A Year Of Radical Agendas And Overreach At The FTC
Over the past year, the FTC has engaged in radical policy shifts and unprecedented overreach. As Springboard has previously highlighted, the agency has feigned transparency while taking sweeping steps to expand its own authority, increasing uncertainty among businesses and stepping into a lane usually reserved for Congress. Here’s a recap of what you need to know:
Over the past year…
— Despite claims of increased transparency, the FTC continues its efforts to limit public comments and undermine institutional guardrails.
— The FTC has laid the foundation for an “avalanche” of rulemaking that would harm business and innovation.
Despite claims of increased transparency, the FTC continues its efforts to limit public comments and undermine institutional guardrails.
The FTC is “[violating] accepted norms of proper notice and comment and [creating] a sham version of input,” explain Professors D. Daniel Sokol and Abraham Wickelgren. “The FTC hastily created public meetings without sufficient opportunity for stakeholders to respond with comments; for example, the public had only a week to respond to the plan to drop the vertical merger guidelines to offer comments to update the reality of the merger guidelines, after roughly a year since their introduction and with arguments for its withdrawal being challenged by the leading antitrust law and economics professors and the Department of Justice expressing reservations about the hasty withdrawal. Further, the FTC invites only one-minute commentary for stakeholders and only after it has voted (often along partisan lines—a change from prior administrations where agreement on harms created more legitimacy for enforcement). The increase in political polarization has now bled into antitrust, and the FTC has become political in a way that it had not been for more than a generation. This violates accepted norms of proper notice and comment and creates a sham version of input.”
FTC leadership is undoing longstanding policy with “little effort to engage impacted constituencies, and little factual inquiry” says Professor Jonathan Barnett. “FTC leadership has reversed decades-old elements of antitrust policy with little opportunity for public comment, little effort to engage impacted constituencies, and little factual inquiry that have been the hallmarks of modern antitrust policymaking.”
The Federal Trade Commission is suffering from a “transparency paradox” notes FTC Commissioner Christine Wilson. “[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”.
— Wilson continued: “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.”
According to reporting by MLex, FTC Commissioner Noah Phillips explained at the Spring ABA antitrust meeting that procedural changes are slowing the process of review. MLex reports that Phillips explained “procedures such as second requests for information, warning letters and prior-approval provisions, are being used to slow the process.”
— “‘The reason goes to the new mentality that is governing merger policy at the top of the antitrust agency,’ Phillips said.”
— “‘There is an increasingly prevalent view among progressive antitrust reformers that mergers have no real value, they don’t produce any goods, and they have a lot of costs.’ He said merger policy is being blamed for a number of bad effects, such as labor taking too little of the share of economic growth and a lack of supply-chain resiliency. ‘So, if that is your view … then it makes eminent sense to throw as much sand in the gears of M&A activity, whether or not we have a good reason to believe there is likely anticompetitive harms,’ he said. ‘I don’t think that is our job.'”
Changes to the Rules of Practice “fast-track regulation at the expense of public input, objectivity, and a full evidentiary record” notes Commissioner Wilson. “While the Annual Regulatory Plan and Semi-Regulatory Agenda characterize those changes to our Rules of Practice as ‘eliminating extra bureaucratic steps and unnecessary formalities,’ in reality those changes fast-track regulation at the expense of public input, objectivity, and a full evidentiary record.”
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.”
The agency has taken moves to expand its power, dangerously encroaching on authorities that belong to Congress, without assuming the accountability.
Commissioners Noah Phillips and Christine Wilson recently stated they cannot embrace the FTC’s recent “dramatic increase” in requested funding, citing a deviation from the FTC’s “established jurisdiction.” “The accompanying Congressional Budget Justification provides no roadmap for effectively deploying the dramatic increase in resources it purports to justify, and no assurance that the agency will abandon its present course of deviating from sound legal precedent and the Commission’s established jurisdiction. For these reasons, we cannot embrace this budget request.”
At an Information Technology & Innovation Foundation (ITIF) event titled the Joint Conference on Precautionary Antitrust: The Rule of Law and Innovation Under Assault, reporting by MLex recounts FTC Commissioner Christine Wilson as saying that Neo-Brandeisians “seek total control of the economy.” According to MLex, Commissioner Wilson said that “Democratic Neo-Brandeisians despise the rule of law, the consumer welfare standard, mergers, efficiencies, low prices, the FTC and the American Bar Association. A united worldview connects it all, Wilson said. ‘They seek total control of the economy.’ The ‘New Brandeis’ school of antitrust is named after Louis Brandeis, a US Supreme Court justice in the first half [of] the 20th century. The philosophy expands analysis of antitrust violations beyond harm to consumers. According to Wilson, the Neo-Brandeisians view the status quo as a politicized exercise[.]”
The FTC’s Annual Regulatory Plan “would recast the FTC as a mini-Congress, without any of the accountability that comes with it” explains Commissioner Phillips. “The Annual Regulatory Plan and Semi-Annual Regulatory Agenda (together, “the Regulatory Plan”) published today by the Commission relies on unsupported assumptions and baleful rhetoric to support imposing substantial and counterproductive regulatory burdens across the economy. Its anti-growth scheme involves regulation after regulation that exceed our legal authority and would recast the FTC as a mini-Congress, without any of the accountability that comes with it. At the Commission’s July 1st open meeting, I expressed concerns about this; and here we are. This will not end well: not for the competition and consumers we are charged to protect, not for the businesses within our jurisdiction, and not for the FTC.”
According to reporting by MLex, at the ABA Spring 2022 Antitrust Law Meeting, FTC Commissioner Phillips said the agency’s ambition “is infinite” and could result in the FTC exceeding its authority. Phillips “expressed concern that the FTC might be exceeding its authority if it tries to embark on rulemaking to make changes to certain areas of antitrust law, such as in labor markets. ‘The ambition is infinite, the view of our authority is infinite. But it would be an unconstitutional delegation of authority,’ he said. Phillips cited Supreme Court precedent from the New Deal era when the court in 1935 struck down the National Industrial Recovery Act as an unconstitutional delegation of lawmaking powers that are reserved for Congress.”
The rescission of the Section 5 policy statement “augurs an attempt to arrogate terrific regulatory power never intended by Congress” says FTC Commissioner Noah Phillips. “The Majority’s decision today to rescind the Commission’s bipartisan 2015 Section 5 Policy Statement reduces clarity in the application of the law and augurs an attempt to arrogate terrific regulatory power never intended by Congress to a handful of unelected individuals on the FTC. This policy proposal was announced just a week ago, the bare minimum notice permitted by law, diminishing the public’s opportunity to give input. And the members of the public we will hear from today will speak after the vote, so that the FTC cannot consider their views. That is inconsistent with rhetoric we have heard about opening up the policy-making process.”
Actions by the FTC are indicative of “overreach that undermines Congressional intent,” explains Commissioner Wilson. “That is significant overreach that undermines Congressional intent with respect to HSR and it doesn’t require a vote. Think about moving all of the omnibus resolutions to one commissioner’s office. Compulsory process used to take three votes. Now one commissioner signs off. They have removed so much discretion from minority commissioners that they are wreaking havoc even now during a 2-2 split.”
Recent FTC policy changes reduce clarity and unleash “unchecked regulatory authority,” explains Commissioner Noah Phillips in his dissent to the July 1st meeting. “Not only are they refusing to articulate limits to the Commission’s ability to declare conduct illegal after investigating it, they are also refusing to articulate limits on their view of what they can regulate. Today, in effect, the majority is asserting broad authority to regulate the economy. They mean, in other words, for just a handful of people to answer major policy questions with no intelligible principle from Congress to guide us.”
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.”
Policy changes at the FTC cast “doubt upon whether the agency remains committed to its statutory mandate” explains Professor Jonathan Barnett. “This unilateral rewrite of the HSR Act is not only legally contestable but casts doubt upon whether the agency remains committed to its statutory mandate to preserve the free play of competitive forces that drive a market economy.”
Congress did not intend for the FTC to have the rulemaking authority it now claims to have, explains 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.”
The FTC is challenging judicial rulings in a way that is “the equivalent of an interbranch duel” highlights Professor Johnathan Barnett. “Only seven months ago, the Supreme Court issued its ruling in AMG Capital Management, LLC v. FTC, in which it unanimously admonished the FTC for having exceeded its statutory authority in seeking monetary relief in certain circumstances. Rather than taking account of the court’s ruling, the FTC has challenged the judiciary to the equivalent of an interbranch duel. An administrative agency is free to adopt new policies to promote its statutory mission; however, it is not free to venture beyond the ambit set by elected legislators. In a democracy, that principle should never be ignored.”
The FTC is stepping into a role usually reserved for Congress, says Marianela Lopez-Galdos, formerly of CCIA. “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 has laid the foundation for an “avalanche” of rulemaking which would harm business and innovation.
Recent changes in FTC enforcement priorities focusing on “dominant firms” are misguided, notes Comissionioner Phillips. “Some of the worst actors aren’t just the big guys, they can be the small guys too. On average, over time you see big guys creating privacy problems, but we also see little guys — and to take our focus off of the little guys I feel would be putting a lot of privacy harms aside and that’s our job.”
In her dissent to the FTC’s Annual Regulatory Plan, Commissioner Wilson says the plan “lays the foundation for an avalanche of problematic rulemakings.” “This plan, though, extends far beyond the systematic review of existing rules (many of which should be abolished in any event) and instead lays the foundation for an avalanche of problematic rulemakings.”
— Wilson continues: “[M]y Democrat colleagues have long aspired to a more expansive rulemaking agenda for the agency. This year, they began taking steps to implement that goal.”
The FTC deleted the following from the description of the FTC’s Bureau of Competition: “The Bureau’s work aims to preserve the free market system and assure the unfettered operation of the forces of supply and demand. Its activities seek to ensure price competition, quality products and services and efficient operation of the national economy.” In doing so, Commissioners Wilson and Phillips noted the agency was “on a sweeping campaign to replace the free market system.” “The deletion of this description makes clear the majority’s intention to embark on a sweeping campaign to replace the free market system with its own enlightened views of how companies should operate, and to replace the goals of price competition, quality, and efficiency with subjective and as-yet-unstated goals that are ripe for political manipulation.”
Deviating from the consumer welfare standard would result in far worse outcomes for American consumers, warns Phil Gramm, former Senate Banking Committee Chairman and FTC Commissioner Christine Wilson in a recent WSJ op-ed. “With the consumer-welfare standard uprooted, antitrust would become a license to control the American economy, capriciously rewarding favored businesses and punishing disfavored ones. The president has appointed regulators who are openly hostile to those they regulate and to the economic system of the country. A goal of Republicans in the upcoming antitrust debate should be to codify the consumer-welfare standard.”
Moving away from a consumer welfare-centered enforcement approach will enable the FTC to act in ways “based on changing political motives and policy preference,” says Jennifer Huddleston. “Most specifically, rejecting the consumer welfare standard signals the FTC may apply its enforcement power in more subjective ways based in changing political motives and policy preference, as was seen in earlier eras of antitrust enforcement. For example, if not focused on the consumer welfare standard, the FTC could act against some of the largest tech companies to break them up or prevent mergers even though consumers were not harmed—or were even helped—by these changes in the market.”
Moving away from the consumer welfare standard could position the agency to enforce ideology at the expense of consumers, warns Jennifer Huddleston. “The withdrawal of the FTC’s statement is the latest signal that antitrust policy, particularly at the FTC, is shifting away from focusing on consumers and using the consumer welfare standard. Instead, there are now real concerns the FTC will enforce antitrust policy in a way that promotes competitors or ideology at consumers’ expense.”
— Huddleston continues: “Most specifically, rejecting the consumer welfare standard signals the FTC may apply its enforcement power in more subjective ways based in changing political motives and policy preference, as was seen in earlier eras of antitrust enforcement.”
The FTC is removing institutional guardrails, says Robert Bork Jr. of the Antitrust Education Project. “[A] Democratic majority of commissioners recently replaced the commission’s chief administrative-law judge with a political appointee. They also rescinded a bipartisan commitment to the consumer-welfare standard and changed the rules so that it no longer takes a majority of commissioners to launch the investigation of a company. Any commissioner can now decide to put a company and its executives in the crosshairs.”
Procedure changes remove FTC oversight and open the door “to abuse, overreach, cost overruns, and politically-motivated decision making” explains Commissioner Phillips. “These resolutions remove Commission oversight for essentially all antitrust investigations, and many others, allowing just the Chair or their chosen commissioner to authorize expensive and time-consuming inquiries. This action does virtually nothing to make investigations more effective, but does lead to less accountability and opens the door to abuse, overreach, cost overruns, and politically-motivated decision making.”
Concern about overreach is “a thing for me,” says FTC Commissioner Noah Phillips in an interview with MLex. “Pertschuk is very much the model,” Phillips told MLex in an interview this week. “When you set unachievable claims, and they are based on arguments that I don’t think have a lot of real factual grounding, I think you set yourself up for overreach, and that is something I’m concerned about. Whether it will result in the [loss of antitrust authority] or the shutdown of the agency, I don’t know. But I take the chair at her word, she said in New York magazine that she’s not concerned about overreach. That’s not a thing for her. It is a thing for me.”