The Federal Trade Commission (FTC) is a bipartisan government agency that seeks to enforce civil antitrust and consumer protection laws in the United States. At the helm of the Commission are five Commissioners, each of whom are nominated by the President and confirmed by the Senate for a seven-year term. The President also appoints one of the Commissioners to act as Chairman, and no more than three Commissioners can be of the same political party.
Although the face of the FTC has changed significantly over the last century, its primary mission has always been to protect consumers and promote competition. It accomplishes this through its three bureaus: the Bureau of Consumer Protection, the Bureau of Competition, and the Bureau of Economics. In addition to investigating and enforcing federal laws, the FTC also aids in developing policy, research tools, and guides for government entities, businesses, and consumers across the country and around the world.
The FTC was established when Congress passed the Federal Trade Commission Act and President Woodrow Wilson signed it into law in 1914. This legislation works in conjunction with the Sherman Act of 1890 and the Clayton Antitrust Act of 1914 to prevent unfair or unethical methods of competition among corporations. It was a response to rising trends of commercial monopolies, or corporate trusts, during the Progressive Era in the United States.
These trusts restricted fair competition that would benefit the consumer. Instead of numerous businesses offering lower prices, wider selections, higher quality, and innovative solutions to compete for market share, trusts caused the market to be concentrated in only a few corporations. This created an anti-competitive environment that raised prices, limited options, reduced quality, and stifled innovation.
The Bureau of Consumer Protection seeks to eliminate unfair, deceptive, or fraudulent business practices that would harm consumers. Its responsibilities include enforcing laws related to consumer affairs, including those concerning advertising, personal data privacy, financial practices, and telemarketing. It also collects consumer complaints and conducts investigations, which sometimes result in federal court cases with the U.S. Department of Justice.
Two of the most notable cases involving the FTC Bureau of Consumer Protection in recent history are the 2012 and 2019 cases against Facebook, Inc. In 2012, the social media company was charged with eight separate consumer privacy violations, and as a result was ordered to implement a clearly-stated privacy program that describes exactly how it shares personal data. In 2019, the FTC brought subsequent charges against Facebook for violating its 2012 agreement—a civil penalty totaling a record-breaking $5 billion.
In addition to the financial settlement, the FTC also ordered Facebook to implement tougher restrictions on third-party developers and more transparency in how it uses the data it collects. For example, Facebook is prohibited from using the phone numbers it collects for security purposes to support its marketing efforts. These restrictions also apply to all of the other companies Facebook owns, including Instagram and WhatsApp.
The Bureau of Competition promotes the competitiveness of the free market economy. It champions the interests of consumers, including lower prices, better quality, and wider selection. Its chief responsibilities include enforcing antitrust laws, reviewing proposed business mergers and acquisitions, and investigating internal business practices that could impede fair competition. The Bureau of Competition frequently works alongside the Antitrust Division of the Department of Justice in federal antitrust court cases. In fact, the Department of Justice has historically brought several court cases against major tech companies like AT&T, Google, and Microsoft that have been aided by the FTC Bureau of Competition’s investigations.
In 2016, the FTC played an integral role in halting a proposed merger between Staples and Office Depot, two of the largest office supplies retailers in the United States. When Staples proposed an acquisition of Office Depot for $6.3 billion, the FTC filed an administrative complaint, citing that the merger would significantly reduce national competition in the consumable office products and services market. The broader concern was that if Staples absorbed its biggest competitor, it would dominate the prices, selection, and quality of products among other office supplies retailers. Ultimately the proposed merger agreement fell apart after a federal judge sided with the FTC.
The Bureau of Economics is the only non-enforcement arm of the FTC. Instead, the Bureau of Economics evaluates the economic impact of the FTC’s actions on consumers and businesses alike. It supports the other two bureaus by providing research and analysis for legislative advocacy. It also shares its expertise with the Legislative and Executive Branches of the federal government as well as the general public on issues relating to market regulations and their effect on businesses and consumers. In recent years, the Bureau of Economics has published research on the effect of tuition-free community colleges, the impact AI has on competitive markets, and the correlation between direct-to-consumer advertising and online search.