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Rep. Eshoo and Rep. Lofgren Complain to FTC about its Google Antitrust Investigation

11/19. Rep. Anna Eshoo (D-CA) and Rep. Zoe Lofgren (D-CA), who both represent Silicon Valley districts, sent a short letter to the five Commissions of the Federal Trade Commission (FTC) regarding its antitrust investigation involving Google.

Their complaint has two elements. First, they object to leaks from the FTC regarding the status of the investigation. Second, they complain that the FTC may be on the verge of bringing an action against Google under Section 5 of the FTC Act, rather than under an antitrust statute.

They wrote that leaks from the FTC "suggest that the FTC is preparing to use Section 5 of the FTC Act to avoid proving some of the elements of a claim required under Section 2 of the Act. Such a massive expansion of FTC jurisdiction would be unwarranted, unwise, and likely have negative implications for our nation's economy."

They added that "Expanding the FTC's Section 5 powers to include antitrust matters could lead to overbroad authority that amplifies uncertainty and stifles growth. These effects may be most acutely felt among online services, a crucial engine of job creation, where technological advancement and small business innovation are rapid. If the FTC intends to litigate under this interpretation of Section 5, we strongly urge the FTC to reconsider."

Section 5 of the FTC Act, which is codified at 15 U.S.C. 45, as implemented by the FTC for decades, is essentially an anti-fraud provision. It provides, in relevant part, that "Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are hereby declared unlawful."

Section 2 of the FTC Act pertains to Commissions' salaries, staffs and expenses. It is codified at 15 U.S.C. 42. The letter's reference to "Section 2 of the Act" therefore must refer rather to Section 2 of the Sherman Act. It is codified at 15 U.S.C. 2. It provides, in part, that "Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony ..."

If the FTC were to proceed against Google under Section 5 of the FTC Act, it would not be the first time in recent years. In 2010 the FTC relied upon Section 5 of the FTC Act in its administrative action against Intel in 2010. However, that case involved a simultaneous consent agreement. Google may wish to contest and litigate any FTC antitrust action to the fullest.

See, story titled "FTC and Intel Settle Antitrust Claims" and related stories in TLJ Daily E-Mail Alert No. 2,018, August 4, 2010.

The FTC has statutory authority to enforce antitrust laws under the Sherman Act and Clayton Act. There are well developed bodies of judicial case law that construe and give meaning to their various sections. In contrast, Section 5 of the FTC Act has hardly been invoked as an antitrust statute for decades.

Hence, there is no body of case law that gives meaning to Section 5 as an antitrust statute. But, this is what makes it so attractive to aggressive regulators. Invoking Section 5 may enable the FTC to regulate conduct that is not unlawful under the antitrust statutes, as construed by the courts.

Of course, the FTC likes to think of itself as a law enforcement agency, not a regulator. But, the very act of asserting Section 5 as an antitrust statute is an effort to get around enforcing long established rules, and instead impose a new and ad hoc mandate, which is the nature of regulation.

Since the invocation of Section 5 would mean relying upon a four words, without any body of case law, there is little to constrain the FTC in determining what constitutes a violation of Section 5. And, there is nothing to put Google or other companies on notice in advance as to what might constitute a violation of Section 5.

(Published in TLJ Daily E-Mail Alert No. 2,479, November 30, 2012.)