FTC

FTC stands for Federal Trade Commission, roughly translated as “Bundeshandelskommission.” It is a US government agency with two main tasks. First, it is meant to ensure that companies compete fairly with one another and that no single entity completely dominates a market. Second, it protects customers from deception, such as false advertising claims or the covert sharing of personal data. The FTC can launch investigations, sue companies, and negotiate financial penalties. It is among the agencies whose decisions noticeably move the stock prices of major technology corporations.

Why tech companies fear the FTC

The world’s largest technology companies are headquartered in the US. Google, Amazon, Meta, Microsoft, and Apple are therefore directly subject to FTC oversight. When the agency blocks an acquisition or opens a proceeding, this affects products used worldwide. That is why German business media also regularly report on FTC decisions.

The agency is especially important in corporate acquisitions. When a large corporation buys a small competitor, this can eliminate competition before it even arises. This is exactly what the FTC accuses Meta of in the case of its acquisitions of Instagram and WhatsApp. Such proceedings can drag on for years and, in extreme cases, can lead to the breakup of a company.

In the AI industry, there is an additional dimension. Large corporations invest billions in small AI companies without formally acquiring them. The FTC examines whether such investments are in reality disguised takeovers. The close relationship between Microsoft and OpenAI was therefore also under scrutiny.

From investigation to settlement

The FTC is led by five commissioners appointed by the US president. No more than three of them may belong to the same party. This is meant to prevent the agency from becoming a mere tool of one administration. In practice, however, a change of government still shifts its course considerably, since the chair sets the priorities.

A typical case begins with an investigation. The agency requests internal documents, emails, and figures, which can reach very far. If it finds evidence of a legal violation, it can file suit. This happens either before a regular court or in an internal proceeding of the agency itself.

Most proceedings, however, end in a settlement. The company pays a sum and commits to changes, but does not admit guilt. Facebook paid five billion dollars in this way in 2019 over its handling of user data. One misunderstanding should be avoided: the FTC does not write laws. It enforces existing laws, and its interpretation must ultimately be upheld by the courts.

FTC news in business reporting

In the news, the FTC usually appears in one of three situations. It is reviewing an announced acquisition, it is opening a proceeding against a corporation, or it is announcing a settlement with a monetary penalty. Such reports often appear with phrases like “FTC opens investigation” and can cause stock prices to drop in the short term.

For Europe, the agency is of interest because similar bodies here do the same kind of work. In Germany, the Bundeskartellamt is responsible; at the EU level, it is the European Commission. Often several agencies investigate the same case in parallel, but arrive at different conclusions. A merger permitted in the US can fail in Europe.

One also encounters the FTC outside of the large corporations. It takes action against fake product reviews, unclear subscription cancellations, and advertising with exaggerated AI claims. For this last area, the agency has even coined its own term: AI washing, meaning claiming artificial intelligence where none actually exists.