Over the last several years, both Leibowitz and Commissioner J. Thomas Rosch have made the argument that Congress designed Section 5 to grant the FTC authority to investigate anti-competitive conduct beyond the confines of the traditional antitrust laws, such as the Sherman Antitrust Act. Section 5 vaguely prohibits "unfair or deceptive acts or practices in or affecting commerce." Leibowitz recently stated that "we think that used judiciously and appropriately, our Section 5 authority ... can benefit consumers and businesses alike. ... Businesses because the possibility of follow-on private treble damages actions is diminished ... and consumers because we can reach some anti-competitive harm that perhaps the antitrust laws can no longer reach." This interpretation of Section 5 is now under heavy attack from all sides.
On November 15, several Republican members of the Senate, including Senators Jim DeMint of South Carolina, Pat Toomey of Pennsylvania and Marco Rubio of Florida, sent the FTC a strong letter. In emphasizing "poor employment and economic growth," they urged the FTC "to act with humility and restrain itself to activities for which it has clear legal authority." The lawmakers also questioned the FTC's "apparent eagerness ... to expand Section 5 actions without a clear indication of authority or a limiting principle," and asked "for clarity related to the FTC's ongoing and intended use of Section 5 authority granted under the Federal Trade Commission Act." Some lawmakers are troubled by the FTC's seeming obsessive investigation of "the rapidly evolving technology industry," as well as "the consequences of hampering legitimate business model innovations and market activities of companies under an aimless, expansive and possibly unauthorized use of the commission's powers."
Two Democratic lawmakers also expressed "great concern" about the FTC's use of Section 5 in its probe of Google in a letter sent to Leibowitz on November 19. California state Congresswomen Anna Eshoo, D-Palo Alto, (the ranking member of the communications and technology subcommittee) and Zoe Lofgren, D-San Jose, stressed that "such a massive expansion of FTC jurisdiction would be unwarranted, unwise, and likely have negative implications for our nation's economy." The letter highlighted "online services, a crucial engine of job creation, where technological advancement and small business innovation are rapid." The congresswomen are particularly troubled because the FTC's threatened use of Section 5 "could lead to overbroad authority that amplifies uncertainty and stifles growth" in the technology sector. Other lawmakers from both sides of the aisle continue to express similar concerns. Just last week, Leibowitz received a letter from Oregon Democratic Senator Ron Wyden, who also criticizes the FTC's "troubling" probe of Google and its controversial interpretation of Section 5, which has received no quarter in the courts to date.
In addition to lawmakers, companies, including Google and Microsoft, have been actively seeking guidance on the FTC's use of Section 5. Representatives of the Chamber of Commerce, which includes the aforementioned companies, recently met with the commission and senior members of the FTC staff in order to request more information and guidance on the FTC's use of Section 5 going forward. Significantly, concerns regarding the FTC's use of Section 5 to challenge conduct beyond the reach of the Sherman Act, which to this date the Supreme Court has resisted, have been voiced even from within the halls of the commission. Commissioner Maureen Ohlhausen, the newest member of the commission, recently stated the "need to use Section 5 on the competition side very cautiously."
Will Congress's opposition to an expanded use of Section 5 of the FTC Act alter Obama's aggressive antitrust agenda on the DOJ side? Will the DOJ feel a need to be even more aggressive to maintain the competitive balance with its sister enforcement agency? Will the FTC be successful in the courts trying to expand Section 5 beyond the Sherman Act, after years of failing to do so? Will Corporate America decide to fight back or let the FTC have its way? Will Leibowitz and Rosch's announced departures from the FTC and the nomination of Dr. Josh Wright, a professor at George Mason University School of Law, to fill one seat on the bipartisan FTC quell the FTC's passion for using Section 5? With so many ponderables for the new season, stay tuned.
Carl W. Hittinger is the chairman of DLA Piper's litigation group in Philadelphia, where he concentrates his practice in complex commercial trial and appellate litigation with a particular emphasis on antitrust and unfair competition matters. He can be reached at 215-656-2449 or carl.hittinger@dlapiper.com.
Lesli C. Esposito is a partner with the firm in Philadelphia, where she focuses her litigation practice on antitrust and unfair competition matters. She was formerly a senior attorney with the Federal Trade Commission's bureau of competition.
This article originally appeared in The Legal Intelligencer.
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