Should the FTC Give Advice?

The FTC first met this week 100 years ago. On its fourth day operation (and again a week later), representatives of the coal industry appeared before the assembled commissioners to request an informal meeting. This was the beginning of the FTC as advice-giving body. A month later, the Dean of the Business School of Harvard appeared before the Commission to state his view that the chief function of the Commission was to be helpful to business. Indeed as Commissioner George Rublee observed, “It appeared to be the common belief of business men that the chief function of the Commission was to give advice in regard to the legality under the Sherman Act of proposed combinations or contracts.” [1]

The early FTC had deep conflicts concerning giving advice to businesses about compliance with the antitrust laws,[2] and this is a tension that exists in the modern Commission. Throughout its history, some Commission leaders have wanted the Agency to be primarily an advice-giving body, as it was in its early years. The theme echoes back to the Bureau of Corporations, and is supported in particular by statements made by President Wilson before and after passage of the FTC Act.

There are many legal and policy problems with the FTC as advice-giving body. It obviously is concerned that advice it gives in one matter could estop an enforcement action in another. Then again, even if the FTC were to give advice, it would not foreclose action by the federal or state attorneys general. Furthermore, advice is not mentioned in the FTC Act, and Congress could have simply kept the Bureau of Corporations if it wanted an advice-giving function. The 1920 Republican Party Platform proposed that the FTC Act be amended to create an advice-giving role.[3]

Policy considerations also militate against advice giving. Advice creates hazard, as many Commissioners leave the FTC before finishing their entire term to lucrative law firm partnerships that concentrate on lobbying the FTC or sometimes directly to companies that are frequent targets of FTC investigation.

[1] George Rublee, The Original Plan and Early History of the Federal Trade Commission, 11(4) Proceedings of the Academy of Political Science in the City of New York 114, 119 (Jan., 1926).

[2] George C. Davis, The Federal Trade Commission: Promise and Practice in Regulating Business, 1900-1929 (Ph.D. Diss. 1969).

[3] “We approve in general the existing Federal Legislation against monopoly and combinations in restraint of trade, but since the known certainty of a law is the safety of all, we advocate such amendment as will provide American business men with better means of determining in advance whether a proposed combination is or is not unlawful. The Federal Trade Commission, under a Democratic Administration, has not accomplished the purpose for which it was created. This commission properly organized and its duties efficiently administered should afford protection to the public and legitimate business interests. There should be no persecution of honest business; but to the extent that circumstances warrant we pledge ourselves to strengthen the law against unfair practices.” Republican Party Platforms: “Republican Party Platform of 1920,” June 8, 1920. Online by Gerhard Peters and John T. Woolley, The American Presidency Project. http://www.presidency.ucsb.edu/ws/?pid=29635. One of the earliest critiques of the FTC focused the use of public resources for prosecution, rather than for advising companies. Rush C. Butler et al., The Case of the Federal Trade Commission: Originally designed for impartial investigation the Commission is charged with bias and abuse, 6(10) The Nation’s Business 9, Oct. 1918.

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