Neil Averitt commentary: Mail call with the House Judiciary Committee

19 January 2023 00:00


The new GOP majority in the House of Representatives clearly has the Federal Trade Commission in its sights. The oversight panel has already announced an investigation of Lina Khan’s stewardship of the agency. But what will the still more powerful House Judiciary Committee do in the year ahead?

A portfolio of letters from Chairman Jim Jordan gives some sense for the committee’s likely oversight agenda.

This group of 120 letters, published on the committee’s webpage, shows the correspondence that Jordan himself signed. But its implications are much broader. The collection includes three major letters also signed by Thomas Massie, the chairman of the antitrust subcommittee. And several of the letters have the detailed footnoting and academic tone that suggests a nucleus of senior staffers and outside allies who will be shaping the committee’s actions for some time to come.

The broadest takeaway from these letters is they’re all exercises of the committee’s oversight function. They don’t suggest any legislative agenda. This isn’t surprising. Many bills in the last Congress were close to passing (including one to limit self-preferencing by tech platforms), and apparently had the votes to pass. Yet they were kept bottled up by the legislative leaders of both parties, including most disturbingly Democrat Chuck Schumer in the Senate. If legislation couldn’t pass under those ideal conditions, it’s not likely to be a priority today.

So oversight it is for the House Republicans.

The letters propose numerous areas for GOP oversight action. These begin with substantive concerns and perhaps just as important to the new majority, a list of concerns about the internal procedures of the antitrust agencies. The letters also signal something about the committee’s emotional attitude toward the agencies.

The letters flag three areas of substantive concern.

The first issue out of the box, in the Feb. 14 letter, involved the FTC’s proposed rulemaking to limit the use of noncompete clauses. A pantheon of senior GOP congressmen (Jordan, Massie, Darrell Issa, and Scott Fitzgerald) questioned the logic of this rule, particularly in the broad form originally proposed. If noncompetes are voluntarily agreed to by the parties, why should they be presumptively questioned? And even if noncompetes are thought to be not really voluntary on the part of the employees involved, how does that fact make them questionable in antitrust terms? The FTC may think that unequal bargaining power makes these agreements “exploitive and coercive,” but what is the limit to that principle? Almost all bargaining is “coercive” in some degree.

Beyond this, the GOP congressmen questioned whether the agency is authorized to conduct competition rulemaking in the first place.

The second area of concern involves merger policy. GOP congressmen wrote to Chair Khan on March 9 and April 5 to suggest the agency was improperly pursuing social goals. They said the FTC was wrongfully departing from the consumer welfare standard in merger analysis, especially as that standard should be understood as comprehensively considering quality and innovation as well as price. They added the agency was excessively hostile toward mergers by being too skeptical about possible efficiencies and insufficiently aware that the mechanism behind funding many startups was the hope of eventually being bought out.

A more focused merger letter was then sent on June 8 by Jordan, Massie, and Issa, charging that the FTC had wrongfully collaborated with British antitrust officials to gain procedural advantages in the Illumina-Grail case. This letter has the self-righteous tone that implies it was drafted by the firms involved (perhaps helped by their attorney, former FTC Commissioner Christine Varney). And it’s surely a client-service document in part, but it also appears to serve the true enforcement-restricting agenda of the GOP members.

The third concern involves Elon Musk’s acquisition of Twitter. A March 10 letter was jointly signed by Jordan and Ted Cruz, the ranking member of the Senate commerce committee. It charged that the FTC began to harass Twitter within two weeks of Musk’s purchase of it, with agency spokespeople expressing “deep concern” about developments at the company, asking whether Twitter still had the resources to adhere to a privacy consent decree, and demanding the names of journalists who had been given access to Twitter’s internal communications. On the face of things this doesn’t look good for the agency. The GOP letter indicated it was political harassment “under the guise of consent decree enforcement.”

A supplemental letter from Jordan on June 8 presented further issues with the background and runup to the Twitter investigation.

Beyond substantive policies, the Judiciary Committee letters identify areas of procedural concern.

Some involve the procedures by which the FTC interfaces with the business world. The main concern here is the agency has been abusing the Hart-Scott-Rodino process to discourage corporate consolidations by imposing costs on them regardless of any real competitive issues. The merger letter charged the FTC with several such tactics — that it suspended giving notices of early termination even for mergers that raise no competitive concerns, that it has slow-walked the evaluation of other matters, and it has sent letters informing companies that they’re still under investigation after the end of the waiting period, even when little further study is actually going on.

(Reporting on front-line consequences, S&P Global says investment-bank revenue has fallen by 22 percent from a year ago.)

Other concerns involve the FTC’s internal decision-making procedures. The GOP letters on noncompete rulemaking and merger policy both repeatedly cited former Republican Commissioner Christine Wilson. Similarly, the oversight panel’s investigation is based almost entirely on Wilson’s charges. Wilson has complained the agency now sets a partisan internal agenda rather than proceeding collegially, that key votes are made along party lines, and minority commissioners are frozen out of the deliberative process and kept in the dark about the details of pending matters.

But there’s another aspect to all this. Besides the clean policy-oriented tip of the iceberg, the congressional letters show something about the submerged parts of committee thinking.

The first thing you will notice is correspondence from the Judiciary Committee is overwhelmingly political. Of the 120 letters in the portfolio as of June 9, 52 of them, or nearly half, addressed Hunter Biden’s laptop. A further group of five letters was addressed to the executives of Big Tech companies such as Google and Meta, and asked about how the Executive Branch may have “coerced and colluded with” them to censor conservative speech.

Among the antitrust letters, you will notice all of them are addressed to the FTC. The Department of Justice’s antitrust division was mentioned only once, and then only to make a favorable contrast between it and the FTC on retaining the old vertical merger guidelines.

The FTC, on the other hand, can only be described as demonized. Typical passages say the agency has engaged in a “power grab,” that it “would undermine the rule of law,” that its actions provide a “chilling example” of “radical beliefs,” and it’s eager “to centrally plan the American economy” — one goal that Chair Khan surely doesn’t have in mind.

The law and economics program at George Mason University seems to have had a hand in this. Some letters used phrases that are oddly distinctive to that institution. One referred to “the so-called ‘hipster’ antitrust movement.”

Having demonized the FTC, the letters then tie the agency to national politics as part of the Biden administration. The letter on noncompete clauses refers nine time to “the Biden FTC.” The letter on merger enforcement uses this same phrase 12 times. In short, the concept of bipartisan agency work is coming under a lot of pressure, which may be part of a GOP or Chamber of Commerce plan to de-legitimize multi-member expert administrative agencies generally.

A final point is GOP committee members aren’t shy about issuing subpoenas. In a nice turn of phrase used with Tim Cook of Apple, Chairman Jordan noted Cook hadn’t responded to a voluntary request for information, and “accordingly, please find attached a subpoena.” Jordan similarly decided the FTC’s response to questions about the Twitter review were “woefully insufficient,” and issued a subpoena there as well. In a later letter, he postponed enforcing this subpoena to explore voluntary compliance, perhaps recognizing the difficulties created by the existence of an ongoing FTC probe, but Jordan kept the threat of a contempt action alive.

The tone in these letters is harsher than the traditional practice, but the subject matter is at least within the normal parameters of intraparty oversight. But where are the debates over actual legislation?

Well, there seems to be little interest in that. For the rest of this Congress, we seem destined to live in a world of oversight hearings. And that isn’t going to be pretty.

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