The Case for "Unfair Methods of Competition" Rulemaking

Author(s): Rohit Chopra and Lina M. Khan

Source: The University of Chicago Law Review , Vol. 87, No. 2 (March 2020), pp. 357-380
Published by: The University of Chicago Law Review

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The Case for “Unfair Methods of
Competition” Rulemaking
Rohit Chopra† & Lina M. Khan††

A key feature of antitrust today is that the law is developed entirely through
adjudication. Evidence suggests that this exclusive reliance on adjudication has
failed to deliver a predictable, efficient, or participatory antitrust regime. Antitrust
litigation and enforcement are protracted and expensive, requiring extensive discov-
ery and costly expert analysis. In theory, this approach facilitates nuanced and fact-
specific analysis of liability and well-tailored remedies. But in practice, the exclusive
reliance on case-by-case adjudication has yielded a system of enforcement that gen-
erates ambiguity, drains resources, privileges incumbents, and deprives individuals
and firms of any real opportunity to participate in the process of creating substantive
antitrust rules. It is difficult to quantify this harm.
This Essay argues that rulemaking under § 5 of the Federal Trade Commis-
sion Act should supplement antitrust adjudication, and that this institutional shift
would lower enforcement costs, reduce ambiguity, and facilitate greater democratic
participation. We build on existing scholarship to debunk the view that the Federal
Trade Commission (FTC) does not have competition rulemaking authority pursuant
to the Administrative Procedure Act conferring Chevron deference, and trace legis-
lative history to underscore how Congress designed the FTC to play a unique insti-
tutional role.
We close by outlining an initial set of factors that should weigh in favor of
rulemaking: when there is significant learning from past enforcement and when pri-
vate litigation would be unlikely. Finally, we pose questions in the context of the
FTC’s recent hearings to prompt further discussion on where this unused tool would
be most useful.

† Commissioner, Federal Trade Commission. The views expressed here are Com-
missioner Chopra’s and do not necessarily reflect those of the Commission or any other
individual Commissioner.
†† Academic Fellow, Columbia Law School; Counsel, Subcommittee on Antitrust,
Commercial, and Administrative Law, US House Committee on the Judiciary; former Le-
gal Fellow, Federal Trade Commission. This Essay reflects Ms. Khan’s views and not those
of the US House Committee on the Judiciary or any of its members. For thoughtful en-
gagement and comments, we are grateful to Scott Hemphill, William Kovacic, Fiona Scott
Morton, Nancy Rose, Jonathan Sallet, Carl Shapiro, Sandeep Vaheesan, and Joshua
Wright, as well as staff at the FTC and participants in the Symposium on Reassessing the
Chicago School of Antitrust Law at The University of Chicago Law School. We also thank
the editors of The University of Chicago Law Review for careful editing.

357

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358 The University of Chicago Law Review [87:357

INTRODUCTION
Open, competitive markets are a foundation of economic lib-
erty. A lack of competition, meanwhile, can enable dominant
firms to exercise their market power in harmful ways. In uncom-
petitive markets, firms with market power can raise prices for
consumers, depress wages for workers, and choke off new en-
trants and other upstarts, undermining innovation and business
dynamism.
Given these far-reaching effects, the Federal Trade Commis-
sion (FTC)’s mandate to promote fair competition is critical. The
Commission’s recent hearings provided an important opportunity
for it to reflect on ways to increase the effectiveness of the Com-
mission’s enforcement of the antitrust laws. This is especially im-
portant given that these hearings came against the backdrop of
concerns about increasing concentration and declining competi-
tion across sectors of the US economy.
When establishing the FTC over a century ago, Congress
sought to harness the value of an expert administrative agency to
collect market data, analyze it rigorously, and use this analysis
to inform enforcement and policymaking. As the FTC reflects on
how the agency advances its competition policy and enforcement
goals, a key aim of this exercise should be to examine its full set
of tools and authorities—not only those that the Commission has
traditionally relied upon.
The Commission should approach this inquiry with three
goals in mind:
(1) Reduce ambiguity around what the law is, enhancing
predictability;
(2) Reduce the burdens of litigation and enforcement,
enhancing efficiency; and
(3) Reduce opacity and certain undemocratic features of
the current approach, enhancing transparency and
participation.
In this Essay, we begin by explaining how the current ap-
proach to antitrust has delivered a regime that generates ambi-
guity, drains resources, and deprives individuals and firms of any
real opportunity to participate in the process of creating substan-
tive antitrust rules. Second, we explore how the FTC can bolster
antitrust enforcement through participatory rulemaking. We close
by identifying two factors to guide when participatory rulemaking
might be especially apt: in situations where (1) there exists an

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2020] The Case for “Unfair Methods of Competition” Rulemaking 359

extensive enforcement record or (2) private litigation is unlikely

to deter anticompetitive conduct.

I. THE STATUS QUO: AMBIGUOUS, BURDENSOME, AND

UNDEMOCRATIC?
Antitrust law today is developed exclusively through adjudi-
cation. In theory, this case-by-case approach facilitates nuanced
and fact-specific analysis of liability and well-tailored remedies.
But in practice, the reliance on case-by-case adjudication yields a
system of enforcement that generates ambiguity, unduly drains
resources from enforcers, and deprives individuals and firms of
any real opportunity to democratically participate in the process.
One reason that antitrust adjudication suffers from these
shortcomings is that courts analyze most forms of conduct under
the “rule of reason” standard. The “rule of reason” involves a
broad and open-ended inquiry into the overall competitive effects
of particular conduct and asks judges to weigh the circumstances
to decide whether the practice at issue violates the antitrust laws.
Balancing short-term losses against future predicted gains calls
for “speculative, possibly labyrinthine, and unnecessary” analysis
and appears to exceed the abilities of even the most capable insti-
tutional actors.1 Generalist judges struggle to identify anticom-
petitive behavior2 and to apply complex economic criteria in con-
sistent ways.3 Indeed, judges themselves have criticized antitrust
standards for being highly difficult to administer.4 And if a stand-
ard isn’t administrable, it won’t yield predictable results. The
dearth of clear standards and rules in antitrust means that mar-
ket actors face uncertainty and cannot internalize legal norms

1 Richard D. Cudahy and Alan Devlin, Anticompetitive Effect, 95 Minn L Rev 59, 87
(2010). See also Maurice E. Stucke, Does the Rule of Reason Violate the Rule of Law?, 42
UC Davis L Rev 1375, 1440 (2009).
2 C. Scott Hemphill, An Aggregate Approach to Antitrust: Using New Data and Rule-
making to Preserve Drug Competition, 109 Colum L Rev 629, 674 (2009).
3 Leegin Creative Leather Products, Inc v PSKS, Inc, 551 US 877, 917 (2007) (Breyer
dissenting) (“One cannot fairly expect judges and juries in such cases to apply complex
economic criteria without making a considerable number of mistakes, which themselves
may impose serious costs.”).
4 See, for example, id at 916 (“How easily can courts identify instances in which the
benefits are likely to outweigh potential harms? My own answer is, not very easily.”); FTC
v Actavis, 570 US 136, 173 (2013) (Roberts dissenting) (“[T]he majority declares that such
questions should henceforth be scrutinized by antitrust law’s unruly rule of reason. Good
luck to the district courts that must, when faced with a patent settlement, weigh the ‘likely
anticompetitive effects, redeeming virtues, market power, and potentially offsetting legal
considerations present in the circumstances.’”).

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360 The University of Chicago Law Review [87:357

into their business decisions.5 Moreover, ambiguity deprives mar-

ket participants and the public of notice about what the law is,
thereby undermining due process—a fundamental principle in
our legal system.6
Decades ago, former Commissioner Philip Elman observed that
case-by-case adjudication “may simply be too slow and cumbersome
to produce specific and clear standards adequate to the needs of
businessmen, the private bar, and the government agencies.”7 Re-
lying solely on case-by-case adjudication means that businesses
and the public must attempt to extract legal rules from a patch-
work of individual court opinions. Because antitrust plaintiffs
bring cases in dozens of different courts with hundreds of differ-
ent generalist judges and juries, simply understanding what the
law is can involve piecing together disparate rulings founded on
unique sets of facts. All too often, the resulting picture is unclear.
This ambiguity is compounded when the Supreme Court assigns
to lower courts the task of fleshing out how to structure and apply
a standard, potentially delaying clarity and certainty for years or
even decades.8
The current approach to antitrust also makes enforcement
highly costly and protracted. In 2012, the American Bar Associa-
tion (ABA) published the report of a task force that sought to
“study ways to control the costs of antitrust litigation and enforce-
ment.”9 The task force, the authors explained, was “a response to
concerns” about both “the costs imposed on businesses by the
American system of antitrust enforcement” and “the length of
time required to resolve antitrust issues both in litigation and in
enforcement proceedings.”10 Out-of-control costs undermine effec-
tive antitrust enforcement by agencies and private litigants, but

5 Thomas A. Piraino Jr, A New Approach to the Antitrust Analysis of Mergers, 83

BU L Rev 785, 807 (2003) (arguing that the rule of reason has “become so confusing that
it preclude[s] antitrust practitioners from advising their clients as to the legality of par-
ticular conduct”).
6 See FCC v Fox Television Stations, Inc, 567 US 239, 253 (2012). A lack of fair notice
raises constitutional due process concerns. As the Supreme Court has explained, fair no-
tice concerns arise when a law or regulation “fails to provide a person of ordinary intelli-
gence fair notice of what is prohibited, or is so standardless that it authorizes or encour-
ages seriously discriminatory enforcement.” Id (citations omitted).
7 Philip Elman, The Need for Certainty and Predictability in the Application of the
Merger Law, 40 NYU L Rev 613, 621 (1965).
8 See, for example, Actavis, 570 US at 160 (“We therefore leave to the lower courts
the structuring of the present rule-of-reason antitrust litigation.”).
9 ABA Section of Antitrust Law, Controlling Costs of Antitrust Enforcement and Lit-
igation *1 (ABA, Dec 20, 2012), archived at https://perma.cc/S94N-DWMR.
10 Id.

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2020] The Case for “Unfair Methods of Competition” Rulemaking 361

may advantage actors who profit from anticompetitive practices

and can treat litigation as a routine cost of business.
Professor Michael Baye and Former Commissioner Joshua
Wright have noted that generalist judges may be ill-equipped to
independently analyze and assess evidence presented by eco-
nomic experts.11 Because determining the legality of most conduct
now involves complex economic analysis, courts have effectively
“delegate[d] both factfinding and rulemaking to courtroom econo-
mists,” making courtroom economics “not just inevitable but often
dispositive.”12 In fact, paid expert testimony now is often “the
‘whole game’ in an antitrust dispute.”13
Paid experts are a major expense. Some experts charge over
$1,300 an hour, earning more than senior partners at major law
firms.14 Over the last decade, expenditures on expert costs by pub-
lic enforcers have ballooned.15 In a system that incentivizes firms
to spend top dollar on economists who can use ever-increasing
complexity to spin a favorable tale, the eye-popping costs for eco-
nomic experts can put the government and new market entrants
at a significant disadvantage.16
Another component of the burden is that antitrust trials are
extremely slow and prolonged.17 The Supreme Court has criticized
antitrust cases for involving “interminable litigation”18 and the

11 Michael R. Baye and Joshua D. Wright, Is Antitrust Too Complicated for General-

ist Judges? The Impact of Economic Complexity and Judicial Training on Appeals, 54 J L
& Econ 1, 2 (2011).
12 Rebecca Haw, Adversarial Economics in Antitrust Litigation: Losing Academic

Consensus in the Battle of the Experts, 106 Nw U L Rev 1261, 1263 (2012).
13 Id at 1261.
14 Jesse Eisinger and Justin Elliott, These Professors Make More Than a Thousand

Bucks an Hour Peddling Mega-Mergers (ProPublica, Nov 16, 2016), archived at

https://perma.cc/4DBF-4KGM.
15 See, for example, Federal Trade Commission Office of Inspector General, Audit of

Federal Trade Commission Expert Witness Services *3 (Nov 14, 2019), archived at
https://perma.cc/UA8A-2FUS (“During FY 2015 and FY 2016, [The Bureau of Competition]
obligated an average $9.3 million on expert services and this spending continues to in-
crease. In FY 2017, spending totaled over $10.7 million and approached $14.9 million in
FY 2018.”).
16 The FTC Office of Inspector General identified soaring expert costs as one of the

two top management challenges facing the Commission in 2019. Federal Trade Commis-
sion Office of Inspector General, Management Challenges Facing the Federal Trade Com-
mission (Sept 27, 2019), archived at https://perma.cc/23VE-ETX5.
17 See, for example, Kevin Caves and Hal Singer, When the Econometrician Shrugged:

Identifying and Plugging Gaps in the Consumer Welfare Standard, 26 Geo Mason L Rev 395,
424 (2019) (“[I]t is unlikely that the slow pace of antitrust enforcement could keep up with
the fast pace of high-tech markets.”).
18 Verizon Communications, Inc v Law Offices of Curtis V. Trinko, LLP, 540 US 398,
414 (2004).

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362 The University of Chicago Law Review [87:357

“inevitably costly and protracted discovery phase,”19 yielding an

antitrust system that is “hopelessly beyond effective judicial su-
pervision.”20 That it can easily take a decade to bring an antitrust
case to full judgment means that by the time a judge orders a
remedy, market circumstances are likely to have outpaced it.21
The same 2012 ABA report suggested that lengthy, costly litiga-
tion may be contributing to reduced government-enforcement ef-
forts over time relative to the expansion of the US economy.22
Lastly, the current approach deprives both the public and
market participants of any real opportunity to participate in the
creation of substantive antitrust rules.23 The exclusive reliance on
case-by-case adjudication leaves broad swaths of market partici-
pants watching from the sidelines, lacking an opportunity to con-
tribute their perspective, their analysis, or their expertise, except
through one-off amicus briefs.24 Nascent firms and startups are
especially likely to be left out—despite the vital role they play in
the competition ecosystem—given that they do not comprise a sig-
nificant portion of the parties represented in litigated matters,
and they usually lack the resources to engage in amicus activity.
Furthermore future entrants, whose interests should be carefully
considered in all aspects of competition law and policy, have no
voice.
Firms, entrepreneurs, workers, and consumers across our
economy vary wildly in their experiences and perspectives on

19 Bell Atlantic Corp v Twombly, 550 US 544, 558 (2007).

20 Stucke, 42 UC Davis L Rev at 1378 (cited in note 1).
21 See, for example, Jonathan M. Jacobson, Tackling the Time and Cost of Antitrust
Litigation, 32 Antitrust 3 (Fall 2017) (describing a case where the final remedy was issued
over twenty years after the underlying conduct had taken place, impeding the efficacy of
the remedy).
22 ABA Section of Antitrust Law, Controlling Costs at *5 (cited in note 9).
23 Courts, policymakers, and scholars have long acknowledged the democratic and

participatory benefits of rulemaking. See, for example, NLRB v Wyman-Gordon, 394 US

759, 777–78 (1969) (Douglas dissenting):
The rule-making procedure performs important functions. It gives notice to an
entire segment of society of those controls or regimentation that is forthcoming.
It gives an opportunity for persons affected to be heard. . . . This is a healthy
process that helps make a society viable. The multiplication of agencies and their
growing power make them more and more remote from the people affected by
what they do and make more likely the arbitrary exercise of their powers. Public
airing of problems through rule making makes the bureaucracy more responsive
to public needs and is an important brake on the growth of absolutism in the
regime that now governs all of us.
24 For a detailed explanation of how the current antitrust system lacks adequate

democratic participation or oversight, see generally Harry First and Spencer Weber Waller,
Antitrust’s Democracy Deficit, 81 Fordham L Rev 2543 (2013).

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2020] The Case for “Unfair Methods of Competition” Rulemaking 363

market conduct. Enforcement and regulation of business conduct

can more successfully promote competition when it incorporates
more voices and evidence from across the marketplace.
The ambiguity of the laws, the administrative and resource
burdens of enforcing them, and the exclusivity of the current pro-
cess tend to advantage incumbents and suppress market entry.
For example, when courts disagree with one another on the legal-
ity of particular conduct, new entrants are likely to eschew the
practice, since the threat of litigation could prove fatal at an early
stage. Incumbents, by contrast, will be more likely to conduct a
cost-benefit analysis of engaging in a potentially unlawful prac-
tice, since they are likely to have higher tolerance for protracted
litigation and deeper pockets to fund it. Continued ambiguity and
complexity also create business opportunities for lawyers, econo-
mists, and lobbyists, who effectively profit from the lack of
clarity.

II. THE CASE FOR RULEMAKING UNDER “UNFAIR METHODS OF

COMPETITION”
Legislative history is clear that Congress sought to advance
competition law outside the courts as well as through them.25 Two
decades into enforcement of the federal antitrust laws, Congress
was frustrated with the exclusively common law approach to an-
titrust. In particular, lawmakers worried that the case-by-case
approach to enforcement was yielding a body of law that was in-
consistent, unpredictable, and unmoored from congressional in-
tent.26 The solution, lawmakers decided, was the creation of a new
expert administrative agency: the Federal Trade Commission.
Congress established the FTC to supplement the authority of
the Attorney General.27 While both institutions were tasked with
enforcing the antitrust laws, lawmakers designed the FTC with
two distinct features: (1) delegated authority to interpret and pro-
hibit “unfair methods of competition,” as established by § 5 of the

25 See Appendix.
26 Daniel A. Crane, Debunking Humphrey’s Executor, 83 Geo Wash L Rev 1835,
1859 (2015).
27 Daniel A. Crane, The Institutional Structure of Antitrust Enforcement 130 (Oxford
2011) (“The FTC was designed as a complement to, not as a substitute for, the Justice
Department. The FTC Act’s legislative history evidences a Congressional intent that ‘[f]ar
from being regarded as a rival of the Justice Department . . . the [FTC] was envisioned as
an aid to them.’”).

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364 The University of Chicago Law Review [87:357

Federal Trade Commission Act28 (FTC Act) and (2) extensive au-
thority to collect confidential business information and conduct
industry studies, as established by § 6(b) of the FTC Act.29
By designing the Commission this way, Congress sought to
create a regime where the law developed not just through the ju-
diciary but also through an expert agency. Congress envisioned
that the Commission’s data collection from market participants
would ensure that the agency stayed abreast of evolving business
practices and market trends, and that it would use this expertise
to establish market-wide standards clarifying what practices con-
stituted an “unfair method of competition,” even as the market
evolved. This unique role would complement adjudication pur-
sued by the Attorney General, state attorneys general, and pri-
vate parties.30 Indeed, Congress expected that federal judges and
other policymakers would defer to the Commission on competition
matters because it would “serve as an indispensable instrument
of information and publicity, as a clearinghouse for the facts by
which both the public mind and the managers of great business

28 15 USC § 45(a). Judicial decisions that have reviewed the legislative history con-
firm that the Commission enjoys flexibility in determining which specific acts or practices
constitute “unfair methods of competition.” Senator Francis Newlands, the statute’s chief
sponsor, said that § 5 would “have such an elastic character that it [would] meet every
new condition and every new practice that may be invented with a view to gradually bring-
ing about monopoly through unfair competition.” Federal Trade Commission Act, 63d
Cong, 2d Sess in 51 Cong Rec 12024 (July 13, 1914). See also, for example, Atlantic Refin-
ing Co v FTC, 381 US 357, 367 (1965) (“The Congress intentionally left development of the
term ‘unfair’ to the Commission rather than attempting to define ‘the many and variable
unfair practices which prevail in commerce . . . .’ In thus divining that there is no limit to
business ingenuity and legal gymnastics the Congress displayed much foresight.”); FTC v
Standard Education Society, 86 F2d 692, 696 (2d Cir 1936):
The Commission has a wide latitude in such matters; its powers are not confined
to such practices as would be unlawful before it acted; they are more than pro-
cedural; its duty in part at any rate, is to discover and make explicit those unex-
pressed standards of fair dealing which the conscience of the community may
progressively develop.
29 15 USC § 46(b). Section 6(b) of the FTC Act authorizes the Commission to require

corporations to file informational reports regarding the company’s “organization, business,

conduct, practices, management, and relation to other corporations.”
30 Ahead of the passage of the FTC Act, President Woodrow Wilson explained that

the Commission could “provide clear rules and direction for business that courts had been
incapable of providing.” Crane, 83 Geo Wash L Rev at 1859 (cited in note 26), referencing
Woodrow Wilson, Address to a Joint Session of Congress on Trusts and Monopolies (Amer-
ican Presidency Project, Jan 20, 1914), archived at https://perma.cc/683G-WWVS (“And
the business men of the country desire something more than that the menace of legal
process in these matters be made explicit and intelligible. They desire the advice, the def-
inite guidance and information which can be supplied by an administrative body, an in-
terstate trade commission.”).

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2020] The Case for “Unfair Methods of Competition” Rulemaking 365

undertakings should be guided.”31 It would, in other words, be

“unusually expert.”32
The Commission, at times, has drawn on its expansive infor-
mation collection authorities to follow market trends and estab-
lish expertise on industry practices. For example, in the 1970s the
FTC ordered over 450 of the country’s largest firms to report cer-
tain financial information. The Commission used this data to
identify uncompetitive areas of the economy and to guide industry-
wide investigations into potential antitrust violations.33 More re-
cently, the FTC has used this § 6(b) authority to study the busi-
ness practices of patent assertion entities and data brokers, as
well as the efficacy of the FTC’s merger remedies.34
As a whole, however, the Commission has fulfilled its man-
date to promote competition by functioning less as an expert
agency and more as a generalist enforcer and adjudicator.35 This
is not to say the agency lacks expertise; indeed, the Commission’s
work with particular markets has provided indispensable in-
sights into the marketplace. But, on competition matters, the
agency has rarely used this expertise to affirmatively identify
what conduct or practices constitute an “unfair method of compe-
tition.” Instead, the Commission has sought to define “unfair
methods of competition” on a case-by-case basis.
Former Commissioner Wright and Jan Rybnicek have ob-
served that relying exclusively upon adjudication has “thus far
proved incapable of generating any meaningful guidance as to
what constitutes an unfair method of competition,” resulting in a
“boundless standard.”36 They have described this “failure to iden-
tify what precisely comprises an unfair method of competition” as

31 Crane, 83 Geo Wash L Rev at 1859 (cited in note 26).

32 William E. Kovacic, The Quality of Appointments and the Capability of the Federal
Trade Commission, 49 Admin L Rev 915, 919 (1997).
33 Federal Trade Commission Bureau of Economics, Statistical Report: Annual Line
of Business Report 1977 1–4 (1985).
34 Federal Trade Commission, Patent Assertion Entity Activity: An FTC Study (Oct

2016), archived at https://perma.cc/ACU8-D93N; Federal Trade Commission, Data Bro-

kers: A Call for Transparency and Accountability (May 2014), archived at
https://perma.cc/R44A-PS2Q; Federal Trade Commission Bureaus of Competition and
Economics, The FTC’s Merger Remedies 2006–2012: A Report of the Bureaus of Competi-
tion and Economics (Jan 2017), archived at https://perma.cc/5HC5-93SM.
35 Crane, 83 Geo Wash L Rev at 1839 (cited in note 26) (“The FTC functions primarily

by enforcing the antitrust and consumer protection laws as a plaintiff, no more expert than
the executive branch agencies doing the same thing.”).
36 Jan M. Rybnicek and Joshua D. Wright, Defining Section 5 of the FTC Act: The

Failure of the Common Law Method and the Case for Formal Agency Guidelines, 21 Geo
Mason L Rev 1287, 1304 (2014).

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366 The University of Chicago Law Review [87:357

“an unfortunate and persistent black mark on the Commission’s

record.”37
We agree that relying solely on adjudication to define the sub-
stance of § 5 has generated persistent ambiguity. However, rely-
ing on courtroom battles to create precedents that set expecta-
tions for the marketplace is not the only vehicle through which
the Commission can establish what conduct constitutes an “un-
fair method of competition.” The Commission has in its arsenal a
far more effective tool that would provide greater notice to the
marketplace and that is developed through a more transparent
and participatory process: rulemaking. Through engaging in rule-
making, the Commission could define “unfair methods of compe-
tition” through processes established by the Administrative Pro-
cedure Act38 (APA).39
There is an enormous body of literature on the choice between
adjudication and rulemaking, and this Essay does not seek to
fully address the various trade-offs.40 Instead, our goal is to reflect
on the current state of antitrust enforcement and consider ways
to address the ambiguity, burdens, and democratic deficiency that
we discuss above.
“Rulemaking” often evokes the idea of government imposing
some inflexible prescription upon the marketplace. This is not
what we are suggesting. As former Commissioner Elman rightly
noted, rulemaking can also be related to “standards, guidelines,

37 Id at 1288.
38 60 Stat 237 (1946), codified as amended in various sections of Title 5.
39 We are not the first to suggest that the Commission engage in competition rule-

making. See, for example, Rebecca Haw, Amicus Briefs and the Sherman Act: Why Anti-
trust Needs a New Deal, 89 Tex L Rev 1247, 1288–89 (2011); Hemphill, 109 Colum L Rev
at 673–82 (cited in note 2); Justin Hurwitz, Chevron and the Limits of Administrative
Antitrust, 76 U Pitt L Rev 209, 250–52 (2014); Sandeep Vaheesan, Resurrecting ‘A Com-
prehensive Charter of Economic Liberty’: The Latent Power of the Federal Trade Commis-
sion, 19 U Pa J Bus L 645, 651–57 (2017).
40 The Supreme Court weighed in on the relative benefits and drawbacks of adjudi-

cation and rulemaking in SEC v Chenery Corp, 332 US 194 (1947). For representative
scholarship, see generally David L. Shapiro, The Choice of Rulemaking or Adjudication in
the Development of Administrative Policy, 78 Harv L Rev 921 (1965); J. Skelly Wright, The
Courts and the Rulemaking Process: The Limits of Judicial Review, 59 Cornell L Rev 375
(1974); Glen O. Robinson, The Making of Administrative Policy: Another Look at Rulemak-
ing and Adjudication and Administrative Procedure Reform, 118 U Pa L Rev 485 (1970);
M. Elizabeth Magill, Agency Choice of Policymaking Form, 71 U Chi L Rev 1383 (2004);
William T. Mayton, The Legislative Resolution of the Rulemaking Versus Adjudication
Problem in Agency Lawmaking, 1980 Duke L J 103; Richard K. Berg, Re-examining Policy
Procedures: The Choice Between Rulemaking & Adjudication, 38 Admin L Rev
149 (1986).

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2020] The Case for “Unfair Methods of Competition” Rulemaking 367

pointers, criteria, or presumptions.”41 Rules come from courts, leg-

islative bodies, and agencies. While they were not promulgated as
agency rules, certain elements of the merger guidelines eventu-
ally came to serve as rules once courts adopted them.42 The mer-
ger guidelines stipulate the analytical framework that the agen-
cies rely on to enforce the merger law. Agency rulemaking could
do the same for “unfair methods of competition.”
We see three major benefits to the FTC engaging in rulemak-
ing under “unfair methods of competition,” even if the conduct
could be condemned under other aspects of antitrust laws. As we
describe above, the current approach generates ambiguity, is un-
duly burdensome, and suffers from a democratic participation
deficit. Rulemaking can benefit the marketplace and the public
on all of these fronts.
First, rulemaking would enable the Commission to issue
clear rules to give market participants sufficient notice about
what the law is, helping ensure that enforcement is predictable.43
The APA requires agencies engaging in rulemaking to provide the
public with adequate notice of a proposed rule. The notice must
include the substance of the rule, the legal authority under which
the agency has proposed the rule, and the date the rule will come
into effect.44 An agency must publish the final rule in the Federal
Register at least thirty days before the rule becomes effective.45
These procedural requirements promote clear rules and pro-
vide clear notice. As the Supreme Court has stated, a “fundamen-

41 Philip Elman, Rulemaking Procedures in the FTC’s Enforcement of the Merger

Law, 78 Harv L Rev 385, 385 (1964).

42 See generally Hillary Greene, Guideline Institutionalization: The Role of Merger
Guidelines in Antitrust Discourse, 48 Wm & Mary L Rev 771 (2006).
43 Notably, rulemaking would address criticisms that the FTC uses § 5 to extract

favorable settlements using “strong-arm” tactics without even defining what § 5 is. See
Hurwitz, 76 U Pitt L Rev at 262 (cited in note 39) (“The FTC has shown an alarming
willingness in recent years to threaten litigation under Section 5 without feeling the need
to define its understanding of Section 5’s contours. It has leveraged the uncertain bounds
of Section 5 to demand extrajudicial settlements from numerous firms, especially in high-
tech industries.”).
44 5 USC § 553(b)–(c). The requirement under § 553 to provide the public with ade-
quate notice of a proposed rule is generally achieved through the publication of a notice of
proposed rulemaking in the Federal Register. The APA requires that the notice of pro-
posed rulemaking include “(1) a statement of the time, place, and nature of public rule
making proceedings; (2) reference to the legal authority under which the rule is proposed;
and (3) either the terms or substance of the proposed rule or a description of the subjects
and issues involved.” 5 USC § 553(b)(1)–(3).
45 5 USC § 553(d).

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368 The University of Chicago Law Review [87:357

tal principle in our legal system is that laws which regulate per-
sons or entities must give fair notice of conduct that is forbidden
or required.”46 Clear rules also help deliver consistent enforce-
ment and predictable results. Reducing ambiguity about what the
law is will enable market participants to channel their resources
and behavior more productively and will allow market entrants
and entrepreneurs to compete on more of a level playing field.
Second, establishing rules could help relieve antitrust en-
forcement of steep costs and prolonged trials. Identifying ex ante
what types of conduct constitute “unfair method[s] of competition”
would obviate the need to establish the same exclusively through
ex post, case-by-case adjudication. Targeting conduct through
rulemaking, rather than adjudication, would likely lessen the
burden of expert fees or protracted litigation, potentially saving
significant resources on a present-value basis.47
Moreover, establishing a rule through APA rulemaking can
be faster than litigating multiple cases on a similar subject mat-
ter. For taxpayers and market participants, the present value of
net benefits through the promulgation of a clear rule that reduces
the need for litigation is higher than pursuing multiple, pro-
tracted matters through litigation. At the same time, rulemaking
is not so fast that it surprises market participants. Establishing
a rule through participatory rulemaking can often be far more ef-
ficient. This is particularly important in the context of declining
government enforcement relative to economic activity, as docu-
mented by the ABA.48
And third, rulemaking would enable the Commission to es-
tablish rules through a transparent and participatory process, en-
suring that everyone who may be affected by a new rule has the
opportunity to weigh in on it, granting the rule greater legiti-
macy.49 APA procedures require that an agency provide the public
with meaningful opportunity to comment on the rule’s content
through the submission of written “data, views, or arguments.”50

46 FCC v Fox Television Stations, 567 US 239, 253 (2012). See also FTC v Colgate
Palmolive Co, 380 US 374, 392 (1965) (noting that FTC orders “should be clear and precise
in order that they may be understood by those against whom they are directed”).
47 To be sure, the agency may face litigation challenges to the rule itself, though these
risks can be mitigated through the development of a clear record of empirical evidence.
48 ABA Section of Antitrust Law, Controlling Costs at *1 (cited in note 9).
49 See David Fontana, Reforming the Administrative Procedure Act: Democracy Index
Rulemaking, 74 Fordham L Rev 81, 102–03 (2005) (observing that greater public partici-
pation in notice-and-comment rulemaking can generate greater public support for the rule
that the process ultimately delivers).
50 5 USC § 553(c).

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2020] The Case for “Unfair Methods of Competition” Rulemaking 369

The agency must then consider and address all submitted com-
ments before issuing the final rule. If an agency adopts a rule with-
out observing these procedures, a court may strike down the rule.51
This process is far more participatory than adjudication. Un-
like judges, who are confined to the trial record when developing
precedent-setting rules and standards, the Commission can put
forth rules after considering a comprehensive set of information
and analysis.52 Notably, this would also allow the FTC to draw on
its own informational advantage—namely, its ability to collect
and aggregate information and to study market trends and indus-
try practices over the long term and outside the context of litiga-
tion.53 Drawing on this expertise to develop rules will help anti-
trust enforcement and policymaking better reflect empirical
realities and better keep pace with evolving business practices.
Given that the FTC has largely neglected this tool, some may
question the Commission’s authority to issue competition rules
and the legal status these rules would have.54 Indeed, a common
misconception is that this authority is extremely limited because
FTC rulemaking is subject to the extensive hurdles posed by the
Magnuson-Moss Warranty–Federal Trade Commission Improve-
ments Act55 (“Magnuson-Moss”). In reality, Magnuson-Moss gov-
erns only rulemakings interpreting “unfair or deceptive acts or
practices.”56 For rules interpreting “unfair methods of competi-
tion,” the FTC has authority to engage in participatory rulemak-
ing pursuant to the APA. Several antitrust scholars have affirmed

51 Those affected by the rule may challenge it on several grounds, including it being:

“(A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law;
(B) contrary to constitutional right, power, privilege, or immunity; (C) in excess of statu-
tory jurisdiction, authority, or limitations, or short of statutory right; (D) without ob-
servance of procedure required by law.” 5 USC § 706(2).
52 In adjudication, outside observers may be limited to participation through the fil-
ing of amicus briefs.
53 Hemphill, 109 Colum L Rev at 633 (cited in note 2).
54 The FTC has issued an antitrust rule only once in its history. Discriminatory Prac-
tices in Men’s and Boys’ Tailored Clothing Industry, 16 CFR Part 412 (1968). This past
December, however, the FTC issued an announcement that seemed to acknowledge its
legal authority to do engage in competition rulemaking. See Federal Trade Commission,
FTC to Hold Workshop on Non-Compete Clauses Used in Employment Contracts (Dec 5,
2019), archived at https://perma.cc/8ERZ-7HNZ (“Should the FTC consider using its rule-
making authority to address the potential harms of non-compete clauses, applying either
UMC or UDAP principles?”).
55 Pub L No 93-637, 88 Stat 2183 (1975), codified as amended at 15 USC § 2301

et seq.
56 15 USC § 57(a)(1)(A).

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370 The University of Chicago Law Review [87:357

this authority, and the Appendix lays out further background on

and discussion of it.57
Others acknowledge the authority exists but assert that an-
titrust law is ill suited for rulemaking because antitrust is a com-
mon law enterprise. It is true that, as a descriptive matter, anti-
trust enforcement has proceeded almost exclusively through
adjudication.58 But the idea that this approach is normatively de-
sirable is neither clear nor persuasive. Indeed, relying solely on
adjudication has certainly not delivered a system with sufficient
clarity, efficiency, or transparency.59
Others question how § 5 rulemaking would intersect with ex-
isting Sherman Act jurisprudence, and whether it would conflict
with or undermine the Justice Department’s authority. Former
Acting Chair Maureen Ohlhausen, for example, has expressed
concern that using § 5 to “supplant” the Sherman and Clayton
Acts could weaken the Justice Department’s hand in some cases
or create a situation where firms engaged in the same conduct
would face different liability standards based on which agency
conducted the investigation.60
Notably, these concerns are responding to the prospect of ad-
vancing—through adjudication—interpretations of § 5 that go be-
yond the bounds of the Sherman and Clayton Acts. It is less clear
that these concerns are as salient in the context of § 5 rulemaking
that interprets “unfair methods of competition” that fall under
the other antitrust laws.61 Moreover, it is worth noting that the
FTC Act already contemplates a role for the Attorney General in
bringing certain claims when authorized to do so by the FTC.62
We see no reason why the Attorney General could not plead
counts involving violations of rules proscribing “unfair methods

57 See, for example, Crane, 83 Geo Wash L Rev at 1862 (cited in note 26); Hurwitz,
76 U Pitt L Rev at 250–52 (cited in note 39); Vaheesan, 19 U Penn J Bus L at 651–57 (cited
in note 39). See also Appendix.
58 Tim Wu, Antitrust via Rulemaking: Competition Catalysts, 16 Colo Tech L J 33,
35 (2005) (observing that with several exceptions, the antitrust regime “remains rooted in
the adjudication model”).
59 Notably, other agencies do engage in competition rulemaking. See id at 34–35.
60 Maureen K. Ohlhausen, Section 5: Principles of Navigation *12 (Federal Trade

Commission, July 25, 2013), archived at https://perma.cc/4PQ5-NP44.

61 This question echoes concerns raised by Commissioner Elman in 1967, when he
noted that “the Congress of 1914 intended the Commission to supplement, not to duplicate,
the work of the courts and the Department of Justice in antitrust enforcement.” Philip
Elman, Antitrust Enforcement: Retrospect and Prospect, 53 ABA J 609, 610 (1967).
62 See, for example, 15 USC § 56.

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2020] The Case for “Unfair Methods of Competition” Rulemaking 371

of competition” in complaints that follow investigations by the An-

titrust Division for entities that are covered by the Act.
Here, it is also worth underscoring that claims under the
Sherman Act are enforceable by private plaintiffs and subject to
treble damages.63 While private enforcement with treble damages
is an important element of the antitrust enforcement regime, gen-
eralist judges may be reluctant to condemn certain anticompeti-
tive conduct and impose remedies with very large financial
awards in close cases. If the Commission promulgates rules under
§ 5 with respect to anticompetitive conduct, private plaintiffs
would generally be unable to rely on these rules for the purpose
of seeking treble damages. This presents an opportunity for the
Commission to use its analytical and information advantages to
advance and further develop the law without opening the door to
treble damages in private suits and prompting judicial reluctance
to find conduct in violation of the law.
Lastly, it is worth noting that FTC rulemaking can also be
used to define what is not an unfair method of competition, which
may address concerns from some critics about the purported
boundlessness of the law.

III. POTENTIAL CONSIDERATIONS TO GUIDE FTC RULEMAKING

Rulemaking would advance clarity and certainty about what
types of conduct constitute—or do not constitute—an “unfair
method of competition.”64 Commission studies of specific indus-
tries and business practices would guide which practices the FTC
should use rulemaking to address. Indeed, as an enforcer and reg-
ulator across industries, the Commission is uniquely positioned
to identify practices that it determines are anticompetitive. Below
we offer two other considerations that could weigh in favor of FTC
rulemaking.
First is the existence of an extensive enforcement record. The
Commission may have a robust record of agency action against a
particular anticompetitive practice—yet that enforcement record

63 15 USC § 15(a) (“[A]ny person who shall be injured in his business or property by
reason of anything forbidden in the antitrust laws may sue . . . and shall recover threefold
the damages by him sustained.”).
64 It is worth noting again that rulemaking can also serve to provide certainty about
the bounds of § 5 in a manner that is more durable than FTC Enforcement Policy state-
ments, such as the one adopted by the Commission in 2015. See Federal Trade Commis-
sion, Statement of Enforcement Principles Regarding “Unfair Methods of Competition”
Under Section 5 of the Federal Trade Commission Act, 80 Fed Reg 57056, 57056 (2015).

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372 The University of Chicago Law Review [87:357

may not be enough to eliminate the practice altogether, especially

when the conduct is highly profitable or can evolve in ways that
do not precisely mirror prior application. Here, rulemaking might
be a useful tool.
Investigations of anticompetitive conduct yield significant
quantitative and qualitative insights about how firms employ cer-
tain practices. In certain situations, these data, supplemented by
other data collected through a process of public participation,
might inform the criteria under which a specific practice should
be deemed anticompetitive.
For example, in 2002 the FTC published a significant study
assessing pay-for-delay settlements that impeded generic drug
entry.65 The agency conducted additional analyses and has pur-
sued a number of cases that were ultimately successful.66 At the
same time, these settlements have evolved in ways that do not
replicate the fact patterns previously condemned by courts. This
has led the FTC to continue to expend significant resources to
confront these practices in protracted litigation.
Given the extensive enforcement and factual record devel-
oped by the agency, it is fair to consider whether the FTC might
have been more effective in targeting pay-for-delay settlements
through both adjudication and rulemaking, which would have es-
tablished for courts the clear rules by which to evaluate these
agreements.67 For an agency with scarce resources, it will be im-
portant to carefully analyze whether investing time and effort
into rulemaking might be a better use of limited resources than
many years of intense and expensive litigation.
The second circumstance that could favor FTC rulemaking is
one in which private litigation is unlikely to discipline anticom-
petitive conduct. Relying on adjudication as a primary way of de-
veloping legal rules and standards is most sensible when there is
a rich body of disputes. When conduct has anticompetitive impli-

65 Federal Trade Commission, Generic Drug Entry Prior to Patent Expiration: An

FTC Study *1 (July 2002), archived at https://perma.cc/A2US-Y8RG.
66 See, for example, In the Matter of Impax Laboratories, Inc, FTC Matter 141 0004

(2019); Notice of Voluntary Dismissal with Prejudice, Federal Trade Commission v Allergan
PLC et al, No 17-cv-00312-WHO, *2 (ND Cal filed Feb 22, 2019); Joint Motion for Entry of
Stipulated Revised Order for Permanent Injunction and Equitable Monetary Relief, Fed-
eral Trade Commission v Cephalon, Inc, No 2:08-cv-2141-MSG, *1–3 (ED Pa filed Feb 19,
2019).
67 Hemphill, 109 Colum L Rev at 673–75 (cited in note 2) (explaining that courts

have struggled to understand and apply the agency’s deep expertise in this area, while
rulemaking would likely provide clearer guidance).

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2020] The Case for “Unfair Methods of Competition” Rulemaking 373

cations but is unlikely to be challenged by private litigants, adju-

dication is not a reliable means of targeting the anticompetitive
practice. Here, rulemaking may also be a useful tool.
Section 5 does not provide for a private right of action. This
means that actions by the Commission—be it through adjudica-
tion or rulemaking—are the only vehicles for developing legal
standards under “unfair methods of competition.” Legal issues
that only the government can pursue are not likely to effectively
evolve and develop through common law. This is because the body
of disputes on that issue will be much smaller. For this reason,
anticompetitive practices that lie beyond the reach of the anti-
trust laws are a particularly good candidate for being the subject
of rulemaking.
Anticompetitive practices that are reachable under the other
antitrust laws but that private litigation is unlikely to target may
also be ripe for rulemaking. Take, for example, noncompete
clauses in employment contracts. These agreements prevent em-
ployees from working for rival firms for a period of time after they
leave. As recent studies show, these agreements—which now
cover roughly twenty-eight million Americans—deter workers
from switching employers, weakening workers’ credible threat of
exit, and diminishing their bargaining power.68 By reducing the
set of employment options available to workers, employers can
suppress wages.
In theory, workers could bring lawsuits alleging that certain
noncompete clauses are anticompetitive under the Sherman Act.
In practice, however, private litigation in this area is effectively
nonexistent. Employers now frequently include in employment
contracts forced arbitration clauses and class action waivers, pro-
visions that prevent workers from banding together to bring a
case in court.69 Any challenges must be pursued in isolation and
through a private arbitrator, whose proceedings lie entirely out-
side the common law system.
Given the paucity of private litigation challenging noncom-
pete agreements as antitrust violations, the FTC might consider

68 Evan Starr, J.J. Prescott, and Norman Bishara, Noncompetes in the U.S. Labor
Force *17 (U Mich L and Econ Research Paper No 18-013, Aug 30, 2019), archived at
https://perma.cc/2UTG-RWCB.
69 In 2018, a 5–4 majority of the Supreme Court upheld the validity of class action
waivers in employment contracts. Epic Systems Corp v Lewis, 138 S Ct 1612, 1632 (2018).
See also Alexander J.S. Colvin, The Growing Use of Mandatory Arbitration *5 (Economic
Policy Institute, Sept 27, 2017), archived at https://perma.cc/724B-BZDZ (noting that
roughly sixty million workers are subject to mandatory arbitration terms).

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374 The University of Chicago Law Review [87:357

engaging in rulemaking on this issue. A rule could grant clarity

as to when noncompete agreements are permissible or not. Pur-
suing this through rulemaking will allow for a general rule that
would give notice to a much larger set of market participants than
addressing noncompetes through adjudication.

CONCLUSION
The choice between adjudication and participatory rulemak-
ing is neither strictly binary nor categorical. The Federal Trade
Commission can pursue each in the appropriate circumstances.
As the Commission undertakes a period of reflection in a time of
scarce agency resources, we encourage interested parties to ex-
plore whether and how rulemaking might lead to antitrust policy
that is more predictable, efficient, and participatory.

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2020] The Case for “Unfair Methods of Competition” Rulemaking 375

APPENDIX: THE FEDERAL TRADE COMMISSION’S AUTHORITY TO

DEFINE “UNFAIR METHODS OF COMPETITION” THROUGH
RULEMAKING
Rulemaking under “unfair methods of competition” is gov-
erned by the Administrative Procedure Act and is eligible for
Chevron deference. Given the misunderstanding on this issue, it
is worth tracing the legal developments around the FTC’s rule-
making authority and understanding how this authority fits with
the institutional role that Congress intended for the Commission
to play.
By passing the Sherman Act, Congress tasked the Justice De-
partment with targeting anticompetitive conduct through pun-
ishing bad acts. Enforcement was to proceed through litigation in
federal courts, and courts, in turn, soon began introducing their
own standards, a trend that troubled Congress. A key inflection
point was Standard Oil Co v United States,70 in which the Su-
preme Court replaced the absolute prohibition on restraints of
trade with a prohibition on only those restraints found to be “un-
reasonable” in the context of a particular case.71
The day after the Supreme Court announced its decision,
members of Congress began recommending new legislation to
take back power from the courts. Senator Francis Newlands said
the key issue was whether Congress would allow future admin-
istration of “these great combinations to drift practically into the
hands of the courts,” subjecting questions about the legality of a
restraint of trade “to the varying judgments of different courts
upon the facts and the law.”72 He introduced two bills providing
for the federal registration of corporations, creating an interstate
trade commission, and introducing “an elastic concept of unfair-
ness.”73 The bills also authorized the Commission to “revoke and
cancel the registration of any corporation” upon a finding of vio-
lation of any operative judicial decree rendered under the Sherman
Act, or upon the use of “materially unfair or oppressive methods
of competition.”74
While neither bill became law, the effort led Congress to hold
hearings on the need for new antitrust law. After three months of

70 221 US 1 (1911).
71 Id at 53–55, 64.
72 62d Cong, 1st Sess in 47 Cong Rec 1225 (May 16, 1911).
73 Neil W. Averitt, The Meaning of “Unfair Methods of Competition” in Section 5 of

the Federal Trade Commission Act, 21 BC L Rev 227, 231 (1980).

74 Id, quoting 62d Cong, 1st Sess in 47 Cong Rec 2619–20 (1911) (cited in note 72).

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376 The University of Chicago Law Review [87:357

testimony, the Committee issued the “Cummins Report.”75 Echo-

ing Senator Newlands’s view, the report criticized the Standard
Oil decision, noting that “whenever the rule [of reason] is invoked
the court does not administer the law, but makes the law.”76 The
report stated that it was “inconceivable that in a country gov-
erned by a written Constitution and statute law the courts can be
permitted to test each restraint of trade by the economic standard
which the individual members of the court may happen to ap-
prove.”77 This approach, they noted, did not create adequate pre-
dictability or uniformity of outcomes.78 The weaknesses in the cur-
rent system, the report concluded, called for new legislation
“establishing a commission for the better administration of the
law and to aid in its enforcement.”79
This set the scene for the creation of the Federal Trade Com-
mission. Most notably, the authorizing statute declared “unfair
methods of competition” in commerce unlawful. The committee
report explained the reason for including such a broad term:
The committee gave careful consideration to the question as
to whether it would attempt to define the many and variable
unfair practices which prevail in commerce and to forbid
[them] or whether it would, by a general declaration con-
demning unfair practices, leave it to the commission to deter-
mine what practices were unfair. It concluded that the latter
course would be the better, for the reason . . . that there were
too many unfair practices to define, and after writing 20 of
them into the law it would be quite possible to invent others.80
In other words, Congress would leave it up to the new Com-
mission to define and identify practices that constituted “unfair

75 Control of Corporations, Persons, and Firms Engaged in Interstate Commerce, S

Rep No 1326, 62d Cong, 3d Sess 1 (1913) (Cummins Report).

76 Id at 10.
77 Id.
78 Id at 12. The report stated:

There are many forms of combination, and many practices in business which
have been so unequivocally condemned by the Supreme Court that as to them
and their like the statute is so clear that no person can be in any doubt respect-
ing what is lawful and what is unlawful; but as the statute is now construed
there are . . . many other practices that seriously interfere with competition, and
are plainly opposed to the public welfare, concerning which it is impossible to
predict with any certainty whether they will be held to be due or undue re-
straints of trade.
79 Cummins Report, 62d Cong, 3d Sess at 12 (cited in note 75).
80 Federal Trade Commission, S Rep No 597, 63d Cong, 2d Sess 13 (1914).

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2020] The Case for “Unfair Methods of Competition” Rulemaking 377

methods of competition.” Indeed, the FTC would be especially

suited to this task, given that Congress was designing the agency
to gather and develop expertise in business practices and indus-
try trends.81
These aspects of the FTC’s design reflect Congress’s intention
for the new agency to alter the institutional structure of antitrust
enforcement. By passing the Sherman Act, Congress had adopted
a crime-tort model—which prohibited certain bad acts—rather
than a corporate-regulatory model, which would have created a
regulatory regime for policing the capital-concentrating effects of
incorporation laws.82 By creating the Federal Trade Commission,
Congress was adopting an expert-agency model alongside the
crime-tort model. A key aim was for legislators to recover power
to steer antitrust law back from the courts. As Senator Albert
Cummins expressed, “I would rather take my chance with a com-
mission at all times under the power of Congress, at all times un-
der the eye of the people . . . than . . . upon the abstract proposi-
tions, even though they be full of importance, argued in the
comparative seclusion of the courts.”83
In order to equip the FTC to fulfill this institutional mission,
Congress endowed the Commission with the authority to “make
rules and regulations for the purpose of carrying out the [FTC
Act’s] provisions.”84 In the parlance of Chevron, this means “Con-
gress delegated authority to the agency generally to make rules
carrying the force of law,” and agency interpretations made pur-
suant to that authority fall within the domain of Chevron.85 In
light of confusion around whether “unfair methods of competi-
tion” applied only to practices that harmed competitors, Congress

81 FTC v R.F. Keppel & Brothers, Inc, 291 US 304, 314 (1934):
[The FTC] was created with the avowed purpose of lodging the administrative
functions committed to it in a ‘body specially competent to deal with them by
reason of information, experience and careful study of the business and economic
conditions of the industry affected,’ and it was organized in such a manner, with
respect to the length and expiration of the terms of office of its members, as
would ‘give to them an opportunity to acquire the expertness in dealing with
these special questions concerning industry that comes from experience.
82 See Daniel A. Crane, The Institutional Structure of Antitrust Enforcement 13
(Oxford 2011); Daniel A. Crane, Antitrust Antifederalism, 96 Cal L Rev 1, 2 (2008).
83 Federal Trade Commission, 63d Cong, 3d Sess, in 51 Cong Rec 13047 (1914).
84 15 USC § 46(g).
85 United States v Mead, 533 US 218, 234–35 (2001).

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378 The University of Chicago Law Review [87:357

in 1938 passed the Wheeler-Lea Amendment,86 adding the pro-

scription against “unfair or deceptive acts or practices.”87
In 1973, the DC Circuit clarified that the FTC did, indeed,
have the authority to promulgate substantive rules, not just pro-
cedural ones.88 The court observed that the “use of substantive
rule-making is increasingly felt to yield significant benefits to
those the agency regulates” and that “[i]ncreasingly, courts are
recognizing that use of rule-making to make innovations in
agency policy may actually be fairer to regulated parties than to-
tal reliance on case-by-case adjudication.”89
Two years later, Congress enacted the Magnuson-Moss
Warranty–Federal Trade Commission Improvement Act. The law
granted the Commission authority to promulgate industry-wide
rules prohibiting “unfair or deceptive acts or practices” and intro-
duced heightened procedural requirements for rulemaking made
under that provision. Legislative history documents that a House
proposal would have subjected all FTC rulemaking to the new
procedures, but that this version of the bill was rejected for one
that spoke only to “unfair or deceptive acts or practices.”90 The
final statute contains a provision limiting its effect to “unfair or
deceptive acts or practices,”91 and the conference report, too,
states that the legislation “does not affect any authority of the
FTC under existing law to prescribe rules with respect to unfair
methods of competition.”92
In 1980, Congress passed the Federal Trade Commission Im-
provements Act,93 which added procedural requirements to rule-
making governed by Magnuson-Moss and stripped the FTC of
rulemaking authority on specific issues. The 1980 Amendments,
like the 1975 Act, applied only to the FTC’s authority over “unfair
or deceptive acts or practices.” The Commission’s “unfair methods
of competition” rulemaking authority was not subjected to the

86 52 Stat 111, codified as amended at 15 USC §§ 41–58.

87 15 USC § 45.
88 See National Petroleum Refiners Association v FTC, 482 F2d 672, 698 (1973) (“We

hold that under the terms of its governing statute, 15 U.S.C. § 41 et seq., and under Sec-
tion 6(g), 15 U.S.C. § 46(g), in particular, the Federal Trade Commission is authorized to
promulgate rules defining the meaning of the statutory standards of the illegality the
Commission is empowered to prevent.”).
89 Id at 681.
90 Hurwitz, 76 U Pitt L Rev at 234 (cited in note 39).
91 15 USC § 57.
92 Hurwitz, 76 U Pitt L Rev at 234–35 (cited in note 39) (citations omitted).
93 Pub L No 96-252, 94 Stat 374 (1980), codified as amended at 15 USC § 57.

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2020] The Case for “Unfair Methods of Competition” Rulemaking 379

new procedures. It remains governed by the Administrative Pro-

cedure Act, and FTC interpretations of “unfair methods of compe-
tition” are subject to Chevron deference.

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