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Federal Trade Commission: Powers, Principles & Provisions

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  • 0:01 Federal Trade Commission
  • 0:40 FTC Powers
  • 2:40 FTC Principles & Provisions
  • 4:23 Lesson Summary
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Lesson Transcript
Instructor: Jennifer Lombardo
Consumers can be preyed upon by unethical businesses. The Federal Trade Commission (FTC) was developed to protect consumers against fraudulent business practices. In this lesson, you'll learn about the powers, principles and provisions of the FTC.

Federal Trade Commission

Consumers should not be preyed upon by unethical businesses with fraudulent products and services. Who can protect consumers? The Federal Trade Commission, also known as the FTC, exists to protect consumers from unfair, deceptive, illegal or unethical business practices. It was created through the passage of The Federal Trade Commission Act of 1914. The FTC has five board members that are appointed by the president of the United States. The president names one of the five members chairperson. Let's take a look at how the agency works with a real case company example.

The FTC Powers

The FTC has numerous powers to protect consumers from unethical business practices. Here are some specific powers and details on how they target unethical behavior:

  • To investigate business practices that are unethical, illegal, or deceptive: The FTC accomplishes this task by acquiring all pertinent business documents relevant to the investigation at hand. Recently, the FTC investigated a company that sold educational programs promising to improve scores on standardized tests, such as the SAT. Based on numerous consumer complaints, the FTC opened an investigation. The end result was that the company was ordered to pay an $18 million fine and was barred from marketing products in that manner.
  • To investigate any violations of antitrust statutes to ensure anticompetitive mergers do not happen: For example, the FTC convinced the government that the merger of Office Depot and Staples should not occur as it would cause overall higher prices for the consumer.
  • Recommend new legislation to protect the original Act's intentions: An example of the FTC supporting new legislation to protect consumers from unethical business practices would be the Children's Online Privacy Protection Rule (COPPA). This new regulation was made to ensure that businesses are not contacting children under age 13 via websites without certain restrictions.
  • Hold trials to handle disputes of accusatory actions: The FTC is known to take cosmetic companies to trial over fraudulent claims about their products. For example, a well-known women's cosmetic company claimed that their product erased facial wrinkles based on unscientific research. The FTC took the company to court and proved that the claims were false and unethical.

FTC Principles and Provisions

The FTC also has specific principles and provisions that it supports to protect consumers. They are:

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