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.640 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.646

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)