Federal Trade Commission

The Federal Trade Commission is an independent agency of the U.S. government that was established in 1915 and charged with keeping American business competition free and fair. The FTC has no jurisdiction over banks and common carriers, which are under the supervision of other governmental agencies. It has five members, not more than three of whom may be members of the same political party, appointed by the President, with the consent of the Senate, for seven-year terms. The act was part of the program of President Wilson to check the growth of monopoly and preserve competition as an effective regulator of business.

The Federal Trade Commission enforces a variety of federal antitrust and consumer protection laws. The Commission seeks to ensure that the nation's markets function competitively, and are vigorous, efficient, and free of undue restrictions. The Commission also works to enhance the smooth operation of the marketplace by eliminating acts or practices that are unfair or deceptive. In general, the Commission's efforts are directed toward stopping actions that threaten consumers' opportunities to exercise informed choice. Finally, the Commission undertakes economic analysis to support its law enforcement efforts and to contribute to the policy deliberations of the Congress, the Executive Branch, other independent agencies, and state and local governments when requested.

The duties of the FTC are, in general, to promote fair competition through the enforcement of certain antitrust laws; to prevent the dissemination of false and deceptive advertising of goods, drugs, curative devices, and cosmetics; and to investigate the workings of business and keep Congress and the public informed of the efficiency of such antitrust legislation as exists, as well as of practices and situations that may call for further legislation. The commission's law-enforcement activities have to do with the prevention of unfair methods of competition and false advertising, with administration of provisions restricting tying and exclusive dealing contracts, acquisition of capital stock, interlocking directorates, and price discriminations. In 1946 the FTC was given the right to cancel faulty trademarks.

To enforce antitrust legislation, the commission is empowered to issue cease-and-desist orders upon ascertaining to its satisfaction that the laws are being violated. These orders, to be effective, usually must have court sanction, and the commission must, therefore, in various instances prove its case in court. In deciding such cases the courts have interpreted and applied the phrase "unfair methods of competition." Many of the judicial decisions have frustrated the work of the commission in restricting the growth of monopoly and also, to some degree, the intent of the antitrust laws. The commission has done much toward eliminating the business world of vicious competitive practices.

The commission may undertake special investigations at the order of Congress,

the President, or upon its own initiative. In its investigatory work, the commission was delegated the power to require information from any corporation in interstate commerce. Many companies, however, gave only partial access to their records, and others gave none. A decision by the Supreme Court declared that access to records of private business, except where substantial proof is submitted as to a specific breach of the law, is a violation of the Fourth Amendment. Despite the fact that the commission's investigatory power was in turn greatly limited, it has made and published a notable series of investigations. After the checks rendered by the courts, the commission tended more and more to carry out its recommendations through trade-practice conferences, at which representatives of an industry might voluntarily adopt regulations to control competition in that industry.

The United States economy is one of the strongest and most productive in the world. Although the credit for our economic success goes to the hard work and creativity of American workers and businesses, it is our national policy of competition that spurs and rewards that work and creativity. History has shown that societies that promote vigorous competition among private companies have lower prices, better products, and greater consumer choice.

The antitrust laws are the basis of this national policy. These laws, enforced by both the federal and state governments, require companies to compete in the marketplace. The Sherman Act, the first federal "antitrust law," was enacted in 1890, at a time when there was enormous concern about "trusts" -- combinations of companies that were able to control entire industries. Since then, other laws have been enacted to supplement the Sherman Act, including the Federal Trade Commission Act and the Clayton Act (1914). With some revisions, these laws still are in effect today. They have the same basic objective: making sure there are strong economic incentives for businesses to operate efficiently, keep prices down, and keep quality up.

When consumers decide to purchase a product or service a car, a new refrigerator, or prescription drugs, the goal of the antitrust laws is to make sure their choices are not restricted unreasonably. Consumer choice is a powerful incentive for the sellers of any products to keep their prices low and their quality high. When the antitrust laws are vigorously enforced, businesses must respond to what consumers want. A business that ignores consumer wishes, by refusing either to keep prices competitive or to offer products or services that consumers want, loses its competitive position in the marketplace.

To ensure consumer choice, the antitrust laws set two basic requirements. First, companies cannot agree to limit competition in ways that hurt consumers. Second, single company cannot monopolize or try to monopolize an industry through unfair practices. The antitrust laws prohibit certain kinds of agreements among businesses. They require that each company establish prices or other terms on its own, without agreeing with a competitor or supplier. For example, automobile dealers in a city cannot agree on the price that they charge for cars. Domestic airlines cannot agree about how many flights they will offer from a particular city. Internet service providers cannot agree on the monthly terms for customers. And a clothing retailer cannot agree with a manufacturer about the minimum price the retailer will charge for clothing.

Another type of agreement among competitors involves an outright combination or merger of the companies. These agreements to merge can be illegal if they significantly undermine competition in the marketplace. For example, when Staples,