Federal Trade Commission

Management Overview

FTC and Its Mission

The Federal Trade Commission (FTC) was created by the Federal Trade Commission Act of 1914. The FTC's mandate is to enforce federal antitrust, competition and consumer protection laws. To this end, the FTC's mission implements a core function of government: to protect consumers and enhance competition by eliminating unfair or deceptive acts or practices in the marketing of goods and services, and by ensuring that consumer markets function competitively.

The FTC's work is carried out through two missions. Maintaining Competition works to ensure that the market place is free from anticompetitive mergers and other anticompetitive business practices. Consumer Protection works to ensure that consumer information in the marketplace is not deceptive or misleading. Economic analysis, technical support, and management and administration are provided to each mission by support organizations.

Limitations of the Financial Statements

Responsibility for the integrity and objectivity of the financial information presented in the financial statements rests with FTC management. The accompanying financial statements have been prepared in conformity with the hierarchy of accounting principles approved by the principals of the Federal Accounting Standards Advisory Board (FASAB) and the Office of Management and Budget (OMB) Bulletin 97-01, Form and Content of Agency Financial Statements. FTC is fully committed to the principles and objectives of both the Chief Financial Officers (CFOs) Act of 1990, and the Federal Financial Management Improvement Act of 1996. The fiscal year 1999 financial statements have been prepared with full consideration of the requirements of both acts. Comparative data for the prior fiscal year is presented. The statements should be read with the realization that they are for a component of the U.S. Government, i.e., a sovereign entity.

Audit of FTC's 1999 Principal Statements

The Office of Inspector General of the Federal Trade Commission has examined the agency's financial statements. The Inspector General's report on the principal statements, internal controls, and compliance with certain laws and regulations accompanies the statements.

Financial Resources and Results of Operations

The accompanying statements summarize the FTC's financial position, disclose the net cost of operations and changes in net position, provide information on budgetary resources and financing and present the sources and disposition of custodial revenue for the years ended September 30, 1999 and 1998.

The FTC had total assets of $115.5 million and $99.2 million as of September 30, 1999 and 1998 respectively. Approximately $44.4 million and $25.0 million of the 1999 and 1998 assets, respectively, were funds collected or to be collected for consumer redress. Another $26.6 million in 1999 and $27.1 million in 1998 represent undisbursed Hart-Scott-Rodino (HSR) premerger filing fees, and the remainder represents fund balances in appropriated accounts, account receivables and net capital assets.

The gross cost of operations during the 1999 fiscal year was approximately $117.5 million, a $7.4 increase over 1998. The majority of this increase was associated with the maintaining competition mission. Several financing sources were received which funded these expenses, including premerger filing fees, direct appropriations provided by Congress, reimbursements received from other government agencies, prior-year unobligated carryover amounts and imputed revenue to cover unfunded benefits. The FTC also received additional resources of $2.6 million transferred from the Y2K Contingent Emergency Fund in accordance with the Omnibus Consolidated and Emergency Supplemental Appropriation Act. These funds were used to fund Y2K compliance issues at the agency. The accompanying pie chart details the percentages of these various financing sources.

During 1999, $97.5 million in fees were collected under the premerger notification program as required by the HSR Act. This was a $3.3 million decrease over the previous year fee collection of $100.8 million. Fee collections, to include carryover fees from prior years, funded approximately 86 percent and 80 percent of agency operations in 1999 and 1998, respectively. The FTC collects a filing fee from each acquiring business entity that files a Notification and Report form transaction. The $45,000 fee, which is set by law, is divided equally between the FTC and the Antitrust Division of the Department of Justice (DOJ). The amounts collected for DOJ are shown as nonexchange revenue on the Statement of Custodial Activity.

Of the $117.5 million in gross operating costs, $112.9 million was funded through budget authority. The remaining $4.6 million represents costs which will be funded in a future period. During 1999, expenses for salaries and related benefits totaled $82.4 million, or 70.1 percent, of the total expenses incurred. Lease space rental amounted to $10.6 million, or 9.1 percent, and the remaining $24.5 million, or 20.8 percent, included travel, facility maintenance, utilities, Y2K compliance, and other items. This supported 964 staff-years which were employed in fulfilling the FTC's mission. In fiscal year 1999, the net cost of operations, was $19.5 million, compared to $8.7 million for 1998.

Systems and Control

The FTC maintains a system of internal controls to provide reasonable assurance that its assets are protected from fraud and abuse, transactions are properly executed and recorded, and operations are conducted in accordance with established policies and procedures. The FTC's accounting system conforms in all material respects with the principles, standards, and related requirements specified in the Federal Financial Management Improvement Act of 1996.

The FTC's accounting, personnel, payroll, and accounts payable processing is performed under contract by the Department of Interior's (DOI) National Business Center in Denver, Colorado. FTC has controls in place to ensure the integrity of both payment and payroll processing.

Year 2000 (Y2K) Issues

All FTC's ten mission critical systems, those application systems that are critical to performing the antitrust and consumer protection mission of the agency, have been certified as Y2K compliant. Two systems, the Federal Financial System (FFS) and the Federal Personnel Payroll System (FPPS), which are used by the agency through its contract with the DOI National Business Center have been fully tested and are certified as Y2K compliant Equipment, including central computer facilities, desktop personal computers, printers, telephone systems, etc., have been examined by the FTC or certified by their vendor as Y2K compliant. The final project, installation of a new Y2K compliant security building access system, was completed in December 1999.

The FTC submitted a Y2K Emergency Funding request to OMB for $2,599,000 in order to support a government-wide Y2K consumer hotline, to complete upgrade network infrastructure, to replace physical equipment, and to correct Y2K deficiencies found in testing. The FTC has obligated $2,244,000 of which $769,000 have been expended through September 30, 1999. FTC had a Y2K contingency plan in place, and submitted a Business Continuity and Contingency Plan to OMB, however, the FTC experienced no significant disruptions of agency operations during actual Y2K conversion.

Custodial Activity

To prevent fraud, deception, and unfair business practices in the marketplace, the FTC's enforcement staff seeks to identify practices that cause the greatest consumer injury, stopping these practices through law enforcement, and preventing consumer injury through education. Fighting fraud is one of the Commission's highest priorities; consumers are bilked out of billions of dollars a year by perpetrators of traditional fraud and fraud on the Internet. In fraud cases, the Commission files actions in federal district court to bring an immediate halt to ongoing business activities and freeze defendants' assets. The Commission then pursues court orders that permanently ban the fraudulent activities and provide redress to consumers. In non-fraud cases, usually involving advertising claims, redress may be obtained for consumers in settlement of administrative complaints. In addition, when a company or individual violates an FTC Trade Regulation Rule, a statute enforced by the agency, or a prior agency order, the Commission seeks Federal district court orders permanently barring future violations and requiring payment of civil penalties. As these agency enforcement activities generate substantial amounts of nonexchange revenue, a Statement of Custodial Activity (SCA) forms part of the FTC's financial statement package.

The SCA is a required financial statement under Statement of Federal Financial Accounting Concepts (SFFAC) No. 2 for those Federal agencies that collect nonexchange revenues (e.g., taxes, duties, fines, and penalties) for the General Fund of the Treasury, a trust fund, or other recipient entities. The fiscal year 1999 SCA for the agency shows nonexchange revenue of $130.5 million for activities performed by the agency under its two major enforcement missions: maintaining competition and consumer protection.

Strategic and Performance Information

The FTC is the only federal agency with broad powers to promote and protect consumer welfare throughout the economy. Its work is based on the belief that competition among producers, and accurate information in the hands of consumers, bring the best products and lowest prices to the marketplace, spur innovation, and strengthen the economy. The FTC performs its work through two missions - Consumer Protection and Maintaining Competition. Following, for each mission, is a narrative description of strategic objectives and a tabular exhibit of FY 1999 accomplishments.

Consumer Protection

The goal of the Consumer Protection mission is to prevent fraud, deception, and unfair business practices in the marketplace. The CP mission works to accomplish this goal through three objectives:

Objective 1- Identify fraud, deception, and unfair practices that cause the greatest consumer harm. Performance is measured in this objective by the cumulative number of consumer complaints and inquires in the FTC Consumer Information System. The FTC uses the complaints in this database to identify problem areas as reported by the public. This use of the complaint data enables the mission to rapidly detect and respond to fraud, deception, and other illegal practices, resulting in effective targeting of the mission's law enforcement resources. Further, to increase the effectiveness of law enforcement agencies across the United States and Canada, the complaint data is shared with over 200 external federal, state and local partners.  

Objective 2- Stop fraud, deception, and unfair practices through law enforcement. This objective has both a fraud and non-fraud component. In the fraud component, the ultimate goal of the mission is to save consumers money. This is done by stopping fraudulent operators usually through successful litigation or settlement with the agency. Consumer savings are increased through the mission's leading of joint enforcement initiatives with Federal, state, local, and international partners.

The goal of the non-fraud component is to increase compliance with the laws against deceptive and unfair practices, thereby ensuring that consumers have more accurate and complete information for their purchasing decisions. Compliance is increased by targeting areas for law enforcement and by encouraging industry self-regulation.

Objective 3- Prevent consumer injury through education. The mission develops education campaigns to accompany each of its major law enforcement initiatives. Public education programs benefit consumers by alerting them to their rights under various consumer protection laws and providing practical tips on how to recognize and avoid scams and rip-offs. To reach the broadest-possible audience, the mission makes maximum use of the national media, the FTC's website, ftc.gov, and the inter-agency consumer.gov website. The mission's messages also reach the public through the FTC's Consumer Response Center and the hundreds of consumer protection partners who distribute its materials, link to the FTC website, or post the mission's messages on their website.

Maintaining Competition

The goal of the Maintaining Competition mission is to prevent anticompetitive mergers and other anticompetitive business practices in the marketplace. The MC mission works to accomplish its goal through three objectives:

Objective 1- Identify anticompetitive mergers and practices that cause the greatest consumer injury. Premerger notification requirements of the Hart-Scott-Rodino (H-S-R) Act provide the primary means for identifying potentially anticompetitive mergers. Mergers that are anticompetitive can drive up consumer prices by millions of dollars every year and can significantly diminish output, product quality, innovation and consumer choice. To prevent this outcome, mission staff review all filings made for proposed mergers, acquisitions and joint ventures, and perform preliminary antitrust review for every transaction that is filed with the Commission. A number of other means are also used to identify matters requiring potential law enforcement action. Current investigations often provide information and expertise that leads to follow-on investigations of likely investigations. The mission also receives numerous inquiries and complaints from customers and competitors throughout the country. To ensure the effectiveness of its work, the mission closely monitors compliance with its divestiture orders and continues to build on its efforts to improve the speed of divestitures.  

Objective 2- Stop anticompetitive mergers and practices through law enforcement. This objective has both a fraud and non-fraud component. The core of the merger enforcement component focuses on mergers among divergent competitors. The mission also acts against vertical and potential competition mergers and joint ventures that harm or threaten to harm competition. A major focus is directed at transactions in industries in which the Commission has particular expertise, including energy and natural resources, food, health care, consumer goods and services, pharmaceuticals, defense and aerospace, video programming and distribution (cable television), and various manufacturing industries.

The mission's nonmerger activities focus on business activities that significantly threaten competition and harm consumers. These activities may be between direct competitors, between suppliers and customers, or between potential competitors. The common thread among the investigations and cases brought is that the activities being challenged threaten to harm competition. In addition, the mission employs a forward-looking analysis to undertake projects that examine the legal, economic and policy implications of agreements among competitors; various distributional arrangements; issue appropriate enforcement policy statements; and continue its efforts on issues related to single firm anticompetitive behavior.

Objective 3- prevent consumer injury through education. The mission increases the awareness of antitrust law through guidance to the business community; outreach efforts to Federal, state and local agencies, business groups and consumers; development and publication of antitrust guidelines and policy statements; and speeches and publications. The goal of these efforts is to publicize the mission's antitrust law and business intentions, with the likely result of deterring future anticompetitive behavior.

Fiscal Year 1999 Year-End Review
Annual Performance Measures

Consumer Protection Mission

Maintaining Competition Mission