Operationalizing the Third Prong of the Federal Trade Commission’s 2015 Statement Regarding “Unfair Methods of Competition”

By Harris S. Rothman

Courts have long held that the Federal Trade Commission’s authority to prohibit “unfair methods of competition” embraces not only the enforcement of the prohibitions of the Sherman and Clayton Acts, but also a “standalone” mandate to challenge practices that violate the spirit but not the letter of these laws. In a 2015 Statement, the Commission announced that it “is less likely to challenge an act or practice as an unfair method of competition on a standalone basis if enforcement of the Sherman Act or Clayton Act is sufficient to address the competitive harm arising from the act or practice.” The meaning of the “sufficient to address” condition is not immediately obvious, and the statement’s critics have pointed to it as just one respect in which the statement is unhelpfully vague. Despite a recent surge in scholarship arguing that the Clayton and Sherman Acts as applied are insufficient to promote the original goals of antitrust law, scholars have not devoted extensive analysis to the interpretation of the third prong’s language.

This Note argues that the third prong reflects the Commission’s determination that the most appropriate use of standalone authority is to fill gaps in the “traditional” antitrust regime of the Sherman and Clayton Acts. The Note proceeds to propose a decision-making framework that the Commission could use to actuate that interpretation. Part II introduces the basic policies of the antitrust laws and the provisions of the Sherman, Clayton, and Federal Trade Commission Acts. Part III reviews the scope of the Commission’s standalone authority under Section 5 of the FTC Act. Part IV analyzes the third prong of the Commission’s 2015 Statement, and argues that it is best interpreted as favoring gap-filling uses of standalone authority relative to other applications. It then develops a framework to guide the Commission in identifying legitimate gaps in the antitrust regime, identifies circumstances in which standalone enforcement may be most appropriate outside of such gaps, and demonstrates how the Commission might apply the framework in weighing a standalone complaint against Google’s allegedly anticompetitive implementation of “Universal Search.”

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