With the confirmation of Commissioner Alvaro Bedoya on May 16, 2022, the Federal Trade Commission finally has a 3-2 Democratic majority and can move forward with Chair Lina Khan’s ambitious agenda.
The Commission’s majority has significant ramifications for many industries, which will likely see the FTC flex its regulatory muscles in accordance with the 2021 Presidential Executive Order on Promoting Competition.
Getting out of the impasse
The FTC, a five-member commission where only three members can be from the same political party, was deadlocked 2-2 in October 2021 when former Democratic commissioner Rohit Chopra resigned to become head of the Consumer Financial Protection Bureau. Since the FTC needs a majority vote from commissioners to get most cases done, the impasse effectively hampered the president’s ability to move forward on issues that lacked bipartisan support. For example, since the two Republican Commissioners are generally opposed to the FTC exercising its regulatory power in the antitrust area, the President did not have the votes to initiate regulatory proceedings.
Commissioner Bedoya, a law professor at Georgetown University and a privacy expert, has a proven track record primarily in the area of consumer protection. His views on antitrust are less well known, but he said he “wants[s] to help small business owners across the country who are struggling to compete on their merits, without a larger corporation using its power to stifle that competition. And since his confirmation, Commissioner Bedoya has rounded out his team with competition attorneys who have experience with the FTC and state antitrust enforcement. Therefore, it is expected to be a reliable third vote to support Chairman Khan and Commissioner Rebecca Slaughter on antitrust issues.
The Biden administration and President Khan’s antitrust to-do list
The White House Competition Council and the FTC have indicated that they intend to use antitrust laws and the FTC Act to not only target market concentration and large corporations, but also to address other issues such as non-competition practices and unequal pay. Of the 72 specific initiatives identified in the executive order, many tasks are specifically directed at the FTC, including:
- Exercise the FTC’s regulatory power to limit manufacturer restrictions on “third party or self-repair of items, such as restrictions imposed by powerful manufacturers that prevent farmers from repairing their own equipment.”
- Work with the Department of Agriculture to submit a report to the White House Competition Council “on the effect of retail competition in the food industries,” including whether the FTC Act or the Robinson-Patman Act could be used to improve farmers’ and other small producers’ access to retail markets.
In the healthcare/pharmaceutical markets
- Exercise the FTC’s regulatory power to limit “unfair anticompetitive behavior or agreements in the prescription drug industries, such as agreements to delay market entry of generic drugs or biosimilars.”
In technology markets
- Exercise the regulatory power of the FTC to end “unfair competition in major Internet markets”.
In real estate markets
- Exercising the FTC’s regulatory power to restrict “unfair tied selling practices or exclusionary practices in the brokerage or listing of real estate.”
In labor markets
- In conjunction with the DOJ, consider additional revisions to the October 2016 antitrust guidelines for human resources professionals”[t]o better protect workers against wage collusion” by employers.
- Exercising the FTC’s regulatory power to “restrict unfair use of non-competition clauses and other covenants or agreements that may unfairly restrict worker mobility” and to limit “unfair restrictions on professional licensing” .
The FTC looks set to pass new competition rules this month
Given the impasse, the FTC has yet to address any of the key competition-related regulations and other agenda items proposed by the executive order or identified in the Commission’s Statement of Regulatory Priorities for 2022. Although it has launched several regulations in recent months, they have all been linked to consumer protection issues with bipartisan support, such as issues related to telemarketing scams, false tax returns and fraud. by identity theft. The FTC also launched rules relating to children’s online privacy and advertising to children shortly after Commissioner Bedoya’s confirmation.
With a Democratic majority in place, the status quo in key rulemaking will likely change in the near term. Under Khan’s presidency, the FTC holds monthly public meetings. The next meeting is scheduled for mid-June, with a date and agenda to be announced. We believe the FTC will begin to address some of the more contentious competition issues in its role fairly quickly, particularly in the agriculture, healthcare, and technology sectors.
The FTC is also aggressively hiring and seeking increased funding for the app.
As the FTC is poised to ramp up its rulemaking efforts, it’s also dramatically increasing its enforcement capacity through hiring.
President Biden has proposed a 2023 budget that would increase funding for the FTC by $139 million and for the DOJ’s antitrust division by $88 million.
President Khan echoed Biden’s call for increased funding for the FTC. In recent testimony before the House Appropriations Subcommittee on Financial Services and General Government, she explained that the recent surge in merger filings has exceeded and exceeded the FTC’s ability to investigate them. “An incredible 3,644 transactions were reported to the FTC and DOJ in fiscal year 2021, 87% higher than the average number of transactions reported over the past five years,” she said. explained, adding that the agency does not have enough resources to meet its legal obligations to review such mergers in a timely manner.
According to Chairman Khan’s testimony, the requested increase would fund the addition of approximately 215 full-time employees to the FTC’s staff. This is in addition to increased funding received by the agency in fiscal year 2022, which currently allows it to hire approximately 85 full-time staff. Massive recruiting efforts are underway at the FTC to achieve this goal.
With its stalemate over and hiring underway, the FTC looks set for a turbulent period of competition rulemaking and enforcement. Companies should keep the agency’s stated priorities and broad mandate in mind when reviewing compliance issues or potential M&A activity. They should also stay tuned to future FTC regulations and consider participating to help the agency make decisions based on a more complete record. Companies with questions regarding the likely enforcement priorities of antitrust authorities and the rule-making process are encouraged to consult an antitrust attorney.