McSweeny stresses FTC’s independence, need for vigorous enforcement

20 April 2017 2:20pm

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By Kirk Victor and Claude Marx. Originally published on FTC:Watch on April 7, 2017.

After having served in the majority since joining the Federal Trade Commission in 2014, Terrell McSweeny is now operating in unfamiliar territory as the only Democrat on the five-member commission, which has three open seats.

Even so, at least for a while, McSweeny will play an outsized role — with an effective veto — since she and acting Chairman Maureen Ohlhausen, a Republican, are the only two members. The commission can't act without a majority vote.

While noting that it has been rare in the agency's history to operate with just two members, McSweeny told us during an hour-long interview in her office that she and Ohlhausen work on a collegial basis.

"For practical purposes we remain a bipartisan, consensus-based law enforcement agency," McSweeny said. "So whether there are two of us agreeing to bring a case, three of us, four of us or five, it doesn't really change the core of what we do."

Still, there is a potential for stalemate until President Donald Trump fills the vacancies. He presumably will choose Republicans for two of the seats since no more than three members can belong to the same political party.

Before then, a standoff might develop. Recently, for example, McSweeny wrote a federal judge a letter that the FTC's proposed settlement of a case against DirecTV for misleading consumers was "insufficient"— exposing a rift between her and both Ohlhausen and Bureau of Consumer Protection staff, who support the settlement.

Other areas of disagreement include Ohlhausen's admonition in recent remarks that the commission should limit its enforcement actions to cases "with objective, concrete harm" and "not focus on speculative injury."

When asked about that comment, McSweeny responded that the agency already has a strong record of showing concrete harm before bringing cases. "We have a demonstrated track record of being focused on harm," she said.

Similarly, when pressed about Ohlhausen's edgier tone in recent months that include her charge that the Democratic majority under President Barack Obama at times had "pursued an antitrust agenda that disregarded sound economics," McSweeny pushed back.

"I look forward to hearing more about what was unsound about our economics," she said. "I'll tell you, I take economics very seriously and don't recall making any decisions in which economic experts told me they were underpinned by unsound economics."

As for whether she is concerned about political interference in light of Trump's statement during the campaign that he opposed certain mergers, McSweeny said: "I am hopeful because we are an independent agency that we will continue to maintain our independence. I have seen nothing that indicates any interference. If I did, I would be very concerned."

Edited excerpts of the interview follow.

FTC:WATCH: What are some of the biggest challenges the agency faces?

McSweeny: We are still waiting to see what kind of resources our agency will have. We are being asked potentially to do more with less. Our budget is a little more than $300 million a year, yet we protect consumers from billions of dollars of harm. My biggest concern is that if we are asked to take on even more responsibilities, can we adequately resource those responsibilities? At the end of the last Congress, two new bills were passed, the BOTS bill [the Better Online Ticket Sales Act] and the review bill [The Consumer Review Fairness Act].

FTC:WATCH: During the campaign, then-candidate Trump criticized some media mergers, saying they "won't happen on my watch." If Trump were to follow through, would that be inappropriate?

McSweeny: We have a strong tradition in antitrust enforcement of allowing the enforcement agencies to investigate and make a careful fact-based enforcement decision that is based on the application of antitrust law to a set of facts. I hope that continues to be the case.

FTC:WATCH: Do you have concern that enforcement will be throttled back under the leadership of Tad Lipsky, the acting director of the Bureau of Competition?

McSweeny: I decline to predict what someone does as acting bureau director. We shall see what acting Chairman Ohlhausen and acting Bureau Director Lipsky see as the way they want to conduct their mandate. I see a lot of macroeconomic trends that suggest that we ought to be vigorously using our antitrust tools and aggressively pursuing our mission to protect competition.

FTC:WATCH: You've cited reports by President Obama's Council of Economic Advisers and others that point to increased consolidation and concentration. Yet the acting chairman said an upward trend in industry consolidation for a time doesn't mean that competition is in decline. Do you expect a shift away from your concerns?

McSweeny: It's important not to misinterpret both points. I am mindful of the fact that in competition we are essentially using microeconomics to look very specifically at the conditions present in very specific markets. I think that's the correct application of those tools. So it's correct to say that you can't necessarily interpret macrotrends as microtrends. We also have to be mindful of the fact that [former] Assistant Attorney General Bill Baer said quite rightly we are seeing more routinely megamergers in very concentrated industries that ought never have gotten out of the boardroom. So that is where I think, 'OK, what is it about these macrotrends, this interest in whether concentration is connected to income inequality, this interest in common ownership and whether it's distorting competition, that I ought to make sure that I am studying and understanding as a competition enforcer.'

FTC:WATCH: Economist John Kwoka wrote a book on the effectiveness of remedies. The FTC did a recent take on remedies and had its own conclusions. As a commissioner, how do you sort that out? Are you concerned that your remedies are missing the boat or are you satisfied at where they are?

McSweeny: I disagree with the premise of the question. I don't think that the remedy study is in tension with the Kwoka work. The Kwoka work is trying to understand the effectiveness of remedies. It is making a very important point about whether we are overly preoccupied with false positives, and, if that is the case, why have we concluded as enforcers that we want to shift the liability of making a bad enforcement decision onto consumers and away from businesses? Why is that the right paradigm? Our remedy study is similar to the work that was done in the 1990s, which is look at how well you've been doing on remedies and learn any lessons that need to be learned. We have had some situations where remedies have not worked. Some of those quite prominently were more recent than the remedy study period that we just conducted [from 2006 to 2012]. It's taught me to look very carefully at the adequacy of the remedy and make sure the investigation of the adequacy is thorough. Be sure that the assets being divested are sufficiently part of a going business concern that can be used for the purpose of restoring competition in the marketplace.

FTC:WATCH: Two FTC economists took issue with Dr. Kwoka and published a rather scathing takedown of his methodology and findings. Is it unusual for such an analysis to be so singularly focused?

McSweeny: It's important not to attribute that independent work by two of our economists to the whole FTC. We allow our economists to do independent work. I found both pieces very interesting. I tend to believe that it is challenging to do what Dr. Kwoka is trying to do but valuable.

FTC:WATCH: There is speculation that the Trump administration may seek to focus on other factors when reviewing mergers, such as the impact on jobs. What do you think of that?

McSweeny: We have a very effective set of tools already at our disposal in assessing the competitive impact of mergers. It is incredibly important for enforcers to not just look at price effects, but also to look at coordinated effects, innovation effects and quality effects and to make sure that all of the dimensions of competition and any potential harms to it are carefully examined in reviewing a merger. We also need to take into account efficiencies. One of the challenges when it comes to thinking about jobs is that very often an efficiency justification put forward for a merger is a loss of jobs.

FTC:WATCH: What do you think of the Smarter Act, which would make FTC standards for getting an injunction the same as those of the Department of Justice?

McSweeny: The Smarter Act is a solution in search of a problem. One of the justifications is to provide some sort of clarity. One of the consequences of passing a new law might be is the courts would have to go back and figure out what impact it has on the precedent they already have. So that might actually create less predictability than we currently have [The Smarter Act was passed by the House Judiciary Committee on a party line vote on April 5].

FTC:WATCH: Congress is moving to repeal the Federal Communications Commission's privacy rules for Internet service providers under the Congressional Review Act. What impact would that move have? [Both the House and Senate voted to repeal the rules after the interview took place.]

McSweeny: That can be devastating to consumers and to the FCC because the CRA is a very blunt instrument. I'm not sure why we're at the point where Congress has decided that consumers ought not be offered a choice about who gets their sensitive information and how it is used. If you purport to care about people and the choices that they have in our always-connected environment, the idea that you would eliminate a basic choice about their most sensitive personal information seems deeply inconsistent with protecting people.

FTC:WATCH: Acting Chairman Ohlhausen and others charge that recent commission actions discount the value of intellectual property rights. What say you?

McSweeny: I start from the point of view that protecting strong IP rights is absolutely essential. The issues that tend to arise are on the edges of those rights. For example, when you have a patent that is essential to a standard, and you have committed it to the standard and as a part of that standard you have said you will license it on fair and reasonable terms, what is the obligation at that point? The right resolution for a royalty dispute at that point is a court if the parties can't work it out. But negotiating under threat of an exclusion order, for example, from the International Trade Commission does distort the negotiating process and the bargaining leverage. So I don't think competition enforcers need to be in the business of deciding what royalty rates are. That's a job for a fact finder that is neutral. But we have an advocacy role to play in talking about the important need for both strong IP rights and competition.

FTC:WATCH: How big an impact does the Sunshine Act have on your work?

McSweeny: It's important to start any Sunshine Act conversation from the perspective of valuing transparency and the values and principles that underpin the act [which bars a quorum of the commission from talking about FTC work unless their meeting is noticed in advance. In a two-member commission, spontaneous chats between Ohlhausen and McSweeny about the agency's work cannot occur without notice]. It can prove a bit inconvenient. You start seeing us notice a bunch of meetings and close them. That typically means that we're trying to talk to each other about a substantive matter. We just have to take minutes, which then we can seal. It is always easiest to forge consensus when you sit across the table from somebody and have a conversation directly with them about their point of view. To the extent that it becomes less possible to do that, it's problematic.

FTC:WATCH: Your term expires in the fall. Have you had conversations about possibly getting another term?

McSweeny: I haven't been engaged in conversations with anyone yet about that. I think it's a little bit soon.

FTC:WATCH: If they pushed you, would you be interested?

McSweeny: I definitely am keeping an open mind.

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