FTC touts tough enforcement while preparing for more court setbacks

17 April 2023 00:00 by Claude Marx


The Federal Trade Commission is expanding staff and taking tough action while preparing for more potential losses to its enforcement arsenal at the hands of the courts.

That was the message of commissioners and agency officials during the ABA Antitrust Spring Meeting and surrounding events.

FTC Chair Lina Khan used the enforcers roundtable at the ABA meeting to promote the agency’s efforts to increase staff — burgeoned by a big budget increase — in the technology area.

“There's an enormous interest in joining this team. Just in a few days of having the posting up, we got 300 applications for technologists,” she said.

Khan has said they need more staff to keep up with changes in the tech industry, and the agency recently set up an Office of Technology.

On the competition front, during an enforcers summit, she promised “in short order,” the FTC will revive a stagnant antitrust enforcement tool forbidding price discrimination and illegal kickbacks.

The agency is looking at the Robinson-Patman Act, which forbids price discrimination among customers when it results in competition harms lacking cost savings or other economic justification. The law was passed in 1936, but the FTC hasn’t brought a case under it since 2000.

FTC Commissioner Alvaro Bedoya used his ABA appearance to push back on the argument that if the agency comes down too hard on big retailers, it will lead to higher consumer prices. Critics also say while it protects small businesses, the law hurts overall competition.

“This is effectively lore that’s been weaponized against a law that can help a lot of people who really need it, and I think we need to stop pretending like decisions are facts and grounded in actual economic research,” he said.

FTC Commissioner Rebecca Kelly Slaughter said the agency must be aggressive in pursuing bad actors and practices partly to remedy its past tendencies toward underenforcement. On a panel, Slaughter countered criticism that overzealous enforcement stifles innovation.

“You can appreciate innovations by companies but be concerned about practices that could inhibit further innovations,” said Slaughter, who served as the acting FTC chair during the first six months of the Biden administration. She is also a former counsel to Senate Majority Leader Charles Schumer.

She was responding to a comment by fellow panel member Richard Parker, who ran the FTC’s Competition Bureau during the Clinton years. Parker warned against enforcement practices that don't strike the right balance between protecting competition and giving companies more leeway to develop new products.

Slaughter noted California has been a hub of Big Tech innovation and the state bans the enforcing of non-compete agreements, which shows preserving competition isn’t incompatible with strong antitrust laws.

Elizabeth Wilkins, FTC Office of Policy Planning director and Khan’s chief of staff, said during a panel the agency’s enforcement approach involves more coordination between different bureaus, which have often been siloed.

She cited the policy statement the FTC issued in 2022 about protecting gig workers from “unfair, deceptive, and anticompetitive practices” as one such initiative. The agency, Wilkins said, plans to use the “full portfolio” of consumer protection and antitrust laws in this area.

Watching the Court

In contrast to the optimism about the FTC’s agenda, there’s the reality that efforts could be hampered by several recent Supreme Court decisions.

The FTC’s rulemaking authority, like that of other independent regulatory agencies, has been lessened in light of the high court’s decision in West Virginia v. EPA, when the justices ruled 6-3 that when regulations raise “major questions,” there ought to be “clear Congressional authorization” before a regulatory agency acts.

Wilkins said the FTC reads the texts of legislation closely and follows lawmakers’ intent, so “we are carrying out the responsibilities Congress gave us.”

In response to a question from FTCWatch earlier this year, Wilkins disputed criticism that some of the agency’s work, such as its proposed rulemaking on noncompetes, runs afoul of the West Virginia decision. Section 18 of the FTC Act lets the agency prescribe rules that define with specificity acts or practices that are unfair or deceptive, she said.

The FTC’s latest loss at the Supreme Court, its second unanimous setback since 2021, doesn’t involve enforcement powers but does make it easier for parties that want to slow down its adjudicative process.

People or companies that challenge the constitutionality of the FTC or its practices will be able to have that challenge heard before the merits of the case are decided, as a result of the high court’s ruling in Axon Enterprise v. FTC, which was announced on April 14.

Justice Elena Kagan wrote that those raising constitutional issues “cannot receive meaningful judicial review” when the merits of an agency’s case against an individual or company are being decided, and so US district courts can review them.

She said plaintiffs opposing the constitutionality of an agency or its processes would “lose their rights not to undergo the complained-of agency proceedings if they cannot assert those rights until the proceedings are over.”

The FTC filed an injunction to block Axon’s acquisition of rival police body camera maker Vievu, but Axon sued the FTC claiming the administrative proceedings let the agency serve as prosecutor, judge and jury.

The FTC won at the district court level and at the US Court of Appeals for the Ninth Circuit. The high court heard Axon’s arguments last year. The appellate court also paused the administrative trial at the FTC.

Bikram Bandy, the chief litigation counsel in the Bureau of Consumer Protection, said before the decision was announced that an FTC loss would probably cause some changes to agency practices but won’t “result in a massive sea change.”

Erin Murphy, who represented Axon before the high court, said the current system leads to companies being “stuck in the process and being at the whim of the FTC.”

The issues driving the case, said Murphy, stem from the FTC’s current structure lacking accountability with the executive branch.

Attorney Olivia Adendorff said an Axon win would help companies being sued by the FTC, adding that “procedural challenges give respondents hope.”

The agency has changed its enforcement strategies because of a 2021 high court ruling. In AMG Capital v. FTC, the justices agreed unanimously that the agency improperly used Section 13(b) of the FTC Act to obtain retrospective relief.

Adendorff said “all day every day” the FTC uses the administrative process to leverage settlements. But Bandy disagreed, saying there’s nothing about the process that puts more pressure on parties to settle.

The agency is now making more use of Sections 5 and 19 of the FTC Act, the Restore Online Shoppers’ Confidence Act (ROSCA), and the Telemarketing Sales Rule.

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