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1 1 (November 4, 2022)

handle is hein.crs/govejhf0001 and id is 1 raw text is: November 4, 2022 Unfair or Deceptive Acts or Practices (UDAP) Enforcement Authority Under the Federal Trade Commission Act The Federal Trade Commis sion (FTC) is the principal agency responsible for enforcing federal consumer protection laws. In addition to enforcing several specific laws, the agency enforces Section5 of the Federal Trade Commission Act (15 U.S.C. § 45) against allU.S. persons, partnerships, and corporations, subject to a few exceptions. Section 5 identifies two categories of acts underthe FTC's enforcement authority: unfair or deceptive acts or practices in or affecting commerce and unfair methods of competition. The first ofthese provisions, frequently referred to as the UDAP provision, provides the basis for many ofthe FTC's consumer protection actions when the agency lacks more specific statutory authority. The FTC has used its UDAP authority to pursue objectives not explicitly granted to the agency by statute, including policing commercial entities' data privacy and cybersecurity practices. Althoughthe FTChas express statutory authority relating to privacy and cybersecurity in certain situations, its UDAP authority underpins many of the agency's enforcement actions, including a complaint against Facebook thatresulted in a $5 billion civil penalty. This In Focus provides an overview ofthe FTC's consumer protection authority and the remedies available to the agency toenforce theUDAPprovision. What is an Unfai or Deceptive Act or Pracice? Section 5 does notdefimeunfair ordeceptive acts or practices, thoughit does seta limit on the FTC's authority to declare a practice unfair. Section 5(n) provides that a practice is not unfair unless it causes or is likely to cause substantialinjury to consumers which is notreasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition. Apart fromthis provision, the FTChas broadlatitude to declare acts or practices unlawful. The FTC has a number of tools to declare particular acts or practices UDAPs: * The agency may issue policy statements or guidance. Policy statements and guidance reflect the agency's position and interpretationof particular legalterms but are not legally binding. The FTChas issued policy statements on both deception and unfairness. In its policy statementon deception, the agency defines a deceptive act orpractice as an act orpractice that, when considered fromthe perspective of a reas onable consumer, is both likely to mislead and material (i.e., the act or practice is likely to influence a consumer's choice regarding a product). Section 5(n) of the FTC Act discussed abovepartially codified the FTC's policy statement on unfairness. See CRS Report R44468, General Policy Statements: Legal Overview, by Jared P. Cole and Todd Garvey for more information on policy statements. * The agency may issue rules defining practices as UDAPs. These rules are sometimes referred to as Trade Regulation Rules (or TRRs). Unlike policy statements or enforcement actions (see below), TRRs may create legally binding obligations for allentities under the FTC's jurisdiction. Section 18 of the FTC Act, as added by the Magnusson-Moss Warranty Act, sets forththe agency's required rulemaking process for designating a practice a UDAPby TRR. This process differs fromthe rulemaking proces s set forth in the Administrative Procedure Act (APA) (5 U.S.C. § 553) in several ways, such as requiring thatthe agency publish an advance notice of proposedrulemaking andpermitting interested persons an opportunity for an informalhearing. See CRS Report R45631, Data Protection Law: An Overview, by StephenP. Mulligan andChris D. Linebaugh for more information on the use ofTRR authority generally; see CRS Legal Sidebar LSB10839, FTC ConsidersAdopting Commercial Surveillance and Data SecurityRules, by Chris D. Linebaugh, for a discussion ofhow the FTC is considering using this authority to protect electronic consumer data. * The agency may pursue enforcement actions against entities it believes have behaved unfairly or deceptively. Although these enforcement actions do not legally bind anyone other than the parties to the action, the FTC may pursueremedies against non-parties in certain situations discussedbelow. TheFTChas statutory authority to litigate its own enforcement actions, rather than being represented by the U.S. Attorney General. In certain proceedings, the FTC shares enforcement authority with the Attorney General and may litigate only if the agency gives written notification to the Attorney General and the Attorney Generalfails to act within 45 days. Re f Availabke The FTC may take several actions to address a potential UDAP. The agency has more enforcement options when the alleged UDAP violates a TRRor specific federal statute. Con duct That Does Not Violate A TRR or Statute * The FTC may initiate an administrative proceeding purs uant to Section 5(b) of the FTC Act. Section 5(b) proceedings allow the FTC to seek a cease-and-desist order against a person or entity that has committed a UDAP. Proceedings under Section 5(b) are adjudicated

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