Unfair Methods of Competition under Section 5 of the Federal Trade Commission Act: What Is the Intelligible Principle?

Abstract: Section 5 of the Federal Trade Commission (FTC) Act of 1914 declared “unfair methods of
competition” (UMC) unlawful. Members of Congress appreciated that the Constitution did not permit
the delegation of legislative power to a commission. And they believed the UMC prohibition
articulated what courts call an “intelligible principle” governing its application. But the intelligible
principle of the UMC prohibition has never crystalized, in large part because the FTC began to ground its decisions on Sherman Act law. This article aims to (1) construct the intelligible principle members of Congress thought they provided in enacting the UMC prohibition, (2) determine how a court likely would interpret the prohibition today, and (3) critique the FTC’s 2022 policy statement on the prohibition.

JEL codes: L41, K21, K23, N4

Keywords: Federal Trade Commission, antitrust, unfair methods of competition, monopolies