Created in 1914, the Federal Trade Commission is an independent agency of the Federal government. With an annual budget in the general vicinity of $300M, it has roughly 1100 employees, which is about 1/15th of the number of US Food and Drug Administration employees. However, in this case size doesn’t matter. This FTC has considerable police power and is generally unafraid to exercise it.
For those of us who hear about the FTC mainly through those popular press reports that happen to gain enough traction among media types to deem them newsworthy, this unique agency really serves several, basic functions.
First, the FTC’s Bureau of Competition operates as the classic trust buster, enforcing the antitrust laws. It seeks to prevent business mergers and business practices (price fixing, etc.) that diminish competition and ultimately hinder the fair price or quality of products and services.
Second, the FTC’s Bureau of Consumer Protection defends consumer interests and prosecutes fraud and unfair or deceptive practices. This Bureau creates trade rules and regulations and investigates industry-wide practices as well as the activities of individual businesses. It prosecutes administrative and federal court litigation against violators and provides business and consumer education.
Third, the Bureau of Economics helps the agency evaluate the impact of its activities and provides the Legislative and Executive Branches of with information about the agency’s efforts.
The FTC should be headed up by five Commissioners, each appointed to a seven-year term by the President with Senate approval. To minimize the role of politics in its operations, there can be no more than three Commissioners from any one political party. However, there are only two Commissioners currently serving, and one is a Republican and the other a Democrat. Perhaps the lack of a full complement of Commissioners is a reflection of how polarized U.S. politics have become.
My professional experience has included defense of a growing number of investigations and prosecutions primarily involving unfair and deceptive business practice allegations. Those cases involved a variety of matters, including celebrity-endorsed weight loss products, health products, a fuel-economy booster, infomercials, professional endorsements, consumer testimonials, marketing plans, educational programs and exercise equipment. Over a long career, I have found FTC enforcement staff to be skilled and dedicated, persistent but fair, aggressive without being excessive, and reasonable and accommodating but not without limits. This explains my affinity toward the Bureau of Consumer Protection.
Within the last six months alone, the FTC Bureau of Consumer Protection successfully prosecuted:
- a cash prize notification scheme targeting seniors;
- a seller who deceptively promoted health products to treat cancer, prevent malnutrition in cancer patients and lessen cognitive decline due to chemotherapy;
- its first case over the privacy breach of children’s personal information involving a toymaker (VTech) who failed to obtain parental consent to acquire such personal information;
- another fraudulent prize scheme;
- a company falsely claiming their mattresses were plant-based and organic when they were largely synthetic materials;
- and an online-based work-at-home scheme.
In the past year, the agency brought or settled 109 consumer protection cases.
The impact of the FTC’s Bureau of Consumer Protection is often significant. For example, for the twelve month period beginning with July, 2016, more than $6.4 Billion in refunds for consumers was secured.
My professional observations suggest that enforcement staff generally avoids witch hunts. Investigations are based upon generally credible information that is obtained from consumer and business complaints, Better Business Bureau disputes, cooperation with other Federal and state regulatory agencies, and independent efforts. Many years ago the Chicago Regional Director told me that a case he recommended for prosecution was inspired during a midnight shopping trip to a national drugstore chain.
Early awareness of the legal responsibilities of a business about to introduce a new product or begin a new ad campaign, coupled with a commitment to achieving compliance, are among the best steps any business can take to avoid an FTC investigation or prosecution. Seeking the support and guidance of legal counsel versed in the nuances of advertising compliance and trade regulation and defense is usually a good place to start. Knowledge and prevention will pay hefty dividends in the long run.