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What is the Federal Trade Commission (FTC)?

Mary McMahon
Updated Feb 16, 2024
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The Federal Trade Commission (FTC) is an agency of the United States government that focuses on promoting a competitive market and protecting consumers from false advertising and unfair business practices. The agency establishes trade rules that the relevant industries must abide by, and can bring suit in Federal court against offenders who violate trade rules or Federal law. The primary focus of the FTC is regulating interstate commerce. The agency, founded in 1915, is headed by five commissioners and headquartered in Washington, D.C. Although the agency cannot punish offenders directly, it can issue orders of compliance and ultimately sue businesses that continue to flout trade rules.

Numerous measures are undertaken to ensure a fair and free market. The FTC reviews potential major business mergers, for example, to make sure that the merger will not form a monopoly or dominate the market for that particular product or service. It also regulates advertising, and heavily prosecutes businesses that engage in false advertising, as this can be harmful to the running of an unobstructed market. In addition, the FTC monitors certain industries that are prone to repeat offenses, such as the telemarketing and funeral industries. As part of its anti-trust mission, the agency cracks down on price fixing schemes, monopolies, and other questionable business practices.

In addition to promoting a healthy market, the FTC also protects consumers. A section of the staff handles consumer complaints about faulty advertising and handles issues with franchising and business opportunities. The agency oversees the enforcement of the Fair Credit Reporting Act, and also regulates e-commerce. In addition, the FTC has an education mission, aimed at empowering consumers so that they can make informed choices about purchases while also protecting their identities and security. It also oversees issues such as product labeling, including claims about the content and efficacy of products other than drugs, which are regulated by the Food and Drug Administration (FDA).

Many small businesses are also protected tangentially by the FTC. For example, it has trade rules for franchise businesses that force the parent company to fully disclose all information pertaining to the business. The agency's activities in the e-commerce sector have also been beneficial for small businesses. Consumers who feel that they are victims of false advertising or have been otherwise violated should file a claim with the FTC, as should businesses which suspect other companies of potentially harmful business practices.

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Mary McMahon
By Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a WiseGeek researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

Discussion Comments
By anon996716 — On Oct 07, 2016

It should, or should I say it will, if not already has become an issue for former mortgage loan officers who worked for a mortgage company, bank or credit union prior to the existence of NMLS, who've since closed their doors, say right at 3 months into required NMLS reporting will show an employment for only three months, even if these individuals were employed six years. Moreover, to have the employment history updated it will cost ,I'm told by NMLS itself, $500. ??????

By burcinc — On Jun 02, 2011

I just learned in class that there are five Commissioners in the Federal Trade Commission. They are appointed by the President and each serve for seven years.

The interesting part is that only three of the five Commissioners can be of the same party. The other two Commissioners have to belong to the other political party.

I really like that, it actually gives me more confidence about the decisions of the Trade Commission. I think they will act neutrally because of it, and that's how it should be. I know that a lot of private firms donate to political parties. It would be worrisome if all Commissioners were from the same party. Not that they would definitely choose sides when making decisions. But it still makes me feel better to know that both parties are represented there.

By discographer — On Jun 02, 2011

Yea, the FTC deals with domestic issues but it can also investigate foreign matters, like if a US firm violates a foreign law on antitrust policies, for example. It can also work with foreign law enforcement and help them investigate about US firms and their practices. But of course there has to be a violation of a law that the FTC deals with. It needs to be about fraud or unfair competition or consumer deception, they can't help investigate everything.

Even this may not be enough reason for the FTC to work with foreign law enforcement. The practices that the foreign agency wants the FTC to investigate should also have a negative affect on public interest and potentially damage people and their rights. The FTC also wants to know that if they help a foreign agency, that agency will also help the FTC in the future when it is needed.

The FTC might be required to help if it is included in an international agreement between the U.S. and that country. But obviously, it is not going to help a country that engages in terrorism.

By bear78 — On Jun 01, 2011

Whenever I heard the name "Federal Trade Commission," I thought that it had something to do with trade between countries. I did not realize that it deals with domestic trade- buying and selling- only.

It turns out that the FTC did not start out with the same responsibilities it has now. It was formed in 1914 and it's responsibility was to make sure that there was no unfair competition between companies. It did not start protecting consumers until 1938. This was when unfairness in business and deception of consumers became illegal in the U.S. The role of preventing it and taking businesses who engage in it to court was given to the FTC.

After reading this article, it makes a lot more sense to me. Unfair competition and deception both fall into the category of unfair business practices. FTC's role is to make business a more just and honest system for all, so it has to be the agency that deals with both.

Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a...

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