2023 means uphill climb for FTC

The year ahead will intensify congressional scrutiny of the Federal Trade Commission, generate vigorous debate about new merger guidelines and see continued questions about the constitutionality of the agency’s work, according to people keeping tabs on the agency.

A Republican-controlled House of Representatives means the FTC will be accused of overreach. At the same time, Chair Lina Khan has sought more funding and personnel for the agency that opened its doors in 1915.

Sean Heather, senior vice president for international regulatory affairs and antitrust for The Chamber of Commerce, said “Congressional oversight of the FTC will ratchet up to the point that by the end of the year, the Hill will impose meaningful policy riders limiting the FTC’s use of funds to rein in its overreach.”

In November, the FTC released an antitrust policy statement to embrace its congressional mandate of broadly policing unfair conduct. The statement clarified that Section 5 of the FTC Act reaches beyond the Sherman and Clayton Acts to encompass unfair conduct that tends to negatively affect competitive conditions.

Alex Petros, policy counsel for Public Knowledge, said “I’m looking for how the Commission will make use of the new Section 5 policy statement and how they will move their big cases forward, from Meta/Within to Microsoft/Activision. I think it will be a good year for those who want to see an assertive FTC protecting competition and consumers throughout the economy.”

But the FTC is still facing the constraints of the April 2021 Supreme Court decision in AMG Capital Management LLC v. FTC that held Section 13(b) of the FTC Act doesn’t authorize federal courts to require defendants to pay refunds to harmed consumers or give up the unjust gains they earned from breaking the law. The result has been more agency coordination on cases with state attorneys general.

Khan also has sought to employ novel antitrust theories. Patrick Bradford, antitrust lawyer with Bradford Edwards & Varlack in New York and adjunct professor of antitrust law at Fordham University School of Law, expects the FTC to bring more actions under new applications of traditional antitrust law.

“The Random House/Simon & Schuster merger decision will give the antitrust agencies more confidence that new applications of traditional antitrust laws can be effective,” Bradford said.

“I believe that the Biden administration’s stated expectations, the US public’s engagement with certain price escalations, and the EU’s more vigorous antitrust laws (and more aggressive enforcement, especially regarding large tech companies), have all contributed to the US antitrust agencies’ commitment to aggressive antitrust enforcement,” he said.

The FTC has been working on revising merger guidelines that are expected to address certain features of digital markets, including zero-price dynamics, the competitive significance of data and network externalities. Public comments on new merger guidelines are expected to draw both praise and repudiation.

Sean Sullivan, professor of law at the University of Iowa College of Law and a former FTC attorney, said “the thing to watch is how they respond to negative feedback. The natural tendency is to ignore that which you don't like. But the durability of these new guidelines depends on how sincerely the agencies consider and address the criticisms they receive over the coming months.”

Former FTC General Counsel Alden Abbott said he expects more FTC efforts on rulemaking.

Already in the first week of the year, the FTC proposed regulations to prevent employers from imposing coercive noncompete agreements on workers. The agency also has proposed a rule that would ban misrepresentation of government and business including nonprofits. In 2022, the FTC started proceedings to initiate rules addressing commercial surveillance and lax data security practices. Releasing a proposed privacy rule could come in 2023, Abbott said.

Abbott said he anticipates the FTC’s loss in a Supreme Court case argued in November challenging the constitutionality of the FTC’s administrative proceedings. When the agency filed for an injunction to block the Axon-Vievu deal, Axon sued and said the proceedings make the agency a prosecutor, judge and jury.

“So that means, I think, that the FTC’s administrative process may be thrown into uproar, certainly in the second half of 2023 after the Supreme Court rules, and that's going to complicate life,” Abbott said.

A vacancy on the Democratic-majority commission after the departure of Republican Noah Phillips in October means the president could nominate a Republican to join the FTC in 2023. In addition, Democratic Commissioner Rebecca Kelly Slaughter’s term expired in September, although she remains on the commission as other previous FTC members have done until renomination or the nomination of a replacement.

So far, President Joe Biden has not nominated Phillips’ replacement.

“I would not be shocked, come the end of 2023, and you’d still have only four commissioners,” Abbott said.