The FTC’s unfairness authority dates back to 1913. Over time, the federal courts have said this allows the FTC to enforce the various antitrust laws (Sherman Act, Clayton Act, etc.). The courts have also held that a violation of the antitrust laws requires a showing of harm to consumers. But some FTC commissioners and antitrust lawyers who make a living litigating with the FTC think there’s a lot more to it – that Section 5 entitles the FTC to convict companies where there is no consumer harm. And they are being rallied by Google’s competitors, who stand to gain.
In the case of Google’s search results, where’s the harm? People know about search engines and click from one to another as it suits them. There’s no monopoly power here. No deception. And there can’t be overpricing – it’s free, for crying out loud.
Where the FTC has tried to “make new law” in the past, it has run into trouble. For example, in Ethyl, a 1984 case in which I, as chairman, dissented, the agency found the company guilty on an expanded reading of Section 5. The Second Circuit Court of Appeals, however, struck down the FTC’s decision, saying that it had failed “to discriminate between normally acceptable business behavior and conduct that is unreasonable or unacceptable.” Otherwise, the court went on to say, “the door would be open to arbitrary or capricious administration of Section 5.”
Another time the FTC “made new law” it ran into such fierce opposition that its very existence hung in the balance. During the late 1970s some FTC officials mused that by using Section 5 they could compel companies to include on their boards of directors representatives of labor groups, consumer groups, and others, and could find liability for contributing to pollution. This created such a firestorm that Congress refused to fund the agency, an impasse that was overcome only with the direct intervention of President Carter.
Once again the FTC is actively looking for opportunities to expand the scope of Section 5, and this time the target is Google. In response to a press inquiry about whether the agency was “investigating the online search market,” Chairman Jon Leibowitz replied, “one of the commission’s priorities is to find a pure Section Five case under unfair methods of competition.”
Some of Google’s competitors have suggested a Section 5 case based on a “limiting consumer choice” theory, whereby any activity that reduced the number of competitors in a market would be a violation of Section 5 – a view that arguably could put “big box” stores out of business and force consumers to pay higher prices. Although it is highly unlikely such cases would ever be upheld in the courts, the mere rumblings of such threats have a depressing effect on economic activity and threaten the viability of the agency.
Initiating an action against Google would be a mistake. First, there is no case here, no evidence of consumer harm, and no evidence of unreasonable or unacceptable behavior. All a lawsuit would accomplish is to waste taxpayer dollars, and reward Google’s competitors and the antitrust bar. More broadly, such an “unfairness” case would intimidate firms across all of industry, diverting their entrepreneurial efforts from serving consumers to defending themselves against a rogue FTC.
Miller served as President Reagan’s chairman of the Federal Trade Commission (1981-1985). He serves as a consultant to Google, but the
views expressed are his own.