Federal Trade Commission and the Act
Prepared for ASCM630.9040, Professor Charles Carey
HISTORY OF THE FEDERAL TRADE COMMISSION ACT
FALSE AND DECEPTIVE ADVERTISING
BAIT AND SWITCH ADVERTISING/TACTICS
IDENTIFYING, VERIFYING AND PREVENTING DECEPTION
CLOSING STATEMENTS ABOUT THE FEDERAL TRADE COMMISSION
The paper will serve as a historical background overview of how the Federal Trade Commission Act (FTC) came into existence. The paper will also break down the key components for which the FTC covers, such as deceptive advertising, baiting and switching and consumer fraud. There will be examples of each of those issues at hand to demonstrate how it happened. The paper will include an argument within the Bait and Switch techniques where some claims have been made that it has been beneficial to consumers who got baited. The paper will also look into ways of determining if the claims are deceptive, fraudulent, and how to best act on such claims. Finally, the paper will provide a closing overview of the FTC as it is today, and what it has done for the consumers since its inception. HISTORY OF THE FEDERAL TRADE COMMISSION ACT
Who is the Federal Trade Commission (FTC)? It is a federal administrative agency that is tasked with the responsibility of enforcing the Federal Trade Commission Act as well as some other consumer protection acts. Some of the acts that the Federal Trade Commission enforce are false and deceptive advertising, bait and switching, and consumer fraud. Sometimes they may work alongside of the Food and Drug Administration, especially when it is based on a health claim and cure. The FTC was created in 1915.
According to the 1916 Annual Report filed by the FTC, at that time, the legal department’s duties were to “assist the Commission in the enforcement of Section 5 of the Trade Commission Act, which prohibits unfair competition in the interstate commerce, and also sections 2,3, 7, and 8 of the Clayton Act, which prohibit, respectively, certain price discriminations, tying contracts, intercorporate stock holdings, and interlocking directorates…..The Commission is also charged in the act creating with it certain duties respecting the enforcement of the Sherman Antitrust Act….” (Federal Trade Commission, 1916). In its first full year, the FTC received 246 applications for issuance of complaints. 138 of those were for violations of Section 5 of the Trade Act. The remainder of the applications were for Clayton Act related issues. The applications ranged from “predatory price cutting, inducing breach of contracts, maintaining bogus independents, betrayal of trade secrets and confidential information, bidding up the prices of goods purchased, combinations and threats to cut off competitor’s supplies, disparagement and confusion of goods, unfair manipulation of guarantees against declines in prices of goods sold, false and misleading advertising, fighting ships and fighting brands, misbranding of goods, instituting boycotts and threats to boycott, instituting vexatious actions and advertising such actions, threats to institute such acts against competitors, influencing newspapers not to accept advertising of competitors, employing systems of espionage, and enticing away competitor’s employees.” (Federal Trade Commission, 1916)
Later, in the 1930s, roughly about 1933, under Franklin Roosevelt’s leadership as President of the United States, the FTC experienced two dramatic changes. One was the National Recovery Administration (NRA), tasked with industrial policy. FTC was empowered to hear challenges to the NRA codes and enforce the “Codes of Fair Competition” until the Supreme Court found the Codes to be unconstitutional. The other role that the FTC had for a brief period of time was the enforcing of the Securities Act. The enforcement lasted...
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