The FTC Keeps Trying To Expand Its Own Authority While Feigning Transparency
We’ve recently highlighted how the FTC has been overstepping its authority and putting ideology ahead of consumers and business. Following another short-notice “open” meeting, the FTC continues to demonstrate that its disregard for appropriate rulemaking and public notice is unlikely to stop anytime soon. Here’s what you need to know:
— The FTC is not a lawmaking body and was never intended to have unlimited rulemaking authority
— FTC leadership claims to value transparency but has been opaque in practice, closing doors to public engagement on rulemaking
— Transparency, notice, and the ability to provide meaningful comment are critical to due process
The FTC is not a lawmaking body and was never intended to have unlimited rulemaking authority.
The FTC is stepping into a role usually reserved for Congress, says Marianela Lopez-Galdos of CCIA. “[T]he agency’s rulemaking authority has been self-limited since the 80s in an effort to ensure the institution doesn’t overuse its capacity to adopt industry-wide regulations and raise concerns with those policy makers that are against the legislature deferring its core mandate to an independent agency that doesn’t represent the people. Traditionally the legislature has the constitutional mandate to create laws affecting different sectors of the economy. Whereas it is legally accepted to design independent agencies with constrained mandates to adopt regulations, such powers are not necessarily understood to construe independent agencies as substitutes for the legislature’s powers.”
The FTC “already serves as prosecutor, judge, and jury,” and competition rulemaking authority was never intended to be a power of the FTC, explains the U.S. Chamber of Commerce. “As designed, the FTC’s core statute gives the agency a dual purpose: it is tasked with enforcement against unfair methods of competition (antitrust) and unfair and deceptive practices (consumer protection) when such conduct arises in the marketplace. However, Congress intentionally avoided articulating precisely what qualifies as a violation under either prong of the FTC’s authority.”
— The Chamber continues: “[T]he FTC was never granted legislative style rulemaking to determine what is and what is not an unfair method of competition or an unfair and deceptive practice. The FTC, given its status as an administrative body, already serves as prosecutor, judge, and jury. Congress, instinctively, has understood the problem of extending rulemaking powers to the agency allowing the agency to write the rules it is empowered to enforce. Such a super concentration of power is ripe for abuse, as an agency empowered to write the rules it enforces severely limits the scope of judicial review.”
In an interview with mlex, FTC Commissioner Noah Phillips said he believes the idea of an FTC with unlimited power is “not well supported.” “Phillips said there is ‘scant evidence’ that in 1915 Congress decided to make the FTC ‘a sort of sectoral regulator without a sector.’ The notion that Congress delegated virtually unlimited regulatory power to the FTC ‘seems not well supported,’ he said, adding that ‘I have a legal problem, I have a kind of institutional, constitutional problem.'”
— Phillips continues: “To put into effect a regulatory program without a congressional nod to make rules would go down the wrong path, he said. While one can debate about consumer welfare versus Brandeisian deconcentration, there is no debate that antitrust laws are meant to protect competition, Phillips said.”
— Phillips adds: “The lived experience of the US is that often government-directed markets culminate in the opposite of competition, he said. There are rules that can help foster competition, and the FTC should look for those and have the authority to make them ‘but going too far down the regulatory path, I think, will yield the opposite of what the antitrust laws were intended to accomplish,’ Phillips said.”
Congress did not intend for the FTC to have the rulemaking authority it now claims to have, says the American Bar Association. “The Commission’s [6(g)] rulemaking authority is buried within an enumerated list of investigative powers, such as the power to require reports from corporations and partnerships, for example. Furthermore, the [FTC] Act fails to provide any sanctions for violating any rule adopted pursuant to Section 6(g). These two features strongly suggest that Congress did not intend to give the agency substantive rulemaking powers when it passed the Federal Trade Commission Act.”
During a panel at the 15th Annual Georgetown Antitrust Enforcement Symposium as reported by mlex, FTC Commissioner Wilson cautioned the agency to “tread carefully” in regard to competition rulemaking. “As an institution, the FTC ‘needs to tread very carefully’ and think about the implications of its actions, Wilson said. She said the current commission leadership is now proposing several actions — such as competition rulemaking — that will provide ‘ammunition’ to the agency’s critics. ‘This is going to anger many on the Hill who are concerned with economic central planning from a politically unaccountable agency,’ the commissioner said. She said on the consumer protection side, a rulemaking spree would be reminiscent of an episode in the 1970s and 1980s that led to bipartisan backlash against the FTC.”
— Wilson continued: “‘There are countless detractors on the Hill and elsewhere waiting for the commission to make a misstep,’ Wilson said. She said that she firmly believes that the FTC would do well to vigorously enforce existing antitrust laws and not overstep its authority. Wilson said she questions both the legality and the wisdom of competition rulemaking, which could hinder rational development and refinement of economic and legal analysis, she said.”
— “Rulemaking has also historically proven to inhibit innovation, she said. ‘Rulemaking is not the democratic alternative to adjudication, despite claims by proponents of rulemaking,’ Wilson said. ‘I am not a fan of competition rulemaking,’ as it places the FTC in a ‘historically precarious position,’ she said.”
While the FTC has issued an array of rules on consumer protection, issuing competition rules would be at odds with the long tradition of focusing on case law, says former General Counsel of the FTC, Alden Abbott of the Mercatus Center. “The FTC has extensive experience in issuing consumer protection rules. FTC regulation of competition through rulemaking, however, would be at odds with a long American tradition of relying on case-by-case antitrust adjudication, rather than rulemaking, to deal with practices that harm the competitive process.”
FTC leadership claims to value transparency but has been opaque in practice, closing doors to public engagement on rulemaking.
The FTC is saying one thing about transparency, but doing another, said FTC Commissioner Phillips at this week’s FTC open meeting. “This is our third public meeting in as many months. Those watching carefully over the course of these three meetings may have heard from members of this Commission about our interest in getting input from the public about what we do. Those same people may have seen however that the majority repeatedly voted against submitting our proposals to the public for their consideration. The public may have noticed that in our meetings, we make decisions first, and then hear from people so that we cannot consider what they say in making our decisions. Today’s consideration on the policy statement on health apps is a new variation on this troubling theme of saying one thing about valuing public input but doing another.”
During the September 15 FTC meeting, Commissioner Wilson explained that the FTC was suffering from a “transparency paradox.” “[I]n 2021, we have the FTC’s Transparency paradox. We’re told that our new leadership values transparency and public input. Unfortunately the majority repeatedly has chosen to undermine transparency and limit public input. At our open commission meeting in July, the majority voted to revise our rules of practice so that in rulemakings going forward, public input will be more limited. The majority has withdrawn important enforcement guidance without telling the business community what the new rules are. Traditionally, FTC staff have participated in a variety of public speaking opportunities to keep the public informed about our activities, but one of our new chair’s first acts was to ban public speaking. And for each open commission meeting that we hold, the public is given the minimum required amount of notice. And we hear realtime public comments only after we have voted.”
Without sufficient notice, FTC meetings are “more performative than an exercise in actual transparency” says the National Taxpayers’ Union Foundation. “Though the date of this proposed meeting has been published for some time, the agenda was released only one week in advance of the meeting, on Sept. 8th, with a deadline for comments at midnight on Sunday the 12th. Two and a half business days’ notice is clearly insufficient time for anything resembling thoughtful or detailed public input, particularly for a major decision like entirely withdrawing the FTC’s revised 2020 vertical merger guidelines. This lack of any useful period of public comment has been a common flaw that renders these meetings more performative than an exercise in actual transparency.”
In their joint dissent to the party-line rescission of the 2020 Vertical Merger Guidelines, FTC Commissioners Wilson and Phillips explained that the agency is rescinding research-based guidance with “zero public input.” “Today the FTC leadership continues the disturbing trend of pulling the rug out under from honest businesses and the lawyers who advise them, with no explanation and no sound basis of which we are aware. In the past two months, the FTC has withdrawn just as many bipartisan policies. Now, the partisan majority will rescind the 2020 Vertical Merger Guidelines issued jointly by the FTC and the Antitrust Division (‘2020 Guidelines’) and the Commentary on Vertical Merger Enforcement (‘Commentary’), with the minimum notice required by law, virtually no public input, and no analysis or guidance.”
— “The 2020 Guidelines incorporate the federal antitrust agencies’ accumulated knowledge from nearly four decades of experience investigating and challenging anticompetitive non-horizontal mergers, as well as economic analysis on the potential harms and benefits of these types of mergers. By laying out the analytic framework the agencies use to evaluate non-horizontal mergers, the 2020 Guidelines are a useful guidepost for businesses that seek to ensure their conduct is lawful. The 2020 Guidelines also benefitted [sic] from well-informed, substantial, and valuable public input in response to the draft Vertical Merger Guidelines released for comment on January 10, 2020, the FTC’s Competition and Consumer Protection Hearings for the 21st Century, and a public workshop the FTC and Department of Justice hosted on March 11, 2020. The Majority discards the 2020 Guidelines today with zero public input.”
In a letter to the FTC, House Judiciary Republicans noted that recent “so-called” opportunities for public input have been “a sham.” “In addition to these dangerous shifts in policy, the FTC is aggressively undercutting the agency’s deliberative processes and commitment to transparency. The public and Commissioners received little advance notice of the July 1 meeting and inadequate time to consider relevant measures fully. Although votes and limited discussion took place in an open meeting, the FTC only accepted public comments after the Commission’s votes—making this so-called opportunity for public input a sham.”
Transparency, notice, and the ability to provide meaningful comment are critical to due process.
Speaking about the adoption of revised Section 18 rulemaking procedures, FTC Commissioners Wilson and Phillips explained that transparency and public input are needed, but FTC process changes reduce opportunities to engage. “The majority declined to seek public comment on the revisions. Had they done so, the public might have noticed that the revisions reduce opportunities for public input and render far less transparent our proposed actions. The majority claims these changes remove ‘extraneous and onerous procedures that serve only to delay Commission Business.’ Transparency and public input can be time consuming, but they are still good. The revisions abolish a staff report that analyzes the rulemaking record and makes recommendations as to the form of the final rule; and remove comment periods on the staff report and the Presiding Officer’s recommended decision.”
— The Commissioners continued: “Both we and the public derive great value from the thoughtful assessments of record evidence by expert staff. The traditional staff report also provided a vehicle for expert recommendations regarding the proposed form of the final rule. It allowed the public to check our work. Moreover, public input on the proposed form of the final rule proved valuable, particularly with respect to unintended consequences that might otherwise escape the Commission’s consideration, given that final rules sometimes differ from initially proposed rules.”
The right to petition the government is guaranteed by the U.S. Constitution, reminds FTC Commissioner Chopra. “The Constitution of the United States guarantees the right to petition the government. The Administrative Procedure Act also requires that quote ‘agencies will give an interested person the right to petition for the issuance, amendment, or repeal of a rule’ end quote.”
Scholars Christopher Yoo, Yong Huang, Thomas Fetzer, and Shan Hiang explain that due process “requires notice” and that agencies can “threaten” due process. “And in any event, due process typically requires notice, the opportunity to present reasons why a particular action should not be taken, and the right to present evidence and to know opposing evidence.”
— They continue: “As global markets integrate and national economies develop, antitrust law is an essential part of a modern legal system. Thus, countries around the world are empowering government agencies to enforce antitrust laws. Although agencies are powerful instruments, they also threaten due process, transparency, and even rational decisionmaking – the main advantage of their existence.”
New FTC policies present due process issues, explains Oliver Dunford of Pacific Legal Foundation. “[T]he FTC’s newly adopted policies present more fundamental issues: the guarantee of due process of law and non-arbitrary government.”
— Dunford continues: “This concentration of powers by definition violates due process of law and ensures arbitrary government. The FTC’s recent actions — centralizing and concentrating power in the chair, calling for serial rulemaking, and requiring sweeping subpoenas — promise even greater threats. Hopefully, the courts will be watching.”
“Sound enforcement outcomes depend on sound process,” explains competition lawyer Paul O’Brien. “The quality of competition agency enforcement depends on the quality of agency process. This is the underlying idea that has driven scrutiny and discussion of agency process over the last decade. Call it due process, procedural fairness, natural justice, or plain old transparency and fairness, there is increasing recognition that sound enforcement outcomes depend upon sound process.”
— O’Brien continues: “[T]he essence of due process includes the fundamental concepts of transparency and notice of charges and evidence, opportunities to respond, and independent appellate review. The consensus ICN Guiding Principles for Procedural Fairness cite impartiality, transparency, objectivity, meaningful engagement, opportunity to respond, judicial review, and timely investigation among its nine universal principles.”