key term - Federal Trade Commission Act

Definition

The Federal Trade Commission Act is a U.S. law enacted in 1914 that established the Federal Trade Commission (FTC) to prevent unfair or deceptive business practices. This act plays a crucial role in promoting competition and protecting consumers from fraudulent activities, as it grants the FTC the authority to investigate and prosecute companies engaging in antitrust violations or unfair methods of competition.

5 Must Know Facts For Your Next Test

1. The Federal Trade Commission Act created the FTC, which has the authority to investigate companies for antitrust violations and deceptive practices.
2. One of the main goals of the act is to protect consumers from unfair or deceptive acts or practices in commerce.
3. The FTC can issue cease-and-desist orders to companies engaging in unfair competition or deceptive marketing tactics.
4. The Federal Trade Commission Act works in tandem with other antitrust laws, such as the Sherman Act and Clayton Act, to enhance market competition.
5. Since its inception, the FTC has evolved to address new forms of unfair practices, including digital advertising and online consumer protection.

Review Questions

• How does the Federal Trade Commission Act support consumer protection in the marketplace?
  • The Federal Trade Commission Act supports consumer protection by empowering the FTC to investigate and take action against businesses that engage in unfair or deceptive practices. This includes examining advertising claims and ensuring that consumers are not misled about products or services. By having this oversight, the act aims to maintain fair competition, ensuring that consumers have access to truthful information when making purchasing decisions.
• Evaluate how the Federal Trade Commission Act interacts with other antitrust laws like the Clayton Act.
  • The Federal Trade Commission Act complements other antitrust laws, such as the Clayton Act, by providing a regulatory framework for preventing anti-competitive behaviors in addition to defining specific practices. While the Clayton Act addresses issues like price discrimination and mergers that may substantially lessen competition, the FTC enforces these provisions along with its own mandate against unfair methods of competition. This interaction ensures a comprehensive approach to maintaining market fairness and consumer protection.
• Assess the impact of the Federal Trade Commission Act on modern business practices and consumer rights.
  • The Federal Trade Commission Act has significantly shaped modern business practices by establishing standards for ethical behavior and transparency in advertising. Its impact extends into various industries as it adapts to technological advancements, including digital marketing and e-commerce. By holding businesses accountable for deceptive practices and enforcing competition laws, the act not only protects consumer rights but also fosters a more competitive marketplace, encouraging innovation and better services for consumers.

Related terms

Antitrust Laws:

A set of laws designed to promote competition and prevent monopolistic practices in the marketplace.

Clayton Act:

A federal law enacted in 1914 that complements the Sherman Act by addressing specific practices like price discrimination and exclusive dealings.

Deceptive Advertising: Advertising that misleads consumers by providing false or misleading information about a product or service.