What Is the Federal Trade Commission and How Does It Protect Consumers?

FT Contributor
An image of the outside of the Federal Trade Commission building in Washington, DC.
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There’s an old saying: “If it sounds too good to be true, it probably is.” The Federal Trade Commission (FTC) was founded back in 1914 to protect consumers against the old adage. The FTC’s purpose is to protect individuals against deceptive, unfair, or fraudulent business practices and keep competition fair for businesses.

It’s been more than 100 years since the U.S. government had this vision, but with the rise of today’s big-tech companies, it cannot be more timely. Some question if today’s tech companies are monopolies — and the FTC has a task force currently assessing the situation.

What Is the Federal Trade Commission?

The Federal Trade Commission protects consumers and businesses by preventing deceptive and unfair business practices that could financially affect individuals or prevent businesses from competing fairly. The agency aims to achieve its mission without burdening legitimate businesses by using law enforcement, advocacy, and education to enforce fair trade and transparent business practices.

What Is the Federal Trade Commission Act?

The Federal Trade Commission Act of 1914 (FTC Act) established the FTC as a government agency to prevent unfair competition and “bust the trusts” that controlled whole sections of the economy such as sugar, railroads, oil, and steel.

In 1938, the FTC expanded its reach. Congress passed a broad prohibition against “unfair and deceptive acts or practices” which led to the following consumer protection laws:

  • Telemarketing Sales Rule which sets limits on the times of day telemarketers may call individuals, prohibits them from calling if they’ve been asked not to call again, and bans misrepresentations.
  • Pay-Per-Call Rule (previously known as the 900-Number Rule) to prevent unauthorized charges on consumers’ phone bills.
  • Equal Credit Opportunity Act which prohibits lenders from discriminating because of an individual’s race, color, sex, nationality, faith, or marital status in deciding whether to approve a credit application.

How Does the FTC Protect Consumers?

The FTC oversees several dedicated bureaus to protect consumers and regulate businesses. The Bureau of Competition focuses on businesses by creating and enforcing rules and regulations to maintain a fair marketplace.

The Bureau of Competition attempts to keep the business playing field level by requiring large companies to file pre-merger notifications so the agency can review large mergers and acquisitions. They have the power to block unfair mergers that could adversely affect the marketplace. Task forces (including the current big-tech task force) investigate questionable practices.

The Bureau of Consumer Protection focuses on consumer rights. It stops deceptive or fraudulent business practices by:

  • Collecting consumer complaints;
  • Investigating complaints and fielding them to law enforcement, when warranted;
  • Educating companies and individuals about their rights and responsibilities;
  • Suing companies or individuals who break the law;

Here’s a closer look at how the Bureau of Consumer Protection protects the rights of individuals:

Collecting and Investigating Consumer Complaints

The FTC accepts complaints through phone calls or through its online Complaint Assistant page about businesses that follow misleading practices or cheat people out of their money. Complaints are shared with the appropriate law enforcement partners (local, state, federal, and/or foreign law enforcement agencies) to investigate the fraud and eliminate shady business practices.

Educating Companies and Individuals About Their Rights and Responsibilities

The Bureau provides free advice on money, credit, mortgages, privacy, and more. They also provide a variety of materials and resources for consumer advocates, such as legal aid providers and teachers to educate individuals on financial literacy, credit, and debt management.

Suing Companies or Individuals Who Break the Law

After investigating complaints, the Bureau may sue companies that deceive consumers about their products or services. Sometimes the lawsuits will result in refunds through the FTC refunds program for the consumers affected.

A recent Equifax data breach lawsuit by the FTC resulted in free credit monitoring and identity theft protection services for up to 10 years so consumers can watch for mistakes on their credit reports. Besides free credit monitoring, cash payments of up to $20,000 per individual affected were made available to cover expenses that resulted due to the breach.

How to File a Complaint With the FTC

Filing a complaint may not ensure that the issue will be resolved, but it’s a good start. Your complaint will alert the FTC to begin an investigation and field the complaint to the proper law enforcement agency (if warranted). There are two options for filing a complaint with the FTC:

Filing a Complaint Online

Consumers can go to the Complaint Assistant page to file a complaint online and follow these simple steps:

  • Click on the complaint category and choose a subcategory;
  • Enter details describing how it started, including incident date;
  • If money was lost, enter payment details and amount;
  • Enter the name of the company or individual you’re filing a complaint about and any contact information or phone numbers you may have;
  • Enter your contact information;
  • Add a brief explanation in your own words of what happened by following the tips in a box on the right-hand side about what information is helpful;
  • Submit;
  • Download or print a copy of the report for your records;

Filing a Complaint on the Phone

Consumers can call the FTC’s Consumer Response Center at 1-877-FTC-HELP (1-877-382-4357). You’ll be asked for:

  • Your personal contact information;
  • The date(s) of the incident;
  • The name of the individual or company engaging in the fraudulent activity;
  • Details on the money lost and payment method;
  • An explanation of what happened;

Besides filing a complaint with the FTC, take other proactive steps such as contacting your local authorities, the company’s corporate office, or a consumer advocate near you. Read more on How To File a Complaint Against a Company to take appropriate action.

Federal Trade Commission Definition

The Federal Trade Commission (FTC) is an agency established by the U.S. government to oversee companies and ensure they are not operating in fraudulent ways or unfairly preventing other businesses from competing in the market. The agency is there to help and support consumers, as well as fight on the public’s behalf against deceptive businesses or individuals when necessary.

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