What is the FTC? Also known as the Federal Trade Commission, the FTC is an agency that is an extension of the U.S. government. Both independent and bipartisan, the role of the FTC is to protect consumers by promoting competition within markets.
More specifically, the Federal Trade Commission’s mission is to prevent unfair, deceptive or anticompetitive business practices. The FTC’s meaning is tied to benefiting consumers and businesses while building a healthy economy.
Table of Contents
- What is the Federal Trade Commission Act of 1914?
- What does the Federal Trade Commission (FTC) do?
- How does the Federal Trade Commission (FTC) work?
- Outlining regulations
- Why is the FTC important?
- How to file a complaint with the FTC
- Examples of FTC Class Actions
- Final thoughts on the Federal Trade Commission
What is the Federal Trade Commission Act of 1914?
The Federal Trade Commission (FTC) was created through the Federal Trade Commissions Act of 1914. This gave the government the authority to regulate unscrupulous acts among businesses.
The Act of 1914 provides the U.S. government with the legal tools it needs to prevent business practices that are unfair, deceptive or anti-competitive. The goal of the Act of 1914 was to create fair competition amongst businesses while protecting consumers from fraudulent businesses or business practices.
What does the Federal Trade Commission (FTC) do?
The FTC was created in 1914 by President Woodrow Wilson with the goal of protecting consumers, investors and businesses from anti-competitive practices. A significant aspect of the FTC is to prevent monopolies and protect consumers by putting a stop to fraudulent companies.
For instance, you witness the FTC in action every time an influencer discloses that they have been paid to promote a product or a service. The FTC is also responsible for guarding against false advertising and enforcing full disclosure requirements.
The FTC was created to enforce provisions in two other acts as well, those being the 1980 Sherman Antitrust Act and the 1914 Clayton Antitrust Act. The FTC stands for consumers and antitrust laws that prioritize the promotion of equitable business across the board.
In doing so, the FTC investigates fraud, makes congressional inquiries, gives companies pre-merger notifications and protects consumer rights. The FTC also works against anything that is viewed as anti-competitive behavior.
How does the Federal Trade Commission (FTC) work?
The FTC is an investigative authority, meaning the FTC can investigate any instance of behavior that is perceived as contradicting the rules set forth by the FTC. Under its investigative authority, the FTC may also collaborate with international or foreign antitrust authorities, according to mutual or bilateral agreements under the International Antitrust Enforcement Assistance Act.
The FTC is also an enforcement authority that functions for the sake of consumer protection while enforcing domestic antitrust laws via the Bureau of Competition. Additionally, the FTC may create rules that address unfair or deceptive methods of competition that are commonplace, including unfair and deceptive advertising protocols or business methods.
The Federal Trade Commission’s purpose explicitly includes the process of outlining deceptive practices as well as rules and regulations that combat these practices. The Federal Trade Commission makes definitions for fair and transparent business practices as well.
Oversight and monitoring
The FTC has the primary role of protecting consumer privacy and security, which are growing areas of concern due to the increase in the number of data breaches. One of the first federal laws under the FTC was the Fair Credit Reporting Act, which was designed to protect consumers above all.
The FTC functions as the oversight and monitoring body for these essential areas:
- Protecting consumer’s personal information
- Enforcing truthful, accurate advertising practices
- Ensuring accurate consumer disclosures
- Promoting better and fair business practices
- Preventing monopolies and promoting economic growth
To improve oversight and monitoring processes, the FTC also creates educational programs for both consumers and businesses alike. They share expertise with federal and state legislatures while building policies and research tools that further promote the role of the FTC to protect consumers.
In addition to full disclosures on advertising policies, the FTC works to protect children from stealth advertising and sets advertising guidelines against fake or manipulated reviews as well. The FTC will investigate fraud, false advertising and anti-competitive practices.
From there, cases will be brought to trial as needed. The purpose of these investigations is both to protect people from paying money for bad products or services and to promote honest competition in the marketplace.
Here are some examples of situations the FTC might investigate:
- Hidden ads targeting children
- Influencers who don’t disclose the payment they received
- Companies deleting bad reviews to improve their overall score
- Companies advertising a product that does not work
- Companies that engage in anti-competitive behavior
The FTC can take legal action to penalize companies that violate antitrust laws and practices. According to the FTC, the FTC can “pursue strong and effective law enforcement against deceptive, unfair and anti-competitive business practices”.
Why is the FTC important?
The FTC is important because it seeks to build free trade in the U.S. and around the world. The policies of the FTC are designed to protect the information of consumers, the privacy of customers and the general public’s right to purchase useful, accurately represented products.
The FTC also protects a healthy, diverse trade economy which creates the possibility for small and medium-sized businesses to grow without competing against a monopoly. But perhaps the greatest importance of the FTC is its continuous evolution whereby the FTC adequately copes with a changing business landscape, providing key support to consumers and businesses around its core mission.
How to file a complaint with the FTC
You can file a complaint with the FTC through the Federal Train Commission’s online Complaint Assistant. You can also call 1-877-FTC-HELP or 1-877-382-4357. Support is available in both English and Spanish.
The identity theft hotline is also maintained by the FTC. If you are a victim of identity theft, you can call 1-877-ID-THEFT. Likewise, consumers can remove their phone numbers from telemarketing lists via the National Do Not Call Registry. Simply dial 1-888-382-1222 to remove your number.
Examples of FTC Class Actions
Recently, the FTC has filed class actions against Harley Davidson, the famous motorcycle manufacturer, and Westinghouse, a manufacturer of outdoor generators. Both companies have warranties that state consumers must fix their products at authorized dealers or risk voiding their warranties.
Within the current warranties, both companies offer no-cost repairs or replacements for defects and other issues that consumers may face. However, the warranty also states that the warranty is void if customers make use of independent dealers for making repairs or replacing parts.
The FTC has intervened so that consumers have the choice of calling upon the help of independent dealers and their parts when it comes time to repair their products. The purpose of the intervention on part of the FTC is to protect the right of consumers to repair their products while allowing fair competition for third parties.
Final thoughts on the Federal Trade Commission
From the ability to protect your privacy and data to shopping for products in a free trade economy, the FTC’s oversight, investigations and legal action are designed to protect you. While most consumers are unaware of the FTC, they come in contact with the FTC’s influence throughout their lives on a daily basis.
Whether you’re a business owner or a consumer, understand your rights and remember that the role of the FTC is to help you protect your interests. You can also make use of the FTC by taking recourse when needed.
Why was the FTC Act created?
The FTC Act was created to prevent business practices that are unfair, deceptive, or anti-competitive, including fraudulent businesses and monopolies. The FTC was created to protect consumers and promote a healthy economy.
Does the FTC educate consumers?
Yes, the FTC educates consumers and works to protect them.
Who funds the FTC?
The U.S. government funds the FTC. As a federal agency, the FTC received budgetary resources from Congress. In the financial year of 2022, the FTC received $431.75 million.