INTRODUCTION

How did a small, independent antitrust agency come to be among the most important forces in consumer protection and privacy law? This chapter explains the founding of the Federal Trade Commission (FTC, “Agency,” or “Commission”), how it quickly pivoted to handle false advertising issues, and how its role and powers grew even while it was subject to periodic, withering criticism. Several themes emerge: First, the FTC has cycles where it is criticized for inactivity, but when it takes an activist posture, Congress sometimes punishes it. Second, until recently, the FTC has been plagued by mediocre appointments. Its reputation has improved greatly as a result of better appointments. Third, compromises in the passage of the FTC's organic act (the Federal Trade Commission Act, or “FTC Act”) caused broad disagreements about the purpose of the Agency. Today, we see this as conflicts between those who want the FTC to help businesses comply with laws versus those who want it to strongly enforce laws. Fourth, the FTC was a revolutionary concept at its time, breaking away from the strictures imposed by the common law. Modern agency critics have never quite accepted the rationale for departing from the common law and seek to reimpose common law elements to cabin the Commission's activities. Finally, the FTC's genesis in antitrust and false advertising matters profoundly shapes how it handles all consumer protection issues, including privacy. Familiarity with FTC precedents in policing false advertising provides context for how the Agency addresses privacy.

The FTC was created in 1914 to address the problem of monopoly and of trusts – large, powerful business conglomerates. These organizations posed economic and social problems that became a major social concern. The FTC did not formally have a consumer protection mission until the passage of the Wheeler–Lea Amendments in 1938. However, the FTC's first reported matters concerned false advertising. The FTC's early foray into advertising regulation came at the request of the advertising industry itself. These were matters where a deception, sometimes made directly to a consumer, harmed competition.

The 1938 amendments dramatically increased the power and jurisdiction of the FTC, as did the rise of the administrative state, subsequent amendments to the FTC Act, and judicial deference to the Agency.