FTC Finally Defines ‘Unfair’

According to the FTC: “The basic consumer protection statute enforced by the Commission is Section 5(a) of the FTC Act, which provides that “unfair or deceptive acts or practices in or affecting commerce … are … declared unlawful.” (15 U.S.C. Sec. 45(a)(1)). Safe Web amended Sec. 5(a) “unfair or deceptive acts or practices” to include such acts or practices involving foreign commerce that cause or are likely to cause reasonably foreseeable injury within the United States or involve material conduct occurring within the United States.”

Given that view and the FTC’s traditionally robust enforcement activities in areas of false, deceptive or misleading advertising, it is not surprising that most advertising, marketing and promotional professionals are familiar with section 5.

However, of lesser fame are pronouncements by the FTC in what is “unfair” competition – another segment of the authority vested in the Federal Trade Commission by section 5 of the FTC Act. This is the lesser-known part of section 5 that gives the FTC the authority to take action when it determines that “unfair methods of competition in or affecting commerce” may be deemed illegal – essentially an antitrust concept.

For the first time, the FTC, this past Thursday (August 13, 2015) released a single page “Statement of Enforcement Principles Regarding ‘Unfair Methods of Competition’ Under Section 5 of the FTC Act“. Perhaps indicative of the challenges and internal discussions among the regulators themselves, the principles are short and, to many, appear to be a re-statement of what has already been the enforcement practices of the FTC in recent years concerning this provision of the Act.

The Commission announced it will follow three basic principles. In short, enforcement will be considered: (1) Using the same underlying principles that guide antitrust law – protection of consumer welfare; (2) if the practice causes, or is likely to cause, harm to competition or the competitive process, without any counter-balancing justification; and (3) if enforcement under the Sherman or Clayton Act is insufficient and independent action is considered necessary.

If you want to know more or have questions, please contact me or any Rimon attorney with whom you work.

Google and the FTC

An Open IMHO Letter to Google

Dear Google:

I’ve heard that the FTC has served you with a civil investigative demand in connection with your search-advertising business. They have raised the question as to whether your search engine technology pushes consumers to your other services in a manner that is unfair to your competition.

Now the FTC will try to determine if your market power is dominant because your practices are unfair and whether consumers are harmed, either directly or by not having competitive choices in the marketplace. Of course, the FTC has taken into account the complaints of your competitors. That is significant because I’ve heard a rumor that companies rarely try to incite trouble for their competitors at a regulatory agency.

So what happens next? Senior executives scramble. Lawyers do research and prepare briefs. Finance people set up cost centers and budgets. Evidence is gathered. Experts are retained. Distraction will be pervasive, invasive, consistent and persistent – until a settlement is reached. It won’t be pretty. It won’t be fun. It never is. But it’s here and at least the sword of Damocles is not hovering above. The issues will be confronted and the scope will be expanded – government always uses what it finds as a basis for going farther than originally planned (it’s great leverage). Then the serious business of trying to reach an accord will begin.

This isn’t about winning or losing. It’s about making a point. But it’s de facto, a recognition that you are thriving at what you do and have grown large and successful as a result. True, this action is probably not the recognition you prefer, but when the government wants everyone to believe you might be too big, too dominant, too much in control at the expense of competition and the detriment of consumers, the target is painted on you and it’s just a question of how much pain is inflicted before a settlement is reached.

Now I am not an economist or a market dominance expert, I’m a lawyer and blogger; but I thought I might help out by offering some observations you can bring to the attention of the FTC that might give the government (maybe others in the industry and even your competitors), pause to question whether their analysis, their efforts, their investigation, is correct or necessary. I’ve taken the liberty of including an attachment to this letter (see Attachment A) that provides some tips. Feel free to use them and tell your lawyers to back them up with lots of research and briefs – those are always impressive and useful.

Sincerely,

Joe Rosenbaum at Legal Bytes.

P.S. If your people end up spending hours, days and months with government regulators, working through lunches, late nights pouring over documents, huddled around conference tables, it may give you an opportunity to point the officials to their next target. You know who.

P.P.S. Feel free to use these and other quotes from the FTC if you like:

“And, as the information industry is still emerging, quite dynamic, and not yet well understood, plausible efficiency benefits should, perhaps, weigh heavily in the balance against asserted risks of decreased competition, especially when the technology is changing so fast that adverse effects on competition are likely to be transitory.”

Antitrust and Technology: What’s On The Horizon?” Prepared Remarks of Federal Trade Commissioner Christine A. Varney, before the American Society of Association Executives, Legal Symposium, Washington, D.C., October 6, 1995

“A less confrontational approach suggests that because of the robust pace of innovation in high-tech industries, government should not intervene ‘unless certain that doing so will benefit consumers and the economy.’ (See, Priest, The Law and Economics of U.S. v. Microsoft, AEI Newsletter, August 1998).” Antitrust Analysis in High-Tech Industries: A 19th Century Discipline Addresses 21st Century Problems, Prepared Remarks of Robert Pitofsky, Chairman, Federal Trade Commission, to the American Bar Association Section of Antitrust Law’s Antitrust Issues in High-Tech Industries Workshop, February 25-26, 1999, Scottsdale, Arizona

You really need to see Attachment “A” so if it isn’t already displayed, point whichever browser you are using and click the “Continue Reading” text on the left below.

Continue reading “Google and the FTC”

Transcending the Cloud – Tying Up Cloud Antitrust Issues in a Bow

As you know, we have been updating our Cloud Computing initiative with a consistent stream of information – new chapters and white papers intended to provoke thought, stimulate ideas and, most of all, demonstrate the thought leadership Rimon attorneys bring to bear when new and important trends and initiatives in the commercial world give rise to new and interesting legal issues. Often, especially when words like “privacy” and “security” are thrown about, it becomes easy to overlook some of the other issues lurking in the background.

So here, from Jeremy D. Feinstein, is a glimpse at some antitrust issues. This next chapter in Rimon’s on-going series, “Transcending the Cloud: A Legal Guide to the Risks and Rewards of Cloud Computing,” is titled “Tying Up the Cloud,” and seeks to give you some insights into the potential antitrust and competitive issues that even customers should be aware of, if not concerned with, when considering entering the cloud.

As we continue to do, we have updated the entire work so that, along with the single chapter on “Tying Up the Cloud” applicable to antitrust, you can now access and download the PDF of our complete “Transcending the Cloud: A Legal Guide to the Risks and Rewards of Cloud Computing” compendium, up to date and including all the previous chapters in one document.

Feel free to contact Jeremy D. Feinstein directly if you have any questions or require legal counsel or assistance related to competition or antitrust. Make sure you subscribe via email or get the Legal Bytes RSS Feed so you are always in touch with our latest information. Of course, if you ever have questions, you can contact me, Joseph I. (“Joe”) Rosenbaum, or Adam Snukal, or any Rimon attorney with whom you regularly work.