Section 5 of the Ftc Act: Not All Gaps Need Filling

• DOI: 10.1177/0003603X0404900308
• Date: 01 September 2004
• Published date: 01 September 2004
• Author: Veronica G. Kayne
• Subject Matter: Article

The Antitrust Bllllctin/Fall 2004

Section 5

of

the FTC act:

not all gaps need filling

BY VERONICA G. KAYNE*

783

It has long been

clear

as an abstract matter that section 5

of

the

Federal Trade Commission Act allows the Federal Trade Commission

(FTC) "to define and proscribe an unfair competitive practice, even

though the practice does not infringe either the letter or the spirit of

the antitrust laws."! In recent years, the FTC has explored its ability to

use section 5 to fill perceived gaps in the federal antitrust regime in

two types of cases. The first type comprises the "invitation to collude"

cases, as they have come to be known, in which the FTC alleged that

one firm made an offer to another, which, had it been accepted, would

have constituted price fixing under section 1

of

the Sherman Act.

While the FTC may have authority to bring these cases, they are

arguably an inefficient use of the agency's always limited resources,

since they attack, by definition, unsuccessful conduct. The second

type of case further developed the Commission's theory of facilitating

practices. The courts have limited the FTC's power in these cases, and

*Partner in Wilmer Cutler Pickering Hale and Dorr,

LLP's

Wash-

ington, DC office. Formerly served as Assistant Director of the Federal

Trade Commission's Bureau

of

Competition and was involved in some of

the cases discussed in this article.

AUTHOR'S NOTE: I would like to thank Debra Greenberger. a New York

University law student.

for

her

invaluable assistance in the preparation

of

this article. and a referee

for

his helpful comments.

FTC v. Sperry &Hutchinson Co., 405 U.S. 233, 239 (1972).

©2004 by Federal Legal Publications. Inc.

784

The antitrust bulletin

the FTC has responded by filing well-considered complaints that fit

within

the

delineated

framework.

Because

these

cases

turn

on

anticompetitive effects caused (or likely to be caused) by the conduct

that has actually occurred in the marketplace, they are a better use of

the Commission's limited resources and should be the focus of future

section 5 proceedings that extend beyond the Sherman Act.'

Invitation to collude: filling a gap, but at what cost?

The invitation to collude cases collectively represent one of the

FTC's most aggressive uses of section 5. Five such

cases-Quality

Trailer,

YKK, Precision Moulding, AE Clevite, and Stone

Container-

were

brought

between

1992 and 1998 .

.1

In

each,

a

person

with

apparent authority to bind Firm Acontacted an official of Firm B, and

made an explicit or implicit offer to engage in conduct that the FTC

contended would violate the Sherman Act if accepted. None of the

invitations was accepted; instead, the invitee apparently informed the

Commission

of

the activity. Each case was settled with a consent

order.

In Quality Trailer, the first of these cases, the FTC alleged that

two representatives of Quality Trailer Products Corporation visited an

officer of a competitor and "told the competitor that certain

of

its

prices were too low and that there was 'no need' for the companies to

Unless the context indicates otherwise, "section 5" is used in the

sense of an antitrust law going beyond the Sherman and Clayton Acts.

E.g., Quality Trailer Products Corp., No. 911-0068, 57 Fed. Reg.

37,004 (FTC Aug. 17, 1992) (proposed consent agreement and aid to

public comment), 115 F.T.C. 944 (1992) (decision and order); YKK

(U.S.A.), Inc., No. 911-0005, 58 Fed. Reg. 19,454 (FTC Apr. 14, 1993)

(proposed consent agreement and aid to public comment), 116 F.T.C. 628

(1993) (decision and order); AE Clevite, Inc., No. 901-0166, 58 Fed.

Reg. 17,405 (FTC Apr. 2, 1993) (proposed consent agreement and aid to

public comment), 116 F.T.C. 389 (1993) (decision and order); Stone

Container Corp., No. 951-0124, 63 Fed. Reg. 10.628 (FTC Mar.

4,1998)

(proposed consent agreement and aid to public comment), 125 F.T.C. 853

(1998) (decision and order); Precision Moulding Co., No. 951-0124. 61

Fed. Reg. 32,824 (FTC June 25, 1996) (proposed consent agreement and

aid to public comment). 122 F.T.C. 104 (1997) (decision and order).