educational plans to encourage competitive practices and inform consumers about their rights. In addition to their presence at national conferences, this division creates Public Service Announcements (PSAs) for radio, print, and the Web.
The Division of Enforcement helps the FTC enforceconsumer protection laws and investigate businesses potentially engaging in false or deceptive business practices, including advertising.Recent activities have included scholarship scams, office supply fraud, textile, wood, fur, and care labeling rules and green guides.
The Division of Financial Practices develops policy and enforces laws related to financial and lending practices, including the Fair Credit Reporting Act and the Gramm-Leach-Bliley Act. Lately, this division has been involved in the subprime-lending crisis.
The Division of Marketing Practices monitors fraudulent marketing prices and is responsible for halting scams such as pyramid schemes.
The Division of Planning and Information provides information for consumers to protect them from unfair or deceptive marketing. This division operates the Consumer Response Center, the Identity Theft Data Clearinghouse and the Consumer Sentinel, an online database of fraud-related complaints.
The Division of Privacy and Identity Protection oversees information security, including identity theft and credit reporting. It develops educational programs related to these areas and enforces Section 5 of the FTC Act, whichprohibits the use of consumers’ personal information.
The work of the FTC is also aided by the Office of General Counsel and seven regional offices.
The FTC is headed by five commissioners, each of whom is nominated by the President and confirmed by the Senate. Each serves a seven-year term. One commissioner, chosen by the President, acts as chairman. No more than three commissioners can be from the same political party.
From the Web Site of the Federal Trade Commission
Calendar of Events
Organization Chart (pdf)
Where Does the Money Go:
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The FTC spent $283.2 million on 5,467 transactions during the past decade. According to USASpending.gov, the FTC paid for a variety of services, from automatic data processing equipment to management support and expert witness services in support of its goals.
The top five contractors are as follows:
1. Lockheed Martin Corporation $49,480,996
2. Omnicom Group Inc. $9,144,957
3. Apptis Inc. $8,696,916
4. Hartek Inc. $6,615,059
5. Vador Ventures Inc. $6,307,721
Lockheed Martin, the FTC’s largest contractor, is a global security company engaged in the areas of research, design, development, manufacture, integration and maintenance of advanced technology systems, products, and services. For many years it has been one of the largest defense contractors supplying weaponry and equipment to the Department of Defense. For the FTC, Lockheed Martin provides automatic data processing and telecommunications services.
Omnicom Group Inc., the agency’s second largest contractor, is a global advertising and marketing communications company that provides services to about 5,000 clients in more than 100 countries.
Controversies:
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FTC Goes After Google for Antitrust and More Privacy Troubles
Internet giant Google found itself facing an antitrust investigation and accusations stemming from privacy violations in 2011 and 2012.
In June 2011, the FTC informed Google that it had launched a formal antitrust review of the Web company’s business practices. The probe was said to be the most serious antitrust test to date for Google, which also had been scrutinized by European regulators and the Texas attorney general’s office.
The major concern was whether Google had abused its dominance in the online search market to take unfair advantages in areas like online shopping, local business reviews, maps, and video.
While the investigation continued, the FTC heard from a consumer group in early 2012 claiming Google was not making mandated changes to its privacy policy. The complaints stemmed from a 2011 settlement between Google and the FTC over the company’s social networking tool, Buzz (launched in 2010 and shut down in 2011), which had been criticized for not taking user privacy concerns seriously. The replacement for Buzz, Google+, was seen as not much better at addressing privacy concerns.
The Center for Digital Democracy said Google was continuing to focus on ways to better track consumers and deliver targeted advertising, instead of improving privacy controls.
Google Likely To Face Antitrust Subpoenas From FTC (by James Temple and Casey Newton, San Francisco Chronicle)
Group Files FTC Complaint Against Google for Privacy Changes (by Grant Gross, IDG News)
FTC on Web-Tracking
With concerns mounting over the tracking of personal data on the Internet, the FTC delved into the controversy in 2011, offering up restrictions on companies and questioning one solution proposed by two powerhouses.
Early in the year, the FTC suggested ways to better protect consumer privacy that were lauded but also deemed potentially troubling for IT security experts. In its “Preliminary Report on Protecting Consumer Privacy,” the commission produced stringent guidelines for limiting data collection and forcing businesses to provide greater transparency into the specific information they are collecting.
Matt Hines, writing for Security Week, noted the barriers proposed by the FTC could interfere with protections for online banking.
The FTC also proposed a “Do Not Track” tool for Internet users, prompting Google and Microsoft to unveil technologies designed to prevent the monitoring of Web users. But Commissioner J. Thomas Rosch spoke out against the companies’ solutions, saying the fixes could actually help Google and Microsoft gain an unfair advantage over their rivals.
Data Collection Debate: FTC Privacy Measures Could Impact Efficacy of IT Security (by Matt Hines, Security Week)
FTC Official Wary of Google, Microsoft Privacy Tools (by John Letzing, MarketWatch)
FTC Opens Intel Probe
In June 2008, Intel announced that the FTC had begun a formal probe into its potentially unfair businesses practices. Advanced Micro Devices Inc., the company’s primary rival, charged that Intel used illegal and aggressive tactics, such as offering incentives and discounts, to shut it out of the global computer chip market. In 2009, Intel agreed to a $1.25 billion settlement with AMD, and in December, the FTC filed suit against Intel, claiming it had engaged in anticompetitive behavior and deceptive marketing practices. A settlement was reached in August 2010 in which Intel agreed to alter its business practices.
Intel faces FTC probe of business practices (by Benjamin Pimentel & Rex Crum, MarketWatch)
Intel, FTC Settle Antitrust Lawsuit (by Jeffrey Burt, eWeek.com)
FTC Chairman Asked to Recuse Herself from Google Vote
As Google prepared to acquire DoubleClick for $3.1 billion in late 2007, a controversy involving the FTC emerged. Then-FTC Chairman Deborah Platt was asked to recuse herself from the vote because her husband, John Majoras, is a partner at the Jones Day law firm, which represents DoubleClick. Platt maintained that her husband was involved with Google only in Europe and she refused to step aside. Platt wasn’t alone. A second FTC commissioner, William Kovacic, has a wife who also works for Jones Day, and he voted as well. (In the above-noted Intel lawsuit, Kovacic was recused for a similar conflict-of-interest situation.) On December 21, 2007, the FTC—in a 4–1 vote—approved the Google-DoubleClick merger.
Google-DoubleClick deal hit by deleted Web page controversy (by Declan McCullagh, CNET)
FTC OKs Google-DoubleClick Merger (by Maureen O’Gara, Sys-Con Media)
Credit-Based Insurance Scores
In July 2007, the FTC released a report on credit-based insurance scores. Immediately, controversy began to swirl between insurance companies and consumer advocacy groups. Consumer groups said the report is meaningless because of how the data was compiled. Insurance companies maintained that they provide real benefits to the majority of consumers. At question was the connection, currently being used by insurance companies, to equate a person’s credit score with risk.
Firestorm of Controversy Continues: Only Two Days Left Until the Hearing on Credit-Based Insurance Scores (by Rob Billingham, Insurance News Net)
- Table of Contents
- Overview
- History
- What it Does
- Where Does the Money Go
- Controversies
- Suggested Reforms
- Comments
- Leave a comment
Federal Trade Commission (FTC)
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