Federal Trade Commission (FTC) history

The Federal Trade Commission Act of 1914 established the Federal Trade Commission (FTC). Originally part of Woodrow Wilson’s effort to “bust the trusts,” the FTC is an independent government agency responsible for ensuring free and fair competition in the economy and protecting consumers from unfair or misleading practices.

The FTC is composed of five members. These members are appointed to seven-year terms by the president, subject to Senate approval, and report directly to Congress. The president chooses one commissioner to act as chairman. No more than three members can be of the same political party, thus ensuring the commission’s bipartisanship. Over the years, the FTC has become increasingly involved in ANTITRUST enforcement. Since 1914, Congress has given the FTC increasingly greater authority to police anticompetitive practices by passing additional laws. Originally, the SECURITIES ACT OF 1933 required the registration of securities with the FTC before the FTC was created. Today, the FTC enforces federal antitrust and consumer protection laws, maintains truth in advertising, and enforces consumer protection laws that prevent fraud, deception, and unfair business practices.

The Federal Trade Commission works to prevent unfair and anticompetitive business practices by enforcing federal antitrust laws. It does so by preventing unlawful business practices such as those prohibited by the Clayton Antitrust Act, including certain MERGERS and other practices that have the potential to inhibit competition. In the post–World War II years, the FTC and the Antitrust Division of the Department of Justice both brought antitrust actions. While the Antitrust Division investigates and prosecutes businesses that violate antitrust regulations, the FTC has the power to order a company to stop unfair competition methods. In the 1990s especially, several notable antitrust cases were brought by the FTC, including an action against Intel and intense scrutiny of the McDonnell Douglas–Boeing merger.

The Federal Trade Commission also enforces federal consumer protection laws. It does so by investigating complaints initiated by individual consumers, businesses, and reports in the media. The FTC and the Consumer Product Safety Commission are the government agencies chiefly responsible for enforcing these consumer protection laws. However, it is not only large companies that have come under scrutiny by consumer advocates. In the 1960s, the FTC itself also came under heavy criticism for its alleged indifferent approach to antitrust action during the conglomerate era. During this era many large companies looked to mergers as a way of diversifying their bases and maintaining their markets in the face of rising costs. However, this activity quickly swamped the Antitrust Division and the Federal Trade Commission. The result was that only the biggest cases with the most potential impact were pursued. Beginning in the 1970s there was a considerable reduction in the number of antitrust cases being brought by the Department of Justice and the FTC. In 1976, Congress passed the Hart-Scott-Rodino Act, requiring companies desiring to merge to file notification so that the FTC and the Justice Department have time to review the consequences of the proposed corporate marriage.

Another important facet of consumerism— advertising—is also regulated by the Federal Trade Commission. It monitors advertising, and if it determines an ad to be false or misleading, the commission has the power to impose fines and order corrective advertising or withdrawal. Along with the Federal Drug Administration, the FTC regulates labeling and packaging of consumer products. When a consumer refers to care labels in clothes, product warranties, or performance claims for computers and other high-tech products, that consumer is consulting information required by the Federal Trade Commission. In addition, the commission’s Division of Financial Practices enforces many of the nation’s other consumer credit statutes, including the Truth in Lending Act, which requires creditors to disclose in writing certain information such as the annual percentage rate, and the Consumer Leasing Act, requiring lessors to disclose certain information to their potential customers. Since it was established, the commission has been empowered to administer a variety of other consumer protection laws, including the Equal Credit Opportunity Act and the Telemarketing Sales Rule.

Although given power to regulate the nation’s businesses, it is important to note that the FTC has no authority over common carriers and banks, which are supervised separately. The FEDERAL RESERVE and INTERSTATE COMMERCE COMMISSION (now the Surface Transportation Board) traditionally had jurisdiction over those two respective areas. In 2003, the FTC established the National Do Not Call Registry, which requires most telemarketers to remove the listed numbers in order to limit the number of unwanted telemarketing calls.

Further reading

• Holt, William Stull. The Federal Trade Commission: Its History, Activities, and Organization. New York: AMS Press, 1974. 
• Kanwit, Stephanie. Federal Trade Commission. Colorado Springs, Colo.: Shepard’s/McGraw-Hill, 1979. 
• Labaree, Robert. The Federal Trade Commission: A Guide to Sources. New York: Garland, 2000. 

Margaret A. Geisst