FEDERAL TRADE COMMISSION
The Federal Trade Commission (FTC) is an
independent federal regulatory agency charged
with the responsibility of promoting fair com-
petition among rivals in the marketplace by pre-
venting unfair and deceptive trade practices and
restraining the growth of monopolies that tend
to lessen free trade.
The Federal Trade Commission was estab-
lished on September 26, 1914, by the Federal
Trade Commission Act (15 U.S.C. 41 et seq).
Created by Congress at the urging of President
WOODROW WILSON, the FTC was designed to
regulate trusts and prevent UNFAIR COMPETI-
TION in interstate commerce. The FTC succeeded the Bureau of Corporations as the fed-
eral agency in charge of regulating unfair and
non-competitive trade practices.
The FTC’s creation was supported both by
anti-monopolists seeking to halt “unfair compe-
tition” that resulted from the trust building
actions of larger corporations and by business-
men seeking “fairness” as a basis for greater
order and stability in the marketplace.
The FTC is composed of five commissioners
appointed by the President of the United States,
with the advice and consent of the Senate, for
a term of seven years. Not more than three of
the commissioners may be members of the s
ame political party. One commissioner is desig-
nated by the president as chairman of the com-
mission and is responsible for its administrative
management.
Generally speaking, the FTC is bestowed
with the power to oversee, issue, and enforce
federal rules, regulations, and laws governing
unfair competition among businesses in the
United States. Under the SHERMAN ANTITRUST
ACT (15 U.S.C. § 1) and CLAYTON ANTITRUST
ACT (15 U.S.C. § 18), the FTC is charged with
the duty of applying the so-called “Rule of Rea-
son” to disputes of unfair competition. Under
this rule, restraints of trade are deemed unlawful
only to the extent they are “unreasonable.”
Specifically, the FTC’s functions include:
(1) promoting competition through the preven-
tion of general trade restraints such as price-fix-
ing agreements, boycotts, illegal combinations
of competitors, and other unfair methods of
competition; (2) stopping corporate mergers,
acquisitions, or joint ventures that substantially
lessen competition or tend to create a MONOP-
OLY; (3) preventing interlocking directorates (an
interlocking director is a director who simula-
neously serves on the boards of two or more
corporations that deal with each other or have
allied interests.) that may restrain competition;
(4) preventing the dissemination of false or
deceptive advertisements of consumer products
and services; (5) ensuring the truthful labeling
of products; (6) promoting electronic com-
merce by stopping FRAUD on the INTERNET and
developing policies to safeguard online privacy
of personal information; (7) stopping fraudu-
lent telemarketing schemes and protecting con-
sumers from abusive and deceptive telephone
tactics; (8) requiring creditors to disclose in
writing certain cost information, such as the
annual percentage rate, before consumers enter
into credit transactions; (9) protecting con-
sumers against circulation of inaccurate or
obsolete credit reports and ensuring that credit
bureaus, consumer reporting agencies, credit
grantors, and bill collectors exercise their
responsibilities in a manner that is fair and equi-
table; (10) educating consumers and businesses
about their rights and responsibilities under
FTC rules and regulations; and (11) gathering
factual data concerning economic and business
conditions and making it available to the Con-
gress, the president, and the public.
The FTC discharges many of these responsi-
bilities by holding hearings, soliciting public and
expert feedback, and conducting investigations
in areas of concern to consumers. Based on the
formal testimony and other informal informa-
tion provided at these hearings and gathered
during investigations, the FTC will issue a tem-
porary or proposed rule, after which it will nor-
mally solicit more feedback either in writing or
again through additional hearings. If a signifi-
cant portion of the public disapproves of the
temporary or proposed rule, the FTC may mod-
ify the rule to accommodate the public’s con-
cerns. Otherwise, the FTC will issue a
subsequent order making the temporary or pro-
posed rule a final regulation.
The commission ensures compliance with
its rules and regulations by systematic and con-
tinuous review of business practices in the mar-
ketplace and by issuing cease-and-desist orders
when violations are discovered. All respondents
against whom such orders have been issued are
required to file reports with the FTC to substan-
tiate their compliance. In the event compliance
is not obtained, or the order is subsequently
violated, civil penalty proceedings may be insti-
tuted.
Compliance is also ensured through volun-
tary and cooperative action by private compa-
nies in response to miscellaneous FTC guidance
procedures, including non-binding staff advice,
formal ADVISORY OPINIONS, and policy state-
ments delineating legal requirements as to par-
ticular business practices. Through these
procedures, business and industry may obtain
authoritative direction and a substantial meas-
ure of certainty as to what they may do under
the laws administered by the FTC. As a result,
smart businesses can plan ahead to prevent
being found in violation of federal trade laws.
FTC investigations may originate through
