Legal Definitions - Federal Trade Commission

The Federal Trade Commission (FTC) is an independent agency of the United States government. Established by Congress in 1914, its primary mission is to protect consumers and promote fair competition in the marketplace.

The FTC achieves its goals through two main areas of focus:

• Consumer Protection: The FTC investigates and takes action against companies and individuals engaged in unfair, deceptive, or fraudulent business practices that harm consumers. This includes issues like false advertising, scams, identity theft, and data privacy violations. The agency also educates consumers and businesses about their rights and responsibilities.
• Competition Promotion: The FTC enforces antitrust laws to prevent anti-competitive practices that could harm consumers by reducing choice, increasing prices, or stifling innovation. This involves challenging mergers and acquisitions that could create monopolies or significantly reduce competition, as well as investigating cartels and other unfair methods of competition.

The FTC has the authority to conduct investigations, bring administrative actions before its own administrative law judges, or file lawsuits in federal court to stop illegal activities, impose penalties, and require companies to change their business practices.

Here are some examples illustrating the work of the FTC:

• Example 1: Deceptive Online Advertising

  Imagine a company selling a "miracle" dietary supplement online, promising rapid weight loss without diet or exercise, backed by fabricated testimonials and misleading scientific claims. Many consumers purchase the product based on these false promises, only to find it ineffective. The FTC could investigate this company for engaging in deceptive advertising practices. If found in violation, the FTC could order the company to stop making false claims, pay refunds to affected consumers, and face significant financial penalties. This demonstrates the FTC's role in consumer protection by ensuring that advertising is truthful and not misleading.

• Example 2: Reviewing a Major Corporate Merger

  Consider a scenario where two of the largest manufacturers of household cleaning products announce their intention to merge. If approved, this merger would result in one dominant company controlling a vast majority of the market share for many essential cleaning supplies. The FTC would likely launch an in-depth review of this proposed merger to assess its potential impact on market competition. If the FTC determines that the merger would significantly reduce competition, potentially leading to higher prices or fewer product choices for consumers, it could challenge the merger in court or require the companies to sell off certain brands or divisions to preserve competition. This illustrates the FTC's function in competition promotion, preventing monopolies and ensuring a fair marketplace.

• Example 3: Data Security Breach and Consumer Privacy

  Suppose a popular social media platform experiences a massive data breach, exposing the personal information (like names, email addresses, and phone numbers) of millions of its users due to inadequate security measures. The FTC could investigate the platform for failing to protect consumer data, which could be considered an unfair practice. The investigation might focus on whether the company made false promises about data security or failed to implement reasonable safeguards. The FTC could then impose fines and require the company to implement stronger security protocols and undergo regular audits to prevent future breaches. This highlights the FTC's commitment to consumer protection, particularly in safeguarding privacy and ensuring companies handle personal data responsibly.