Attachment 1
Statutory and Organizational Framework
The Federal Trade Commission ("FTC"), an independent law enforcement agency, consists of five members, each of whom is appointed by the President and confirmed by the Senate to a seven-year term. No more than three (3) Commissioners may be from any one political party. The Commission currently includes Chairman Robert Pitofsky -- who became Chairman in April 1995 -- and Commissioners Mary L. Azcuenaga, Janet D. Steiger, Roscoe B. Starek, III, and Christine A. Varney. The agency's organic statute, the Federal Trade Commission Act, prohibits unfair methods of competition and unfair or deceptive acts or practices.
A. The Consumer Protection Mission
In executing its consumer protection law enforcement responsibilities, the Commission can rely both upon section 5 of the FTC Act -- which prohibits unfair or deceptive acts or practices -- and upon a number of more specific consumer protection statutes. Under Section 5 of the Act, the Commission has determined that a representation, omission, or practice is deceptive if (1) it is likely to mislead consumers acting reasonably under the circumstances; and (2) it is material; that is, likely to affect consumers' conduct or decisions with respect to the product at issue.(1) In a statute that became effective in August 1994, Congress amended Section 5 of the FTC Act to provide that an act or practice is unfair if the injury to consumers it causes or is likely to cause (1) is substantial; (2) is not outweighed by countervailing benefits to consumers or to competition; and (3) is not reasonably avoidable by consumers themselves.(2)
Congress has over time enacted a number of other statutes prescribing more specific types of enforcement responsibilities. In the late 1960s and early 1970s, for example, a number of statutes substantially strengthened the Commission's enforcement presence in the credit practices area. These statutes include the Truth in Lending Act (effective in 1969), as amended by the Fair Credit Billing Act (effective in 1975) and other statutes; the Fair Credit Reporting Act (effective in 1971); the Equal Credit Opportunity Act (effective in 1975); the Fair Debt Collection Practices Act (effective in 1978); and the Consumer Leasing Act (effective in 1977).(3) With respect to tobacco products, the Public Health Cigarette Smoking Act of 1969, as amended in 1984, requires cigarette packages to bear one of four rotated health-related warnings, and in addition requires the Commission to submit annual reports to Congress concerning the effectiveness of cigarette labeling, current practices and methods of cigarette advertising and promotion, and recommendations for legislation. In addition, the Comprehensive Smokeless Tobacco Health Education Act of 1986 requires manufacturers, packagers, and importers of smokeless tobacco products to place one of three statutorily prescribed health warning labels on their product packages and in advertisements, on a rotating basis; prohibits them from advertising smokeless tobacco products on radio and television; and empowers the Commission to enforce these provisions. In addition, the Wool Products Labeling Act, the Fur Products Labeling Act, and the Textile Fiber Products Identification Act -- all enacted in 1939 -- address different aspects of textile fiber product labeling.
Together, these statutes place responsibility on the Commission in connection with matters such as health claims in food advertising; environmental advertising and labeling; general advertising issues; health care fraud; telemarketing, business opportunity, franchise and investment fraud; mortgage lending and discrimination; enforcement of Commission orders; and enforcement of the credit statutes and a wide variety of trade regulation rules.
B. The Maintaining Competition Mission
In executing its antitrust law enforcement responsibilities, the Commission can rely both upon section 5 of the FTC Act -- which prohibits unfair methods of competition -- and upon a number of other antitrust statutes. As a general proposition, practices that constitute unfair methods include at least practices that violate the Sherman Act and the Clayton Act. Thus, for example, while the Commission cannot directly enforce the Sherman Act, it can prohibit -- as unfair methods of competition -- practices that (1) violate Section 1 of the Sherman Act because they constitute a "contract, combination . . ., or conspiracy, in restraint of trade or commerce;" or (2) violate Section 2 of the Sherman Act because they constitute monopolization of, an attempt to monopolize, or a conspiracy to monopolize a particular market.(4) In addition, the Commission can directly enforce the Clayton Act. Thus, for example, section 7 of the Clayton Act directs the Commission and the Justice Department to prevent acquisitions that may substantially lessen competition or tend to create a monopoly, and therefore threaten competition and consumer welfare. To assist with that effort, section 7A of the Clayton Act requires companies to file premerger notifications with the Commission and the Antitrust Division for transactions satisfying certain threshold requirements, and to wait specified periods of time before consummating such transactions. Moreover, section 2 of the Clayton Act, as amended by the Robinson-Patman Act, prohibits certain forms of price discrimination that may substantially lessen competition or tend to create a monopoly, and therefore threaten competition and consumer welfare. In addition, section 3 of the Clayton Act addresses certain types of tying and exclusive dealing arrangements, and section 8 of the Act addresses interlocking directorates and officers.
Both the consumer protection and maintaining competition missions are supported by other divisions within the FTC, such as the Bureau of Economics, the Office of General Counsel, and Policy Planning. Pursuant to its authority under the Federal Trade Commission Act, the FTC conducts studies and research about competition in the U.S. economy, holds public hearings on such issues, and provides policy analysis on consumer protection and competition issues to state, federal and other governmental entities upon request. The FTC also is committed to educating consumers and businesses about consumer protection and competition issues. Thus, for example, the FTC hosts workshops on emerging issues and provides a variety of services to assist its customers -- including a World Wide Web site on the Internet, brochures, videos, and telephone access to members of its staff -- concerning the whole spectrum of FTC consumer protection and maintaining competition efforts.
1. Stouffer Foods Corporation, Docket No. 9250 (Sept. 26, 1994), slip op. at 3; Kraft, Inc., 114 F.T.C. 40, 120 (1991), affirmed and enforced, 970 F.2d 311 (7th Cir. 1992), cert. denied, 113 S.Ct. 1254 (1993); Removatron International Corporation, et al., 111 F.T.C. 206, 308-09 (1988), citing, e.g., Southwest Sunsites, Inc. v. FTC, 785 F.2d 1431, 1436 (9th Cir.), cert. denied, 107 S.Ct. 109 (1986); International Harvester Co., 104 F.T.C. 949, 1056 (1984); Cliffdale Associates, Inc., 103 F.T.C. 110, 164-65 (1984); see generally Federal Trade Commission Policy Statement on Deception, appended to Cliffdale Associates, Inc., 103 F.T.C. at 174 et seq.
2. See Section 5(n) of the FTC Act, 15 U.S.C. § 45(n), added by The Federal Trade Commission Act Amendments of 1994, Pub.L. No. 103-312. The Commission previously relied on similar criteria to define the scope of its authority to prohibit unfair acts or practices pursuant to Section 5(a) of the FTC Act. See, e.g., Orkin Exterminating Company, Inc., 108 F.T.C. 263, 362 (1986); International Harvester Co., 104 F.T.C. 949, 1061 (1984); see generally Federal Trade Commission Policy Statement on Unfairness, appended to International Harvester Co., 104 F.T.C. at 1070-76.
3. These statutes have been amended on a number of occasions; for example, they were all amended in 1996.
4. See, e.g., FTC v. Motion Picture Advertising Serv. Co., 344 U.S. 392, 394-95 (1953); FTC v. Cement Institute, 333 U.S. 683, 694 (1948); Fashion Originators' Guild v. FTC, 312 U.S. 457, 463-64 (1941).