Phillips airs concerns about US Federal Trade Commission priorities under its new leadership

19 Aug 2021 7:22 pm by Mike Swift

FTC

Noah Phillips, perhaps the more centrist of the two Republicans on the US Federal Trade Commission, thinks new Chair Lina Khan is “super smart.” He likes Khan’s open FTC meetings. He’s even behind aspects of the “bold agenda” of the chair. “I don’t disagree we should be more aggressive,” he told MLex this week.

Phillips is emerging as a measured critic, however, of Khan’s regulatory vision and her leadership of the FTC, as the new chair attempts to shake up the 107-year-old antitrust and privacy regulator. He’s concerned that Khan’s efforts to have the FTC embrace the theories of “New Brandeisian” antitrust could alienate some of the agency’s most valuable staffers, people with decades of expertise in industries like healthcare and technology, who fear the change-minded 32-year-old Khan does not value that experience.

“I think the chair, and agency leadership, have a really bold agenda. I agree with some of it,” Phillips told MLex in a conversation at a technology policy conference in Colorado this week. “In order to effectuate a bold agenda, you need to be strategic, and you need to have people willing to do the work. There is a lot of work that we do that isn’t about party lines; it isn’t about your view of antitrust law and the arc of history and whatever. We need to keep doing that work.”

“We blocked a hospital merger very recently in New Jersey. I was proud of that,” added Phillips, who is 43, referring to an Aug. 4 order the FTC won from a federal judge to stop the merger of Hackensack Meridian Health and Englewood Healthcare Foundation. “That takes a lot of work, and it takes motivated people. I want to make sure that people are happy.”

Phillips let his fellow Republican commissioner, Christine Wilson, do much of the tough talk at a commission meeting last month but supported Wilson’s complaints that the FTC staff was being “muzzled” and “silenced” by Khan’s policies that staff should limit outside speaking engagements to prioritize the FTC’s limited resources. Phillips is not a fan of the restrictions.

“I don't know how they serve the staff and I don’t know how they serve the agenda of the agency,” he said, choosing his words carefully. “I have every reason to believe our staff are working hard. But I want to be able to continue to attract real talent, people who know how to get things done. That’s important.”

Beyond her leadership of the FTC, Phillips says Khan’s policies are “undermining” what he said is one of the agency’s most effective antitrust tools, the Hart-Scott-Rodino Act. The FTC has already ramped up its antitrust enforcement, blocking more mergers in the 2020 fiscal year — 27— than any year in the past two decades, according to data Phillips collected and that he made a point of highlighting to the audience during his panel discussion on antitrust enforcement earlier that day at the Technology Policy Institute in Aspen, Colorado.

“To look at a few instances and say we should change everything, the danger that raises to me is overcorrecting and undermining some of the good things that have happened since modern antitrust became modern antitrust,” the lanky, balding, bespectacled commissioner told MLex. “The fact is, since 1980, we have had a lot of innovation in America. We’ve had a lot of disruptive company growth. We have a robust M&A market. A lot of good things have happened too. I think that’s an important part of the conversation.”

Learning the privacy side

On privacy, Phillips predicted Khan will lead an enforcement program as aggressive as what she intends on antitrust, even though the former antitrust scholar lacks extensive privacy experience.

“I think you'll continue to see aggressive privacy enforcement,” Phillips said. “Lina definitely cut her chops on the antitrust side. But that doesn't make her different from any other [new chair]. …Having to learn [the consumer protection] side of the house, that was true of [former FTC Chair] Joe Simons. That doesn’t distinguish Lina. It is a learning curve. She's super smart.”

The FTC is moving into the enforcement phase of the landmark $5 billion privacy settlement it finalized last year with Facebook that requires an extensive overhaul of the company’s internal privacy oversight. Facebook’s general counsel, Jennifer Newstead, said at the TPI conference this week that the FTC settlement “has been front and center for me during my time at Facebook and will be for the foreseeable future”.

The organizational changes, for Facebook at least, are “a lot harder than paying $5 billion, although $5 billion is a big fine, I will continue to believe that,” Phillips said. “But leaving that aside, yeah, look, I think that order is a priority for everybody. I think it’s a priority for Facebook. I hope it is.”

Phillips believes businesses and consumers would be better off with a single national privacy law, rather than the series of state-level laws that may be developing with California, Virginia and Colorado now having comprehensive consumer privacy laws on the books.

“My concern is having too many different laws makes it really hard for smaller companies. It makes them invest more on lawyers, and less on engineers,” Phillips said. “States can be the laboratory of democracy, but this is definitely interstate commerce.”

On antitrust too, Phillips says he supports more aggressive oversight of the biggest tech companies. But he believes some antitrust proposals in Congress are overly restrictive against tech giants Google, Apple, Facebook, Amazon and Microsoft.

“I don't think it ought to be the law that four tech companies or five tech companies can't ever do mergers and acquisitions,” he said. “I do think we ought to scrutinize their acquisitions carefully. I agree with that. But, it’s important to understand that, as I mentioned earlier today, the agencies are being aggressive in merger enforcement.”

Middle ground

The annual TPI conference draws a dollop of its attendees from Washington regulatory agencies, law firms and lobbying groups, who fly west to meet an equally large contingent of people from tech companies like Microsoft, Google, Apple, Amazon and Facebook who fly east to meet their counterparts in a kind of policy DMZ in the Rockies.

Perhaps because she is still a cipher after just two months in office, Khan’s name was on everyone’s lips at this year’s conference, no matter which coast they came from. One evening in the hotel courtyard among a group of conference attendees, a university economist offered that he’s hearing consulting firms are circling the FTC like sharks, hoping to gobble up staffers driven out by Khan’s arrival. A worried Democrat with extensive knowledge about FTC politics wondered aloud whether to open a back channel to Khan, to share advice about not alienating the staff. A former Republican regulator predicted Khan’s aggressive antitrust challenge to Facebook, renewed by an amended complaint the FTC filed Thursday, is doomed to flame out in the initial pleading stages.

So it was not very surprising that the first question fired at Phillips on his antitrust panel was about the new FTC chair. But Phillips looked surprised. He paused for a moment before joking about retribution for the moderator, noting the question was not on the list of prospective queries sent before the conference.

“I like the concept of open meetings. I think it’s good to show the public kind of who we are and what we’re doing,” Phillips said, praising Khan before launching into a critique on the how the new chair’s policies could hurt HSR enforcement, which Phillips called “one of the great win/wins in antitrust law over the decades.”

“I fear that some of the steps we’re taking now will make that process less effective, and less efficient and less fair,” he said.

Phillips told MLex he is concerned that a series of orders Khan spearheaded July 1 authorizing the use of compulsory process for investigations by the agency into key law enforcement priorities also will make it harder for other commissioners to maintain a flow of information they need for oversight of the agency’s policies and programs. He said the policy justification “seemed very thin to me” for those orders.

“I’m worried that it would remove commissioner oversight, and I think commissioner oversight is important, no matter what side you're on. And that has been a feature of both sides throughout administrations for a long time on big cases,” he said.

The FTC in recent years has been less partisan than some regulators such as the Federal Communications Commission, which has been deeply divided along party lines over issues such as net neutrality. Asked by MLex if he thinks the FTC is doomed to similar party-line votes instead of bipartisan consensus, Phillips got animated.

“Look, we have [consensus] already on certain issues!” he said, noting that the FTC’s controversial “Right to Repair” report and policy statement last month declaring that restrictions on product repairs will receive prioritized antitrust and consumer protection scrutiny were adopted by unanimous, bipartisan vote.

“Where we think things through, where we talk to each other, where we predicate our work on information from staff, from the outside — good research — we absolutely can continue to get to consensus,” Phillips said. “But the best way to do that is to make sure we do all the important kinds of input that have made the agency a place that historically has not been a party-line kind of institution.”

The FTC declined to comment.

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