Federal Trade Commission (FTC)

History

As the United States transitioned from an agricultural nation to an industrial power during the 19th century, many citizens and legislators became concerned about the concentration of economic power in the hands of only a few large corporations. The Sherman Antitrust Act was passed in 1890 in an effort to stem the tide of corporate consolidations. The objective was to protect competition and thereby benefit consumers by providing better products and services at competitive prices. However, United States Supreme Court rulings during this laissez-faire economic period, based on the belief that unrestricted competition would produce the best results for society, exempted mergers from the Sherman Act's coverage.

Following an unprecedented wave of merger activity from 1898 to 1902, the Bureau of Corporations was formed by President Theodore Roosevelt. The self-described trust-buster established the Bureau due to his concern about business combinations that reduced competition and in an effort to revitalize the Sherman Antitrust Act. The Bureau conducted investigations and published reports on interstate corporations. Such investigations were also in response to a growing consumerism movement early in the 20th century. This movement was aided by the publication in 1906 of The Jungle by Upton Sinclair. The resulting public outrage at the unsafe and unsanitary conditions in the Chicago meatpacking industry helped to give added momentum to the movement. Sinclair partially blamed the conditions he observed on the consolidation of businesses in the meatpacking industry, also known as the beef trust.

The 1912 presidential election featured a national debate on the necessity for controlling big business and business concentration. Democrat Woodrow Wilson was elected president by defeating William Howard Taft, the Republican challenger, and Theodore Roosevelt, then a third-party challenger. In 1914, Wilson signed into law the Federal Trade Commission Act, which created the FTC. Section 5 of the act prohibited unfair methods of competition. A short time later, the Clayton Act was signed into law, which strengthened and defined the limitations on business combinations.

The FTC assumed the role of the Bureau of Corporations, and its first chairperson was the former commissioner of the Bureau. Like the Bureau, the FTC could investigate and publish reports. However, unlike the Bureau, it could also bring enforcement actions, including enforcement of the Sherman and Clayton Acts. The FTC also had the informal duty to assist businesses in complying with the law.

The new FTC expanded its role by providing support to the federal government during World War I by establishing prices for goods sold to the government. Throughout the 20th century, the President and Congress expanded the role of the FTC as the leading source of protection for consumers and of protection of competition among businesses.

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