NATIONALLY RECOGNIZED FEDERAL LAWYERS
Last Updated on: 2nd October 2023, 05:51 pm
Dealing with Allegations from the FTC
Getting accused of anti-competitive practices by the Federal Trade Commission can feel totally intimidating for any business. But with the right game plan, companies can successfully handle FTC investigations. This article shares practical tips for responding to allegations, using real laws and cases as examples.
What Powers Does the FTC Have?
The FTC mainly gets its authority from two laws – the Federal Trade Commission Act and the Clayton Act.The FTC Act bans “unfair competition” and “deceptive practices.” This gives the FTC a lot of room to challenge stuff that hurts competition, even if it doesn’t clearly break antitrust laws like the Sherman Act.The Clayton Act focuses on specific anti-competitive stuff like mergers and interlocking directorates (when people sit on multiple companies’ boards).On top of direct lawsuits, the FTC can also investigate and subpoena companies. It has broad power to demand documents, data, testimony, and other information about potentially anti-competitive practices.FTC investigations come from many places – complaints from competitors, customers or suppliers, tips from Congress or other agencies, and the FTC’s own market monitoring.
Where Do Companies Often Get in Trouble?
Some of the most common areas where the FTC brings allegations include:
- Price Fixing – Agreements between competitors to manipulate prices are automatically illegal. Even implied agreements based on behavior can lead to FTC action. Penalties include massive fines and even jail time.
- Monopolization – Using anti-competitive tactics to get or keep monopoly power in a market. For example, blocking rivals from critical inputs or distribution channels.
- Mergers – Mergers and acquisitions that seriously reduce competition. The FTC reviews big mergers and can block deals or force divestitures.
- Exclusive Dealing – Forcing suppliers, distributors, or customers to only deal with your company. This can block out competition.
- Tying – Making customers buy one product to get access to another product. Tying can illegally take advantage of monopoly power.
Even if something doesn’t clearly violate antitrust law, the FTC can still see it as an “unfair method of competition” under its Section 5 authority.
Responding to FTC Inquiries and Subpoenas
If your company gets any kind of request from the FTC, take it very seriously. While many FTC investigations don’t end up as enforcement actions, ignoring them can cause big problems. Here are some practical tips:
- Appoint one person to coordinate the response and talk to the FTC.
- Hire experienced antitrust lawyers – the stakes are high so you need expertise.
- Negotiate the scope of subpoenas to reduce undue burden.
- Do a thorough internal investigation to understand any problematic conduct.
- Claim all applicable privileges like attorney-client privilege to protect sensitive info.
- Ask for confidential treatment of sensitive business documents given to the FTC.
- Provide truthful, responsive information to the FTC on time. Lack of cooperation looks bad.
- Remember that any statements to the FTC can be used as evidence, so be thoughtful.
Navigating Settlement Talks
If the FTC thinks your company did something illegal, settlement will probably be the goal. Over 90% of FTC antitrust cases settle through consent decrees rather than litigation. Here are some tips for productive settlement negotiations:
- Hire expert antitrust counsel to lead talks.
- Suggest alternative solutions that address FTC concerns while avoiding excessive requirements.
- Offer to implement a compliance program or other voluntary measures.
- Provide economic analysis showing the pro-competitive benefits of the conduct.
- Argue that precedent doesn’t support such a broad application of antitrust law.
- Be willing to sue if the FTC insists on unreasonably harsh remedies.
Successful settlements often need creative solutions to satisfy the FTC that competition won’t be harmed.
Key Considerations if You End Up in Court
If settlement fails, the FTC may sue your company administratively or in federal court. Some key litigation points:
- The FTC has the burden of proof like any plaintiff.
- Challenge the FTC’s definition of the relevant market and assessment of market power.
- Hire top economic experts to rebut FTC theories of harm.
- Argue that novel applications of antitrust law exceed the FTC’s powers.
- Emphasize pro-competitive justifications and efficiencies.
- Undermine the credibility of complaining competitors who may have ulterior motives.
Litigation outcomes are hard to predict. But a strong defense can lead to a favorable settlement or even a complete win.
Avoiding Problems in the First Place
The best defense is a good offense when it comes to antitrust compliance. Companies can reduce FTC attention by:
- Implementing a solid antitrust compliance program with training.
- Getting legal review of agreements with competitors, suppliers, distributors, and customers.
- Avoiding even the appearance of improper communication with competitors.
- Consulting antitrust counsel before mergers and acquisitions.
- Being careful with exclusivity arrangements.
- Monitoring employee communications on company systems.
While the FTC is on alert for anti-competitive behavior, businesses can still compete vigorously within antitrust law boundaries.
The Bottom Line
Dealing with FTC allegations requires expert help. But by managing investigations proactively, exploring settlements, and vigorously defending your interests in court, it’s possible to resolve FTC issues favorably.Let me know if you have any other questions! I’m always happy to discuss these complex legal situations in plain language.