Q&A: Getting candid with Noah Phillips

17 June 2022 00:00 by Claude Marx, Kathleen Murphy

Federal Trade Commission

Federal Trade Commission member Noah Phillips spoke with FTCWatch reporters June 7 on a balcony outside his office overlooking 600 Pennsylvania Avenue, NW. Inside his office, a picture hangs on the wall of conservatives’ bête noire, Louis Brandeis. During a wide-ranging interview, Phillips critiqued the views of the so-called neo-Brandeisians and others who want to push the agency in a direction he thinks isn’t good for the economy.

Phillips said he’d recently recovered from a bout of Covid-19. A Republican, he is set to finish his term Sept. 25, 2023.

Edited excerpts of the interview follow.

FTCWatch: It’s been a tumultuous time at the FTC. What’s the general mood over here?

Phillips: I think you’ve definitely seen in some of the public documents, a lot of unhappiness, and I think that’s regrettable. Whether that shift is because of a change in the commissioner lineup or otherwise, I hope it shifts.

FTCWatch: Has it been mostly from frustrations with the way things have been run? Is there any shift in that?

Phillips: Some of it, I think, has been very easy to spot. ... The communication has not been as robust, at least at the commissioner level, and I think you see in that IG report that came out from some of the merger review, that a lot of times, staff don’t feel like they have the direction that they need. It’s not a policy question. It’s what’s the goal here? How are we getting to the goal? And that’s what management is about. It’s a neutral attribute with respect to what direction you’re taking, but it’s about how to get there. I also do worry. I talk about this a lot. One of the things that helps husband resources, that helps husband, you know, the very valuable time of our career staff who work to the bone for very little money, that allows us to focus on the big important cases that we need to be bringing, is the ability to triage: the ability to sort of say, this is worth pursuing, this is not worth pursuing. Consent this. Litigate that. Let that one go. Triage.

… I also worry we spend a little bit too much time maybe chasing after little things and ultimately, who benefits? It’s bigger actors with the resources to push back and maybe the deals where they don’t really care. The additional increase of time and money from longer investigations become rounding errors, but if you’re selling your family grocery business, that extra time can make a lot of difference.

FTCWatch: Your colleague [Republican Commissioner] Christine Wilson has said the style of [Chair Lina Khan] and the initiatives that she’s pushed are essentially promoting Marxism. And so, I see you laughing. You haven’t said that about Marxism, but do you agree with her?

Phillips: I haven’t. Look, I studied political theory in college. But it’s been a long time since I picked up Das Capital. What I do see in a lot of our rhetoric, sorry, not our rhetoric … but some of the way that certain kinds of business practices, whole industries sometimes, are described … is a very, it’s a very jaundiced view. It is a view that if you’re making money… you must be predatory. I don’t think that’s our historical experience. And I don’t think that’s true.

I think mostly, not entirely, but mostly the reason that companies or folks succeed in business is because they’re doing a good job of serving consumers.

They’re giving people what they want. And sometimes even in the advocacy of antitrust reformers, you’ll see this nodded to.

One of the favorite things that I see in the recent intellectual history of some of the antitrust reform movement is the fact that three years ago they were complaining a lot about how low the prices were and wasn’t it unfair to smaller competitors, that we had low prices? OK, now we have eight-and-a-half percent inflation. So we’ve seen this very awkward attempt to try and lay it on a lack of competition. It’s pretty clear we have a wrong answer. But I do think there is a sense that whatever the big evil corporations were doing to succeed must have been a fraud. It must have been predatory.

And yes, there is predatory business conduct, and our remit is to go after unfair methods of competition and unfair and deceptive acts and practices. But if you look at the economy, and that’s all you see, you’re missing a big part of the story. And that’s a really important thing. … But if you really think that all that’s going on in America’s most successful companies and many others is just rampant fraud and illegality, I submit, you’re not really taking a look at the market realities that the chair always talks about wanting to focus on.

FTCWatch: Should antitrust law have some impact on systemic racism? Do you still think that the FTC has no role to play in combating systemic racism?

Phillips: Antitrust law is and has always been about protecting competition. The notion that if we had, whether it is more competition, or maybe even the atomized competition that new Brandeisians say they value, all the problems would go away, that racism would go away, that the lot of labor would be better, that we would have more data privacy — there’s nothing there. And in fact, they don’t believe this.

So you hear a lot of this language about how you know, ‘we decide how the markets will work, and we will structure the markets better.’ And yes, right, perhaps you could hope for better outcomes, but I do think the lived experience of the world is that attempts — especially not particularly well-designed attempts to structure markets by government — can have some really bad impacts, too.

FTCWatch: You said you studied political theory in college. Have you always been conservative? Have you always had these views or did you change your world view on politics?

Phillips: My big change came in high school.

FTCWatch: Do tell. What happened?

Phillips: So I grew up in Newton, Massachusetts, which is west of Boston. And I believe I read somewhere once, with the exception of Cambridge, [Newton] is the most liberal town in Massachusetts. So I think I am by nature a kind of contrarian. The thing I remember most clearly was when I was in high school, there was a big debate over Murphy Brown (the CBS sitcom starring Candice Bergen). You may remember this. And Murphy Brown was a single woman who decided to have a kid on her own. And this was a big, political back-and-forth.

FTCWatch: Dan Quayle, remember?

Phillips: Dan Quayle criticized her, I mean, the character. And after being 10, I was in a single-parent family through no fault of anyone’s. And I just remember thinking like, ‘Well, OK, right, but I’m not so sure that’s good.’ And, that issue, and perhaps some others, there were a few issues where I found myself sort of arguing with people a lot. Somehow, that nice Jewish boy from Newton, Massachusetts, ended up a Republican.

FTCWatch: Did you lose your father?

Phillips: My mom. … It was a long time ago. To be clear, my dad is a great guy, raised three great kids, but it wasn’t easy.

FTCWatch: Hart-Scott-Rodino filings have been down five of the last six months. Do you think the FTC is going to reverse course on early terminations and warning letters?

Phillips: No.

FTCWatch: Do you think the decision was political to kind of slow down mergers?

Phillips: I thought it was a bad idea when we canceled early termination. My view has always been this was an early opportunity for triage: stuff nobody cares about, let it happen earlier. As I laid out in my speech at Berkeley last month, I do think this is one of a number of mechanisms that we have taken in my view, gratuitously to throw sand in the gears of M&A activity generally, and that diverts resources and diverts attention from the deals that are likely to be more problematic from a competition perspective, which is our job. So there’s that.

Also, I didn’t think the nominal rationale at the time for what was supposed to be a temporary pause made a lot of sense, and it makes even less sense now. I think a lot has been justified using the HSR filing numbers. I will be a monkey’s uncle if anyone switches course just because the numbers are switching course. I thought most of those justifications had been just justifications for what people want to do anyway.

But if I had to guess, it has something to do with rising interest rates and lowering equity values. It’s more expensive to do M&A work, so people are doing fewer deals. I had my economic adviser chart, just very roughly HSR filings against the S&P 500 going back decades, and they roughly track. People do more deals when it’s cheaper to buy things. And they do fewer deals when it’s more expensive. … I never viewed any of the policy asks as being driven actually by the numbers, and we’ll see what happens, but I suspect the fact that the numbers are falling won’t lead even to a change in rhetoric.

FTCWatch: Rulemaking is something Chair Khan has talked about. You’ve mentioned in several talks there are court decisions that limit what agencies can do. There are some people who push back and say the courts haven’t really enforced that much, except for the [Schechter Poultry Corp. v. US ruling]. What do you think about that?

Phillips: Yeah. So, I think in terms of competition rulemaking, which is what you’re talking about, there are three areas of potential peril that I see for this effort. The first is a statutory one. There was a court as you guys know, in the 1970s, an appellate court in the DC Circuit that said we had the power to make rules under this aspect of the statute. Reading that decision today, it’s very hard to see how the courts that look at agency authority to make rules today, it’s hard to see them reaching the same decision. I don’t think that decision was well done. So that’s thing No. 1. We don’t have the authority.

FTCWatch: The Chevron doctrine?

Phillips: Chevron is yet another step which is if there is ambiguity, the agency gets deference, but that’s assuming you have the authority. Whether you have the authority is not a Chevron question. That’s sort of thing No. 1. Thing No. 2 is this constitutional question, and it’s true the courts have not enforced — well, sorry, the Supreme Court — has not enforced the non-delegation doctrine since Panama Refining and Schechter Poultry. And that was the New Deal. However, a majority of Supreme Court justices have expressed an interest in looking at that area of law again, and we had a decision recently in the Fifth Circuit, looking at non-delegation, so I don’t think the book is fully written. The third issue is, assuming the authority exists, and assuming its exercise is constitutional, as with our consumer protection authority, which we clearly have, for UDAP rules, you still have to color in the lines of the law, right?

You can only regulate or ban that which is an unfair method of competition if we have that authority, just like you can only regulate or ban what is an unfair and deceptive act or practice. And as broad as the words may sound, and however much we may have repealed our policy on what the limits of Section 5 are, I don’t think it’s true that courts will just say, whatever you want is what the law means. And so, we have to color within the lines.

FTCWatch: It was the case in AMG?

Phillips: Yeah. Let me say two additional things. The first thing is when the agency was bringing standalone Section 5 competition cases, the experience at the appellate courts was not good. Those were litigations. When you’re considering a rule, and you’re not just enforcing against one party, the stakes are even higher. And so the scrutiny is likely to be high as well. The other thing is this, and I wrote a blog post about this a few weeks ago, is the main thing we’ve seen from courts on antitrust from the late ‘70s to today is re-evaluating what conduct was covered by the per se rule.

FTCWatch: Is the rulemaking, then, constitutional or unconstitutional?

Phillips: Well, we haven’t seen a rulemaking attempt yet. But I think the notion that we have the power to make any rule we want governing the economy, except for common carriers and nonprofits, and that there are no standards — if that’s the notion? The president laid out seven different items he felt we could do rulemaking on, competition rulemaking. The notion that Congress gave us all that power, to me that would be an unconstitutional delegation, because all of the proponents of this seem to think it has no limit and that’s a problem.

FTCWatch: I’ll switch topics a little bit here to a consumer protection issue and what has become a national health crisis. Lately, children going to school, polls say half of them are afraid of being shot in their classroom. And the gun safety groups say the marketing of guns to children is part of the issue. What can the FTC do about that? What are you doing about it?

Phillips: I’m aware of that petition. I’d have to read it and scrutinize it, so I wouldn’t want to opine on it. The FTC is not a gun regulator. What we do is unfair and deceptive acts and practices and unfair methods of competition.

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