Lots of changes ahead at FTC regardless of Trump’s pick for chairman

24 March 2017 10:12am

By Kirk Victor. Originally published on FTC:Watch February 3, 2017

As Maureen Ohlhausen settles into — as much as she can — her post as acting chairman of the Federal Trade Commission, much speculation continues about whether she will get the nod to lead the agency on a permanent basis.

President Trump will make that call and also will fill three vacancies, two of them with Republicans, to put the GOP in control. Certainly, personnel is policy, as the popular saying in Washington goes, and there is a growing sense in the consumer protection and privacy bars that some changes in direction at the commission will not require a terribly heavy lift, regardless of who the next chairman is.

Ohlhausen, a Republican whose philosophy in many ways reflects a conventional GOP playbook, has made comments recently that give a sense of what she sees as priorities for change. Additionally, in interviews with a number of antitrust and consumer protection specialists, FTC:WATCH found certain themes and specific actions that were often mentioned.

One such recurring theme is that the agency will take a "more business friendly" approach. Ohlhausen often has stressed the need for "regulatory humility".

It is a pretty safe bet that whoever is chosen to lead the agency will share that perspective. But, specifically, how will that "humility" translate into policy?

Here are some changes that were mentioned repeatedly in interviews as initiatives that may well come early on once the FTC has a Republican majority, no matter who winds up as chairman:

Reducing costs of second requests and compulsory process

Ohlhausen mentioned this practical idea in remarks at the Heritage Foundation on Jan. 24 and said she'd like to "convene a meeting of the FTC's Bureau of Competition and Consumer Protection leadership to address possible overbreadth of discovery."

Private practitioners have long championed some changes here because, as Phyllis Marcus of Hunton & Williams said, "Targets of government investigations are subjected to pretty significant costs." She pointed to the American Bar Association's recent presidential transition report and noted that it recommended "the agency should issue CIDs [civil investigative demands] that are more narrowly focused, with the option of follow-up CIDs later if more information is needed."

That ABA report found a trend "toward generic and overly-broad CIDs that are not tailored to the nature of the business or the practices." Consequently, "in many cases" firms have been hit with "astronomical costs in responding."

This proposal has wide resonance. Julie Brill, a former Democratic member of the FTC, said: "It is very important for commissioners to understand how expensive investigations can be, particularly when recipients of compulsory process are not a target of an investigation. Now that I am working with companies that are engaged in that process and understand how expensive the process can be, I think it merits discussion at the highest level of the agency."

Placing more emphasis on economics of decisions to bring enforcement actions

Ohlhausen took a swipe at the Democratic-led commission during the Obama administration, saying that at times, it "pursued an antitrust agenda that disregarded sound economics."

Those sentiments struck a chord. While the commissioners and senior management at the FTC "value the [agency] economists, very few consider strongly the views of the economists in thinking about whether they ought to proceed with an enforcement action or not," said Bilal Sayyed of McDermott Will & Emery. "There is substantial room for the improvement and incorporation of economic analysis and the economists at both [the FTC and the Justice Department's antitrust division] in the ultimate decisions by the commissioners or agency heads."

Reining in disgorgement

Ohlhausen strongly dissented when, in 2012, the commission withdrew its policy statement for determining when to seek equitable monetary remedies, including disgorgement. The statement had said such relief should be sought only when the underlying violation is clear, when there is a reasonable basis for calculating the amount of the remedial payment and after considering the availability of other remedies.

In withdrawing the policy statement, the FTC explained that it had created "an overly restrictive view" and had "chilled the pursuit of monetary remedies."

The agency, instead, said it would rely upon "existing law" on monetary equitable remedies and would "exercise responsibly its prosecutorial discretion" to decide when to seek disgorgement.

Ohlhausen blasted that change, saying the agency had withdrawn a clear, well-reasoned and widely supported policy and replaced it with a promise to use prosecutorial discretion responsibly — something it already did.

Look for a rollback to the earlier statement. "If you look at what [Republican] Commissioner [Joshua] Wright and Commissioner Ohlhausen wrote in a couple of their cases addressing disgorgement — they didn't say it's never appropriate, but they said without clear guidelines, the parties don't know when they should be worried about it," said Joseph Ostoyich of Baker Botts. "Therefore you can't really factor into your analysis what the risks are. So that would be solved by reinstituting something along the lines of the [earlier] guidance."

Tying monetary relief to actual harm

Ohlhausen's recent dissent in the Uber Technologies case, in which the commission charged that the ride-hailing company misled prospective drivers with hyped earnings claims and misleading claims about its financing program, focused on its $20 million judgment to be used for refunds to affected drivers. Her dissent found that the judgment "far exceeds the best estimate of actual consumer harm."

That notion that the agency's judgments are not sufficiently related to consumer harm is widely shared. "The monetary relief that the FTC has been extracting has really been unrelated to consumer harm but mostly related to the ability of defendants to pay," said Linda Goldstein of Manatt, Phelps & Phillips. "I think they are going to be looking to have any monetary relief that is imposed much more related to actual consumer harm."

This shift has real implications for data breach cases, Goldstein added. "Not every instance of a breach results in consumer harm, and I think right now we have been dealing with a philosophy of [the FTC imposing] strict liability — 'You didn't do what you should to protect it.' It's like telling the victim of a robbery, 'It's your fault because you didn't do enough to protect your home.'"

The FTC's approach has been that "if a breach occurs, then you didn't take all the steps you needed to take," Goldstein added. "Sometimes you just can't protect against fraudsters. If I were to think about one overarching [theme], it will be that in deciding whether to bring an enforcement action — I think they will be much more focused on cases where there really is significant consumer harm."

Supporting legislation to bring the FTC more in line with the Justice Department in seeking preliminary injunctions

Look for a Republican-led commission to be supportive of the long-debated Smarter Act — the Standard Merger and Acquisition Reviews Through Equal Rules Act, which would make the FTC meet the same standards as the Justice Department when seeking a preliminary injunction to block a proposed merger. Their support may help build momentum for passage of the legislation.

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