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On December 16, 2009, the Federal Trade Commission made a renewed bid to expand the scope of federal antitrust enforcement by filing suit against Intel Corporation under Section 5 of the FTC Act for alleged unfair trade practices against competitors in the microprocessor market.

The FTC complaint alleges that Intel entered into anticompetitive vertical agreements with computer manufacturers, offered selective discounts, redesigned its compilers and libraries specifically to reduce their performance with competing central processing units ("CPUs"), and took other action designed to make it harder for competitors to enter the market either for CPUs or for graphics processing units ("GPUs").

The scope of Section 5 is broader than the Sherman or Clayton Acts

While the FTC complaint contains multiple references to Intel's monopoly power and its actions' effects on competition, the complaint is not brought under the Sherman or Clayton Acts, but under Section 5 of the FTC Act, 15 U.S.C. § 45 et seq.  Section 5 was designed to supplement the traditional antitrust laws enforced by the Antitrust Division of the Department of Justice, giving the Commission broader authority while limiting the remedies available to it.

Section 5 prohibits "unfair methods of competition … and unfair or deceptive acts" affecting interstate commerce. 15 U.S.C. § 45. Congress left this language intentionally vague to give the FTC the leeway to address new and creative attempts to circumvent existing antitrust law, and the courts have consistently held that the Commissioners may use Section 5 to attack conduct that would fall either within or outside the scope of the Sherman or Clayton Acts. In practice, the FTC has used Section 5 to prosecute behavior that fell within either the letter or the spirit of the Sherman Act, and for practical purposes the FTC's enforcement authority has therefore been almost coequal with the authority of the Department of Justice, Antitrust Division under the Sherman Act.

The FTC widens the gap between public and private enforcement

The FTC Act also has a few important limitations. It applies only to for-profit institutions, meaning that nonprofit hospitals and other nonprofit entities are not subject to suit under Section 5, even if they would be under the Sherman Act. It also applies only to interstate commerce, and excludes some foreign commerce. Most importantly, Section 5 contains no private right of action, and treble damages are not available. Instead, Section 5 is enforced exclusively by FTC action. It is this difference that accounts for the FTC's renewed interest in Section 5.

As the Commissioners make clear in their published statements on the Intel proceeding, the FTC's renewed interest in Section 5 in Intel and other recent cases is in part a reaction to recent decisions by the federal courts, such as Twombly, 550 U.S. 264, and Credit Suisse, 551 U.S. 264, that the Commissioners see as "'shrinking' the ambit of the Sherman Act both procedurally and substantively." Statement of Commissioner J. Thomas Rosch, at 4. Concerned with the rising number and cost of private treble damages suits, the courts have been raising additional barriers to antitrust enforcement, barriers that also apply to government enforcement under the Sherman Act. These restrictions will not apply to Section 5 actions; as Section 5 is enforced only by the FTC and is not subject to what some courts may see as abusive or frivolous private actions, the courts have not and likely will not feel the need to restrict Section 5 actions in the same way they have Sherman Act actions.

This Section 5 action represents the FTC's bid to claw back the restrictions that the courts have applied to the Sherman Act, allowing it to continue pursuing public enforcement under a statute that, as the Commissioners wrote in Intel, "extends beyond the borders of the antitrust laws," despite the courts' crackdown on abusive private enforcement actions. In the Commissioners' Statement, they make this explicit by suggesting that, in light of these recent developments, "it is more important than ever that the Commission actively consider whether it may be appropriate to exercise its full Congressional authority under Section 5." This means that even cases which, like Intel, might have previously been litigated under the Sherman Act are more likely to be enforced instead by the FTC.

Focus your antitrust policy on more than the Sherman Act

For corporations subject to Section 5 scrutiny, this new move by the FTC is not all bad news. FTC proceedings are less common than public lawsuits and the FTC cannot seek treble damages. If the FTC's broad powers encourage the existing trend towards tighter restrictions on private plaintiffs, some suits that would otherwise be brought by the plaintiffs' bar might instead be brought by the FTC, or not at all. Section 5 actions are also likely to move faster than traditional Sherman Act actions; the Commissioners in Intel write that they anticipate a trial beginning within nine months, with a Commission decision within 20 months.

Most of all, however, Intel and other recent Section 5 actions highlight the need to be comprehensive in your company's internal antitrust compliance policies. Even if private enforcement is not available under Section 5, private plaintiffs may be able to proceed under similarly-worded state unfair competition laws, or may be able to piggyback on a federal investigation to overcome Twombly problems in order to proceed under the Sherman Act. Also, private antitrust cases may concern behavior a decade or more old, and no company should assume that the current tightening of controls on Sherman Act suits will last forever. A well-written, complete antitrust compliance policy should consider all state, federal, and international competition laws, including Section 5.

Further reading

Read the complete Complaint, and the statements issued by Chairman Leibowitz and Commissioner Rosch, at the FTC web site: