Federal Trade Commission (FTC)

• Pages: 490-492

Page 490

The Federal Trade Commission (FTC) was established as an independent administrative agency pursuant to the Federal Trade Commission Act of 1914. The purpose of the FTC is to enforce the provisions of the Federal Trade Commission Act, which prohibits "unfair or deceptive acts or practices in commerce." The Clayton Antitrust Act (1914) also granted the FTC the authority to act against specific and unfair monopolistic practices. The FTC is considered to be a law enforcement agency, and like other such agencies it lacks punitive authority. Although the FTC cannot punish violators—that is the responsibility of the judicial system—it can issue cease and desist orders and argue cases in federal and administrative courts.

Today, the Federal Trade Commission serves an important function as a protector of both consumer and business rights. While the restrictions that it imposes on business practices often receive the most attention, other laws enforced by the FTC—such as the 1979 Franchise Rule, which directed franchisors to provide full disclosure of franchise information to prospective franchisees—have been of great benefit to entrepreneurs and small business owners. Basically, all business owners should educate themselves about the guidelines set forth by the FTC on various business practices. Some of its rules can be helpful to small businesses and entrepreneurs. Conversely, businesses that flout or remain ignorant of the FTC's operating guidelines are apt to regret it.

CREATION OF THE FTC

The FTC was created in response to a public outcry against the abuses of monopolistic trusts during the late 19th and early 20th centuries. The Sherman Antitrust Act of 1890 had proven inadequate in limiting trusts, and the widespread misuse of economic power by companies became so problematic that it became a significant factor in the election of Woodrow Wilson to the White House in 1912. Once Wilson assumed the office of the Presidency, he followed through on his campaign promises to address the excesses of America's trusts. Wilson's State of the Union Message of 1913 included a call for extensive antitrust legislation. Wilson's push, combined with public displeasure with the situation, resulted in the passage of two acts. The first was the Federal Trade Commission Act, which created and empowered the FTC to define and halt "unfair practice" in trade and commerce. It was followed by the Clayton Antitrust Act, which covered specific activities of corporations that were deemed to be not in the public interest. Activities covered by this act included those mergers which inhibited trade by creating monopolies. The FTC began operating in 1915; the Bureau of Operations, which had previously monitored corporate activity for the federal government, was folded into the FTC.

The FTC is empowered to enforce provisions of both acts following specific guidelines. The offense must fall under the jurisdiction of the various acts and...