Partisan tensions escalate at FTC, but usual comity remains intact

20 Sep 2021 12:00 am by Claude Marx, Kathleen Murphy

Federal Trade Commission

Even though Republican commissioners have complained about being cut out of the information flow at the Federal Trade Commission, the five-member panel can still behave in public.

The agency’s traditional collegiality survived in a public virtual meeting Sept. 15 despite ongoing vocal critiques of the Democratic majority and Chair Lina Khan by Republican members. Christine Wilson and Noah Phillips continued to bristle at the new sheriff in town and decry Khan’s actions to follow the letter of the law regarding meeting notice and deliberative process privilege.

The panel mostly disagreed on party lines but displayed the usual comity as they rescinded vertical merger guidelines; approved a health breach notification policy for consumer apps; and fast-tracked subpoenas for eight categories of investigations including those affecting veterans, children, bias in algorithms and repair restrictions.

The meeting took place during a week in which the White House announced President Joe Biden’s intent to nominate Georgetown University Law professor and privacy expert Alvaro Bedoya to serve on the FTC, and a House panel voted to approve $1 billion for FTC privacy probes. Agency staff at the meeting also presented commissioners a report on Big Tech companies buying 616 companies that weren’t big enough for federal review but allowed tech firms to acquire talent and patents under the radar, according to Khan.

Republicans’ critique

Commissioner Wilson, in a Sept. 10 interview with MLex, outlined a broad critique of Khan and the agency’s Democratic majority and blasted what she described as an erosion of the FTC’s traditional collegiality. Earlier on Twitter, Wilson complained the agency had not supplied her with so-called “second request” information in merger regulation. The FTC makes second requests to seek more information from companies that are planning to merge.

“What we’ve seen is three commissioners of one political party abandon, with little or no deliberation or discussion or solicitation of input, many good-government policies and practices that were founded upon deep practical experience and supported by a broad bipartisan consensus in cases from Carter to Trump,” Wilson told MLex. “That approach is partisan, not bipartisan.”

She continued the criticisms at the Sept. 15 meeting: “And now in 2021, we have the FTC transparency paradox,” Wilson said. “Unfortunately, the majority repeatedly has chosen to undermine transparency and limit public input.”

Her word choice was a dig at Khan, who became famous in antitrust circles with a Yale Law Journal article titled “Amazon’s Antitrust Paradox.”

Wilson cited a July vote to revise rules of practice and the chair’s ban on FTC staff speaking publicly that occurred after a media leak investigation closed.

“For each open commission meeting that we hold, the public is given the minimum required amount of notice,” Wilson said. “And we hear real-time public comments only after we voted.”

Seven days’ notice is required by law for meetings. Commissioners can’t disclose the deliberations of other commissioners, lest such wrongdoing be referred to the Justice Department. Khan said she would disclose the content of voted-on items after the meeting, and the posting of several items occurred hours after the meeting concluded.

“Introducing these open meetings and inviting public comments on a monthly basis has been part of a broader effort to democratize our work,” Khan said at the meeting.

Commissioner Phillips echoed Wilson’s critique regarding consideration of the health breach notification rule.

“The public may have noticed that in our meetings we make decisions first and then hear from people, so that we cannot consider what they say in making our decisions. Today’s consideration of the policy statement on health apps is a new variation on this troubling theme of saying one thing about valuing public input, but doing another,” Phillips said. “I dissent from this end run around a normal rulemaking process, and my views are set forth in greater detail in my dissenting statement which I will publish.”

While comity and decent public behavior seem to remain among commissioners, it’s been decades since heartfelt back-and-forth seeking a mutual resolution has occurred among FTC political appointees.

Disagreement by design

Although there is tension among the commissioners, it’s hardly unprecedented and lawmakers intended that there would be some when they designed the FTC.

The FTC was the nation’s second independent executive agency (after the Interstate Commerce Commission) and those are designed to have members of both parties.

The commission’s initial powers were limited partly because President Woodrow Wilson, who proposed creation of the agency, was fearful of empowering a “smug lot of experts.”

But there were many fights among commissioners about how to use those powers.

During the first year of the Trump administration, there were only two FTC commissioners, acting Chair Maureen Ohlhausen and Democratic member Terrell McSweeney. The two clashed on several big cases, but they never let their disagreements get personal.

“We don’t agree all the time, but … you can’t look at all that we have accomplished as a two-person commission and see anything other than two people compromising, getting along and behaving in a mutually respectful way,” McSweeny told FTCWatch in 2018.

In July 2017, there were three separate comments that Ohlhausen, McSweeny and the FTC staff filed with the Federal Communications Commission on the FCC’s net neutrality process, called “Restoring Internet Freedom.”

Unless Congress gives the FTC stronger privacy enforcement tools than it has now, “consumers would be left worse off if the proposal before the FCC were adopted,” McSweeny argued in her filing.

Ohlhausen, however, said it was a “negative side effect” that the FCC’s 2015 order, by classifying consumer broadband as a Communications Act Title II “common carrier” service, removed the FTC from privacy and data security enforcement. That move created “a consumer protection gap that remains unfilled,” she said.

Ohlhausen and McSweeny were also on opposite sides on the FTC’s litigation against Internet of Things device maker D-Link. An agency lawsuit alleged that D-Link deceived consumers with false promises about the security of its products. Unlike previous IoT cases, the FTC didn’t allege a data security breach had occurred, but that D-Link’s lax security put consumers at risk of future harm. Ohlhausen voted against suing D-Link, but was overruled during the last days of the Obama administration.

In another high-profile dispute, McSweeny refused to back a proposed settlement in the FTC’s litigation against DirectTV that Ohlhausen favored. The FTC alleged that more than 40,000 advertisements by the company deceived consumers and sought nearly $4 billion in restitution.

McSweeny prompted the case to go to trial when she wrote US District Judge Haywood S. Gilliam Jr. in April 2017 that the settlement money proposed by DirecTV was “insufficient” and “not meaningful” given the large settlement class, and that she had “serious reservations” about whether the proposed injunctive relief would sufficiently protect consumers.

The FTC lost the case at trial and Gilliam ruled the agency had “definitively failed to prove its” Section 5 claims for ads that were in print or on television.

Some of the biggest fights at the FTC came during the presidency of Jimmy Carter.

During the chairmanship of Michael Pertschuk from 1977 to 1981, the FTC went after industries with strong congressional support, such as funeral homes and auto dealers, and he found himself being lambasted across the political divide. The Washington Post famously wrote that the agency’s overreach meant it was in danger of becoming a “national nanny.”

While the Republicans on the commission opposed some of these initiatives, so did some Democrats.

Robert Pitofsky, a former senior staff member who previously wrote an American Bar Association report that led to an agency overhaul in the early 1970s, was named a commissioner by Carter in 1978. He left after three years because he clashed with Pertschuk, whose activist agenda Pitofsky felt was straining resources and alienating key business interests.

Pertschuk had been a staff director of the Senate Commerce Committee before becoming FTC chairman.

The agency’s initiatives angered members of Congress in both parties. Twice in 1980 lawmakers let the agency’s funding lapse, and its doors closed for two days. The Senate also came within two votes of passing legislation to eliminate the FTC’s authority over state-regulated professions.

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