Remarks

The Columbia University International Journalists Seminar

Date:
By: 
Sheila F. Anthony, Former Commissioner

Welcome to the Federal Trade Commission! The FTC is a law enforcement agency that has been on duty since 1915, protecting consumers from unfair methods of competition and deceptive business practices.

I am one of the five FTC Commissioners and would like to give you an overview of the FTC, its missions, its organization, and where it fits into our government.

I. The FTC's "independence"

The relationship of an enforcement agency like the FTC to other parts of the government can be critical to its effectiveness. As a practical matter, antitrust and consumer protection policy is, at any given time, what those who interpret, apply, and enforce the antitrust and consumer protection laws say it is. History teaches that the legal structure through which policy is implemented can be as critical to its effectiveness as the substance of the policy itself.

With the creation of the Federal Trade Commission, the Congress tried to do two seemingly contradictory things: On the one hand, it wanted to give the FTC some independence, or at least deference to its decisions and authority. On the other hand, Congress also wanted to assure the FTC's accountability.

The agency's independence is attributable in part to the fact that we can conduct our own investigations and prosecute our own cases through an administrative procedure here at the agency or by bringing a case to a U.S. District Court. The agency's independence is also attributable to the fact that the Commissioners cannot be removed from their position simply because the President or the Congress disagrees with their decisions.

I will discuss how the FTC is held accountable in a few moments.

II. The FTC, its organization

But first, Let me tell you some specifics about the agency and its organization, starting with the Commissioners:

  • The FTC has five Commissioners who are nominated by the President and confirmed by majority vote of the U.S. Senate
  • Those commissioners serve a seven-year term - three years longer than the President's term - and they can be removed by the President only for good cause,(1) a limitation on the President's power that has survived a Supreme Court test.(2)
  • The terms of the five commissioners are staggered; that is, the term of each member commences and ends at a different time. (Mine, for example, ends on September 25, 2002.)
  • No more than three of the commissioners can be members of the same political party.

These factors help to insulate the FTC's commissioners from direct political pressure. But that does not mean, however, a lack of accountability. The Judiciary may review our decisions. The Congress grants both legal jurisdiction and budgetary authority to permit us to carry out our missions. And, the President has the authority to designate which commissioner shall be the Chairman.(3) As you might expect, this is usually someone with compatible views.

III. Carrying out the FTC's Missions

The fulfillment of the Commission's two main missions - consumer protection and maintaining competition - is assisted by the work of the Commission's staff of lawyers, economists, and other professional and clerical staff. The staff is organized into two enforcement Bureaus - the Bureau of Competition and the Bureau of Consumer Protection - and the work of those bureaus is supported by the Bureau of Economics which provides economic analysis.

Each Bureau is divided into groups that specialize on particular problem areas. For example, the Bureau of Competition includes four divisions that are devoted to reviewing mergers, one that is devoted to examining anticompetitive practices, and one that deals with both mergers and anticompetitive practices solely in the health care industry. The Bureau of Consumer Protection includes separate divisions to examine 1) advertising, 2) financial, and 3) marketing practices. Both bureaus have compliance divisions to monitor and assure compliance with our decisions and orders.

As we learn of anticompetitive or deceptive practices, we open a preliminary investigation of the matter. The staff assigned to the case will make inquiries aimed at verifying the allegations to determine whether further investigation is needed. If further investigation is warranted, the staff must ask the Commission for authority to use compulsory process either subpoenas or civil investigative demand to obtain information from targets of the investigation and third parties who may - for legitimate reasons - have concerns about cooperating with our investigation. If, as a result of this further investigation, the staff believes that the acts complained of fall within the prohibitions of the FTC Act and are unfair methods of competition or are deceptive, the staff may recommend that the Commission issue a complaint. In many instances, however, the targets of the investigation will seek to settle the charges by agreeing to stop the offending practice and to be subject to an order that would penalize them for further transgressions.

IV. How big is the FTC?

You might wonder how many people we have doing this work. Currently, we employ a little under 1,000 people, most here in Washington at headquarters, the remainder in seven regional offices located around the country. The Congress appropriated about $125 million for the operation of the agency this year.(4)

What do the taxpayers get in return for this expenditure? For example, during the last fiscal year:

  • We estimate that we saved consumers $1.6 billion through our law enforcement actions.
  • We and DOJ reviewed a record number of mergers (4642). The number of notified mergers tripled from 1991 to 1999. The dollar value of the mergers was nearly 2 Trillion Dollars - an 11-fold increase.
  • We received and processed more than 390,000 consumer complaints in a data base shared with over 200 law enforcement agencies, and distributed more that 8.6 million educational publications.

The enforcement actions that we have taken in the face of the merger wave have protected consumers in many markets, including pharmaceuticals and petroleum products.

Let me tell you about a particular case that I feel exemplifies our work. In December 1998, the Commission sued Mylan Laboratories and three other companies, alleging that their exclusive vertical supply agreements violated the antitrust laws. The case is presently in the discovery stage with a trial expected to occur next year.

In late 1997, Mylan Laboratories entered into several exclusive supply agreements with effectively the only supplier of the active pharmaceutical ingredient for two generic drugs it produced. These exclusive supply agreements were part of an overall scheme by Mylan to dramatically raise the prices of the two generic drugs.

Because these two drugs are used to treat chronic anxiety, they are heavily prescribed in nursing homes and hospices, and users tend to stay on them for long periods of time. The agreements prevented Mylan's competitors from having access to supply and thereby made it easier for Mylan to raise prices. As a result of these exclusive agreements, Mylan was able to raise the prices of the drugs by 2,000 to 3,000 percent, costing consumers over $120 million. Can you imagine what an impact such drastic price increases had on consumers who depend on these medications on a daily basis? Especially, when many of those consumers are elderly and most likely on fixed incomes!

Because this case is currently pending in the Federal District Court for the District of Columbia, it remains to be seen whether a Federal Judge will agree with the allegations contained in the Commission's complaint and issue a permanent injunction or order monetary relief. Nonetheless, I hope that this case sends a strong message to businesses that if they engage in anticompetitive conduct that has a clear negative effect not just on competition, but consumers as well, I as a Commissioner will seek relief that goes beyond a mere slap on the wrist. I will be looking for strong injunctive relief, and, in appropriate cases, disgorgement as well.

V. Concluding comments

This gives you an overview from a Commissioner's perspective - with some pride - of what the FTC is and what it does. I will turn the meeting over to Randy Tritell, the head of the International Division in our Bureau of Competition, who will tell you about the international dimension of the FTC's enforcement work.

1. . . . specifically "inefficiency, neglect of duty, or malfeasance in office." 15 U.S.C. § 41.

2. Humphrey's Executor v. U.S., 295 U.S. 602, 627-632 (l935). President Franklin Roosevelt notified FTC Commissioner William Humphrey on Oct. 7, 1933, that he was removed from office (after earlier seeking his voluntary resignation) due to their divergent views of the policies administered by the FTC. Humphrey thereupon sued for his salary; he subsequently died, but his Estate prevailed and recovered his salary.

3. Reorganization Plan No. 8 of 1950, § 3; 64 Stat. 1264; 5 USC App. 1. Accordingly, a newly-inaugurated President could immediately designate a sitting FTC commissioner of his political party to be Chairman thus shifting the patronage and agenda-setting powers of the Office of Chairman to someone of - presumably - more compatible views.

4. This figure and those that follow are taken from the FTC's Fiscal Year 2001 budget request to Congress.