Hovenkamp Herbert, Federal Trade Commission and the Sherman Act

62 Fla. L. Rev. 871 (2010) | | |

INTRODUCTION :: The Federal Trade Commission was created in 1914 with the authority to identify and condemn “[u]nfair methods of competition.” The FTC, originally referred to as an “interstate trade commission,” was part of President Woodrow Wilson’s progressive campaign promise against big business, and much of its support came from, frankly, anti-big-business interest groups. Others really believed that comprehensive federal regulation and even a federal incorporation act would have been superior to the state corporate law system that we continue to have, but they settled on the FTC as a compromise. The FTC Act creates a tribunal headed by five Commissioners, not more than three of whom may be from the same political part. Significantly, Congress chose initially not to create an elaborate code of competitive business behavior. Rather, it took its cue from the Sherman Act, which prohibited anticompetitive conduct in only the most general terms. Indeed, the term “unfair methods of competition” is even more general than the Sherman Act’s rather vague condemnation of contracts, combinations, and conspiracies in restraint of trade in § 1 or of every person who shall “monopolize” in § 2.

Read with the aid of nearly a century of hindsight, the term “unfair” seems unfortunate, for it suggests that the Commission was concerned more with business torts than with truly anticompetitive practices. Business torts can encompass many kinds of deceptive or unfair conduct, often without regard to anticompetitive consequences. Indeed, many of those historically accused of business torts are not dominant firms bent on monopoly at all, but rather small, undercapitalized or fly-by-night companies that make their living by deceit or by free riding on the investments of other firms.

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