The Federal Trade Commission Act was originally enacted in 1914. The Act sought to supplement antitrust judicial enforcement under the Sherman Act by creating a new federal regulatory agency, the FTC. Sec. 5 establishes the basic standard:

Congress left to the FTC and ultimately to the courts the broad regulatory authority to define what constitutes an "unfair or deceptive" act or practice. Although under this standard the FTC is an antitrust enforcement agency, the scope of Sec. 5 goes beyond antitrust activities and covers a wide gamut of unfair trade practices. The discussion here focuses on the FTC in its capacity as a regulator of trade practices rather than as an enforcer of the antitrust laws.

The statutory proscription in Sec. 5 served as the model for the basic proscription in the NAIC Unfair Trade Practices Act. Thus, if the FTC Act (which is one of the antitrust laws explicitly included in the McCarran Act proviso) were applicable to insurance, federal and state law would cover the same ground, resulting in dual federal and state regulation of insurance trade practices.

Direct mail advertising using the federal mail facilities and trade across state lines posed some jurisdictional difficulties for the states in efforts to regulate. The FTC was alert to this problem area. Thus, it next sought to prohibit an accident and health mail order insurer from sending allegedly deceptive letters from its state of domicile to prospective policyholders in another state, maintaining that such activity was beyond effective state regulatory capacity. The mail order insurer argued that it was entitled to McCarran Act immunity because the law of the domiciliary state applied to its advertising material both within and outside the state. In Federal Trade Commission v. Travelers Health Association, the Court held that the regulated by state law standard requires regulation be by the state in which the business activities occur and have their impact.

The Court expressly declined to consider whether the regulation by the non- domiciliary states into which the advertising was sent met the McCarran standard since that argument had not been raised in the lower courts. However, since most if not all states regulate such conduct within their own borders, the vitality of the FTC victory is questionable. Although the FTC continued some activity in the areas of accident and health mail-order advertising, this did not lead to that agency becoming a major player in the regulation of insurance.

Judicial blunting of its early intrusions in insurance regulation did not permanently dampen FTC enthusiasm to make its presence felt. With some success it has become involved, for example, in mergers involving insurance companies. Furthermore, armed with judicial sanctioning of broad FTC authority to investigate, in the 1970s the Commission became much more aggressive by evincing interest in such areas as medicare supplement insurance, insurance mergers, industrial life insurance, discrimination, privacy, etc. After undertaking major efforts in developing a regulatory approach to life insurance cost disclosure and initiating a study of the McCarran Act focusing on perceived anticompetitive insurance mergers and board of directors interlocks between banks and insurers, the FTC accumulated enough political opposition to induce Congress to apply the brakes. In 1980, Congress voted to prohibit FTC studies or investigations of the business of insurance, except in the area of medicare insurance, unless specifically requested by a majority vote of either a specified House or Senate committee. Although this action effectively ended most insurance-related FTC projects, Congress maintains the option of either lifting this ban in its entirety or directing a study of a particular area. Consequently, the FTC continued as a potential rather than an actual major regulatory factor in the control of life insurance trade practices.