The FTC abandons (the rule of) reason

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On November 10, 2022, the Federal Trade Commission (FTC) issued a policy statement (the “Policy Statement”) radically expanding the FTC’s interpretation of prohibited “unfair methods of competition” under Section 5 of the FTC Act. According to the Policy Statement, in determining whether something is unfair, the FTC will consider (1) whether the conduct is “coercive, exploitative, collusive, abusive, deceptive, predatory, or involve[s] the use of economic power of a similar nature” and (2) whether the conduct impairs competition. Notably, the FTC is abandoning the longstanding “rule of reason” previously employed by the FTC and by courts in antitrust cases. Instead, the Policy Statement states that the FTC may bring Section 5 cases without alleging a relevant product market and may not allow companies to justify allegedly unfair conduct with procompetitive or business justifications. Although this interpretation will no doubt be tested in the courts in the coming years, the Policy Statement creates significant uncertainty for companies now, both in their day-to-day activities and in the M&A context.