Cybertelecom Federal Internet Law & Policy An Educational Project

Federal Trade Commission

Derived from Guide to the FTC, FTC:

As a consumer or businessperson, you may be more familiar with the work of the Federal Trade Commission than you think.

Consumers who refer to care labels in their clothes, product warranties or stickers showing the energy costs of home appliances are using information required by the FTC. Businesses must be familiar with the laws requiring truthful advertising or prohibiting price fixing. These laws also are administered by the FTC.

The FTC deals with issues that touch the economic lives of most Americans. In fact, the agency has a long tradition of maintaining a competitive marketplace for both consumers and businesses. When the FTC was created in 1914, its purpose was to prevent unfair methods of competition in commerce as part of the battle to “bust the trusts.” Over the years, Congress passed additional laws giving the agency greater authority to police anticompetitive practices.

In 1938, Congress passed the Wheeler-Lea Amendment, which included a broad prohibition against “unfair and deceptive acts or practices.” Since then, the Commission also has been directed to administer a wide variety of other consumer protection laws, including the Telemarketing Sales Rule, the Pay-Per-Call Rule and the Equal Credit Opportunity Act.

In 1975, Congress passed the Magnuson-Moss Act, which gave the FTC the authority to adopt trade regulation rules that define unfair or deceptive acts in particular industries. Trade regulation rules have the force of law. As you read through this booklet, you will learn about other laws that enable the FTC to help consumers.

The FTC’s work is performed by the Bureaus of Consumer Protection, Competition and Economics. That work is aided by the Office of General Counsel and seven regional offices.

COMMISSIONERS

The FTC is an independent agency that reports to Congress on its actions. The Commission is headed by five Commissioners, nominated by the President and confirmed by the Senate, each serving a seven-year term. The President chooses one Commissioner to act as Chairman. No more than three Commissioners can be of the same political party. See the Commissioners page for a list of the current commissioners and their bios.

Section 5 of the FTC Act

Derived From: FTC Staff Report 2007 p 129: Section 5 of the FTC Act prohibits entities from engaging in unfair or deceptive acts or practices in interstate commerce. An act or practice is deceptive if it involves a representation, omission, or practice that is likely to mislead consumers acting reasonably under the circumstances, and the representation, omission, or practice is material. Thus, an advertisement is deceptive if it includes material information that is false or that is likely to mislead a consumer acting reasonably under the circumstances. Likewise, an advertisement is deceptive if it omits material information, and that omission is likely to mislead a consumer acting reasonably under the circumstances. Requiring accurate disclosure of material terms allows consumers to compare similar services offered by one or multiple providers and weigh the different terms being offered in making decisions about what services to purchase.

An act or practice is unfair, also in violation of the FTC Act, if it causes injury to consumers that: (1) is substantial; (2) is not outweighed by countervailing benefits to consumers and competition; and (3) consumers themselves could not reasonably have avoided.643 The Commission has used its unfairness jurisdiction in a broad array of cases. For example, the Commission has taken the position that cramming unauthorized charges for information services onto consumers' telephone bills is an unfair practice.644 In the data security context, the Commission has challenged the failure to implement reasonable safeguards to protect the privacy of consumer information, where the failure causes substantial injury without offsetting benefits, as an unfair practice. The Commission also has taken the position that a unilateral change of contract may be an unfair practice. For example, in the context of lifetime service contracts used by an exterminator, the Commission challenged unilateral changes of material terms of the contract by the company as unfair trade practices.

Common Carrier Jurisdiction Exception

Legislation

• Safer Net Act H.R.1008 Title: To improve public awareness in the United States regarding safe use of the Internet through the establishment of an Office of Internet Safety and Public Awareness within the Federal Trade Commission. Sponsor: Rep Bean, Melissa L. [IL-8] (introduced 2/13/2007)
• US Safe Web Act
• Clayton Act 1914
• Consumer Safe Review Act
• 1938 Amendments
  • "FTC v. The Sperry and Hutchinson Co., 405 U.S. 233, 235, 92 S.Ct. 898 (1972)(“1938 Wheeler-Lea amendment The amendment added the phrase ‘unfair or deceptive acts or practices' to the section's original ban on ‘unfair methods of competition’ and thus made it clear that Congress, through s 5, charged the FTC with protecting consumers as well as competitors. The House Report on the amendment summarized congressional thinking: ‘(T)his amendment makes the consumer, who may be injured by an unfair trade practice, of equal concern, before the law, with the merchant or manufacturer injured by the unfair methods of a dishonest competitor.’ H.R.Rep.No.1613, 75th Cong., 1st Sess., 3 (1937). See also, S.Rep.No.1705, 74th Cong., 2d Sess., 2-3 (1936).”); FTC v. Colgate-Palmolive Co., 380 U.S. 374, 85 S. Ct. 1035, 1042 (1965); Guziak v. FTC, 361 F.2d 700, 703 (8th Cir. 1966)"

Reports

• Federal Trade Commission, A Look at What ISPs Know About You: Examining the Privacy Practices of Six Major Internet Service Providers, October 21, 2021
• Press Release, Fed. Trade Comm’n, FTC Seeks to Examine the Privacy Practices of Broadband Providers (Mar. 26, 2019)
• Press Release, Fed. Trade Comm’n, FTC Revises List of Companies Subject to Broadband Privacy Study (Aug. 29, 2019)
• FED. TRADE COMM’N, CROSS-DEVICE TRACKING: AN FTC STAFF REPORT (Jan. 2017)
• Press Release, Fed. Trade Comm’n, FTC Issues Orders to Nine Social Media and Video Streaming Services Seeking Data About How They Collect, Use, and Present Information (Dec. 14, 2020) ("noting that the FTC has issued orders to large platform providers to understand how they collect, derive, and use consumer data"")

FTC Actions

• Deceptive ISP Marketing and Advertising
• Juno Online Servs., Inc., No. C-4016 (F.T.C. June 25, 2001)
• CompuServe, Inc., No. C-3789 (F.T.C. Mar. 16, 1998)
• Prodigy Servs. Corp., No. C-3788 (F.T.C. Mar. 16, 1998)
• Am. Online Inc., No. C-3787 (F.T.C. Mar. 16, 1998)
• Insecure ISP Equipment (ISP Provided Routers)
• Letter from Maneesha Mithal, Assoc. Dir. of the Div. of Privacy & Identity Prot., Fed. Trade Comm’n, to Dana Rosenfeld, Partner, Kelley Drye (Nov. 12, 2014), ("finding that, while Verizon took steps to mitigate the risk to consumer information, the use of Wired Equivalent Privacy (“WEP”) as an encryption standard could leave consumers vulnerable to hackers"").
• Mobile Charges Cramming
• Fed. Trade Comm’n v. T-Mobile USA, Inc., No. 2:14-cv-0097-JLR (W.D. Wa. Dec. 19, 2014)
• Fed. Trade Comm’n v. AT&T Mobility, LLC, No. 1:14-cv-3227-HLM (N.D. Ga. Oct. 8, 2014)
• Deceptive Throttling
• Fed. Trade Comm’n v. AT&T Mobility LLC, No. 3:14-cv-04785-EMC (N.D. Cal. Feb. 26, 2018)
• Fed. Trade Comm’n v. TracFone Wireless, Inc., No. 3:15-cv-00392-EMC (N.D. Cal. Feb. 20, 2015)

Timeline

• 1938: Amendments to FTC Authority
• 1914: FTC Establishes

News

• Dr. Felten Goes to Washington, Freedom to Tinker 11/5/2010
• FTC's first Chief Technologist: DRM basher Ed Felten, Ars Technica 11/5/2010