Federal Trade Commission (FTC): What It Is and What It Does

What Is the Federal Trade Commission (FTC)?

The Federal Trade Commission (FTC) is an independent, bipartisan agency of the U.S. government tasked with protecting consumers and ensuring a strong competitive market. Lina Khan is the current Chair of the Federal Trade Commission (FTC). 

Its principal purpose is to enforce non-criminal antitrust laws in the United States, preventing and eliminating anticompetitive business practices, including coercive monopolies. The FTC also seeks to protect consumers from predatory or misleading business practices.

Understanding the Federal Trade Commission (FTC)

The Federal Trade Commission (FTC) was established in 1914 by the Federal Trade Commission Act, as part of the Wilson administration's trust-busting efforts—trust-busting being a significant concern at the time. It was tasked with enforcing the Clayton Act, which banned monopolistic practices.

Before the birth of the FTC, there was the Bureau of Corporations, created by the Roosevelt administration in February 1903. Part of the Department of Commerce and Labor, the Bureau of Corporations was tasked with making sure businesses acted in the best interest of the public. The success of the Bureau of Corporations led to the creation of the FTC.

The FTC continues to discourage anticompetitive behavior through the Bureau of Competition, which reviews proposed mergers together with the Department of Justice (DOJ). As the years have passed, the FTC has been tasked with enforcing additional business regulations, as codified in Title 16 of the Code of Federal Regulations.

The Federal Trade Commission's Core Activities

The FTC's regular activities include investigating fraud or false advertising from consumers, businesses, and the media, congressional inquiries, and pre-merger notification filings.

The FTC may investigate a single company or an entire industry. If an FTC investigation reveals unlawful activities on the part of one or more companies within an industry, it can seek voluntary compliances via consent order, initiate federal litigation, or file an administrative complaint. Traditionally, such a complaint would be heard in front of an administrative law judge (ALJ) and may be appealed to the U.S. Court of Appeals and then the Supreme Court.

The FTC also deals with complaints of unfair business practices, such as scams and deceptive advertising. Its Bureau of Consumer Protection conducts investigations into alleged abuses, carries out enforcement actions, and provides educational materials to consumers. The Bureau of Consumer Protection is in charge of the U.S. National Do Not Call Registry.

The FTC also administers and enforces the Telemarketing Sales Rule, the Pay-Per-Call Rule, and the Equal Credit Opportunity Act. In total, the Commission has enforcement or administrative responsibilities under more than 70 laws.

The Bureau of Economics provides research support to the other two departments of the FTC, including analysis of the potential effects of FTC actions.

Examples of Federal Trade Commission Actions

In 1984, the FTC cracked down on deceptive pricing in the funeral home industry, implementing the FTC Funeral Rule, which requires funeral homes to offer a written General Price List (GPL) detailing all prices for goods and services in the funeral industry to anyone who requests one.

No one can be denied a written copy of GPL by law, and they must be allowed to keep it if they desire. In 1996, the FTC implemented the Funeral Rule Offenders Program, which allows offending funeral homes to make a voluntary payment to the U.S. Treasury or an appropriate state fund in exchange for not having to go to court.

In the 1990s, the agency also conducted several investigations into telemarketing scams, beginning with Project Telesweep in 1995, which cracked down on at least 100 fictitious business opportunity scams.

The FTC has been active in the healthcare industry, too, blocking the proposed acquisition of Palmyra Medical Center by Putney Memorial Hospital based on potential harm to consumers. The case went to the Supreme Court, which ruled in the FTC's favor in 2013.

More recently, in 2021, the FTC ordered e-commerce giant Amazon to pay more than $61 million as a settlement for its failure to pay Amazon Flex drivers all of their tips from Amazon customers. The charges against Amazon state that the company promised its Flex drivers 100% of customers tips while delivering and that the customers were advised the same. For more than two years, it withheld part of customer paid tips from its Flex drivers.