key term - Federal Trade Commission Act

Definition

The Federal Trade Commission Act is a U.S. federal law that established the Federal Trade Commission (FTC) and empowered it to regulate anticompetitive business practices and corporate mergers. It serves as a key piece of legislation in the context of corporate mergers and regulating anticompetitive behavior.

5 Must Know Facts For Your Next Test

1. The Federal Trade Commission Act was passed in 1914 and gave the FTC the authority to investigate and prohibit 'unfair methods of competition' in the marketplace.
2. The Act empowers the FTC to review proposed corporate mergers and acquisitions to ensure they do not create or enhance monopolistic market power.
3. Under the Act, the FTC can challenge mergers that are likely to substantially lessen competition or tend to create a monopoly.
4. The FTC can also use the Act to regulate and prohibit other anticompetitive business practices, such as price-fixing, market allocation, and exclusionary tactics.
5. Enforcement of the Federal Trade Commission Act is a key tool in promoting competition and protecting consumers from the harmful effects of monopolistic and anticompetitive behavior.

Review Questions

• Explain how the Federal Trade Commission Act relates to the regulation of corporate mergers.
  • The Federal Trade Commission Act grants the FTC the authority to review proposed corporate mergers and acquisitions to ensure they do not substantially lessen competition or create a monopoly. Under the Act, the FTC can challenge mergers that are likely to harm competition, giving the agency a crucial role in maintaining a healthy, competitive marketplace. By empowering the FTC to scrutinize mergers, the Act helps prevent the consolidation of market power that could lead to higher prices, reduced innovation, and fewer choices for consumers.
• Describe the FTC's role in regulating anticompetitive behavior under the Federal Trade Commission Act.
  • The Federal Trade Commission Act allows the FTC to investigate and prohibit 'unfair methods of competition' in the marketplace. This includes the authority to regulate and challenge a wide range of anticompetitive business practices, such as price-fixing, market allocation, and exclusionary tactics. By enforcing the Act, the FTC can take action against companies engaging in monopolistic or otherwise anticompetitive behavior that harms consumers. This helps promote a fair, competitive environment that encourages innovation, choice, and lower prices.
• Analyze how the Federal Trade Commission Act has evolved to address changes in the business landscape over time.
  • Since its enactment in 1914, the Federal Trade Commission Act has been adapted and interpreted to address emerging anticompetitive threats and market dynamics. As the economy and business models have evolved, the FTC has leveraged the Act's broad language to scrutinize new forms of monopolistic and exclusionary conduct, such as those enabled by digital platforms and technologies. The FTC's enforcement of the Act has also evolved, with the agency taking on a more proactive role in monitoring mergers and acquisitions to prevent the consolidation of market power. This adaptability has allowed the Federal Trade Commission Act to remain a vital tool for promoting competition and protecting consumers in an increasingly complex economic landscape.

Related terms

Antitrust Laws:

A set of laws that promote competition by prohibiting monopolistic practices and other actions that restrain trade.

Monopolistic Behavior: The actions taken by a company to maintain its dominant market position and limit competition, such as predatory pricing or exclusionary tactics.

Merger Review: The process by which regulatory agencies, like the FTC, evaluate proposed mergers and acquisitions to ensure they do not substantially lessen competition.