Self-Regulation and Antitrust: FTC Chairman Lays Out How Self-Regulatory Efforts Can Avoid Antitrust Challenge

Self-regulation efforts that are serious, legitimate and fair should not be blocked by rigid and outdated interpretations of antitrust laws, Robert Pitofsky, Chairman of the Federal Trade Commission, said today. In a speech before the D.C. Bar Association, Pitofsky expanded on this theme as he spoke to the increasingly common question -- are antitrust and self-regulation at odds? "My answer," the chairman said, "is that antitrust only rarely limits the opportunities for genuine self-regulation."

On the other hand, self-regulation can be anticompetitive when it is used to disadvantage new rivals or new forms of competition, the chairman warned. "When that happens, enforcement must be forceful and firm." He pointed out that government regulation can be helpful in providing a point of view other than industry's. In addition, Pitofsky analyzed several older antitrust cases that he said might appear to restrict efforts toward self-regulation, but that in his opinion, they do not pose a significant obstacle to legitimate self-regulation.

Pitofsky spoke to the benefits and risks of self-regulation and explained that "[l]egitimate and fair self-regulation will become more important as the economy grows faster than government regulation." One of the benefits of self-regulation, the chairman said, is that creating and disseminating truthful information encourages competition and creates choices for consumers.

Pitofsky noted the importance of self-regulation from a public policy point of view. He referred to the fact that self-regulation sometimes is more "prompt, flexible, and effective than government regulation." The judgment and experience of an industry also is of great benefit, especially in cases where the government has difficulty defining "bright-line rules," he said.

Pifosky outlined how the FTC addresses self-regulation issues. The agency works with industry groups to "develop self-regulatory initiatives, thereby avoiding unnecessary government regulations," he said. The chairman applauded the advertising industry's self-regulatory program as an effective model. The Commission, in both its competition and consumer protection missions, seeks to encourage self-regulatory efforts that create useful information and expand the range of choices open to consumers.

Chairman Pitofsky also offered some suggestions about how self-regulation can avoid undue antitrust risk. If standards are voluntary there is little antitrust risk -- i.e. when parties to a self-regulatory regime simply announce standards that ought to apply, or announce such standards and refer violations to enforcement agencies, he noted.

If standards are mandatory, clear and fair procedures that give parties affected by the standards a chance to explain their positions, are often critical to determining whether there is an antitrust concern, Pitofsky said. "Clear and fair process for mandatory self-regulation has several valuable benefits," he noted. For example, it will highlight the legitimacy of the program and the organization's commitment to the regulatory goals. A hearing can provide a record and procedural requirements will often encourage organizations to act in good faith, and they may prevent litigation by requiring interaction between the parties that can lead to resolution short of litigation. Records of past self-regulatory efforts may provide evidence of a reasonable effort and a hearing may prevent a simple mistake from harming a group's self regulation effort.

In conclusion, Pitofsky said agencies such as the FTC are willing to provide guidance to organizations in designing their self-regulation programs, and he believes such efforts will play an increasingly important role in the economy.

The views expressed are those of Chairman Pitofsky, and do not necessarily reflect those of the Commission or other Commissioners.

Copies of the full text of the Chairman's remarks are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-3128; TDD for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.