|
|
|
|
|
|
|
Thursday, March 16, 2023
FSF's Annual Can't Miss Policy Conference on March 28! Space Is Limited!
Wednesday, February 08, 2023
Carr, Simington, and Wilson Among Keynoters at #FSFConf15 on March 28!
Fifteenth Annual Policy Conference
|
|
|
|
|
|
|
Thursday, August 18, 2022
FTC Initiates Privacy Rulemaking Despite Congressional Momentum: Republican Commissioners Issue Strong Dissents
At a virtual news conference last Thursday, the FTC announced the adoption of an Advance Notice of Proposed Rulemaking (ANPR) on "commercial surveillance" (that is, the use of personal information) and "lax" data security practices.
Over forceful objections from the two Republican Commissioners, and in the face of significant congressional progress on a bipartisan, bicameral federal comprehensive data privacy bill, this action by the majority initiates a "Magnuson-Moss" rulemaking pursuant to Section 18 of the FTC Act.
The ANPR:
[I]nvites comment on whether it should implement new trade regulation rules or other regulatory alternatives concerning the ways in which companies (1) collect, aggregate, protect, use, analyze, and retain consumer data, as well as (2) transfer, share, sell, or otherwise monetize that data in ways that are unfair or deceptive.
It poses a total of 95 wide-reaching questions, grouped into the following broad categories:
- The extent to which personal data practices and security measures harm consumers, particularly children and teenagers;
- The appropriate way to balance costs and benefits; and
- Whether the FTC should regulate prevalent data privacy and security practices.
In just one troubling example of the ANPR's explicit bias against the prevailing notice-and-consent paradigm – a point of view that Commissioner Noah Phillips in his dissent characterizes as "a rather dystopic view of modern commerce" – question 74 asks under "which circumstances, if any, is consumer consent likely to be effective" and question 77 seeks input on "[h]ow demonstrable or substantial must consumer consent be if it is to remain a useful way of evaluating whether a commercial surveillance practice is unfair or deceptive" (emphases added).
In her Dissenting Statement, Commissioner Christine Wilson objected to the ANPR primarily on the basis of the risk it poses to the continued progress of the American Data Privacy and Protection Act (ADPPA). As I noted two weeks ago in a Perspectives from FSF Scholars, an amended version of the ADPPA on July 20, 2022, cleared the House Commerce Committee on a 53-1 vote.
Emphasizing her unwavering preference for congressional, rather than agency, action, Commissioner Wilson made plain that "[t]he momentum of ADPPA plays a significant role in [her] 'no' vote" – and that she is "gravely concerned that opponents of the bill will use the [ANPR] as an excuse to derail the ADPPA."
Commissioner Wilson did acknowledge that, at an earlier point in time, she "became willing to consider whether the Commission should undertake a Section 18 rulemaking to address privacy and data security."
However, for a litany of reasons – including "changes to the Section 18 Rules of Practice that decrease opportunities for public input and vest significant authority for the rulemaking proceedings solely with the Chair" and "Chair Khan's public statements [that] give [Commissioner Wilson] no basis to believe that she will seek to ensure that proposed rule provisions fit within the Congressionally circumscribed jurisdiction of the FTC" – the Commissioner has had an abrupt change of heart.
I documented this evolution in a series of posts to the Free State Foundation's blog.
In his Dissenting Statement, Commissioner Phillips reiterated a similarly longstanding conviction that Congress, rather than the FTC, "is where national privacy law should be enacted." In that vein, he wrote that he is "heartened to see Congress considering just such a law today" and hopes that "this Commission process does nothing to upset that consideration."
Taking issue with the ANPR's foundational terminology, Commissioner Phillips labeled the phrase "commercial surveillance" an "academic pejorative," one that is "defined so broadly (and with such foreboding) that it captures any collection or use of consumer data" – and one that "trades a serious attempt to understand business practices it would regulate for the chance to liken untold companies large and small to J. Edgar Hoover's COINTELPRO."
Expanding upon this concern, Commissioner Phillips makes the following additional points:
- The ANPR "provides no notice whatsoever of the scope and parameters of what rule or rules might follow" – thereby "undermining the public input and congressional notification processes" required by Section 18.
- It exceeds the FTC's congressionally delegated Section 5 authority over "unfair or deceptive acts or practices" and "signal[s] the majority's view that the scope of the rules passed by the unelected commissioners of an independent agency should be on par with statutes passed by elected legislators." Referencing (1) "personalized" or "targeted" advertising, and (2) consent, which he refers to as "one of the traditional bedrocks of privacy policy," he argues that the ANPR portends regulating "common business practices we have never before even asserted are illegal."
- Overstepping the limits of the FTC's jurisdiction, "[i]t seeks to recast the agency as a civil rights enforcer, contemplating policing algorithms for disparate impact without a statutory command."
- It "shortchanges data security, one area ripe for FTC rulemaking."
Critically, Commissioner Phillips highlights how the ANPR in practice could result in consumer harm: "Reducing the ability of companies to use data about consumers, which today facilitates the provision of free services, may result in higher prices – an effect that policymakers would be remiss not to consider in our current inflationary environment."
On September 8, 2022, the FTC will host a virtual public forum on the ANPR.
Thursday, May 26, 2022
#FSFConf14 Speakers on Need for Federal Privacy Law
At the Free State Foundation's recent Fourteenth Annual Policy Conference, FTC Commissioners Christine Wilson and Noah Phillips voiced their support for a federal data privacy regime. And on May 23, 2022, another speaker at #FSFConf14, USTelecom President & CEO Jonathan Spalter, authored a blog post urging the Biden Administration and Congress to work together "on this essential national priority."
In the meantime, Connecticut has compounded the confusion and chaos wrought by multiple, inconsistent state-level comprehensive data privacy statutes. On May 10, 2022, Governor Ned Lamont signed into law "An Act Concerning Personal Data Privacy and Online Monitoring." Connecticut is the fifth state to date – following California (twice), Virginia, Colorado, and Utah – to fill the federal void.
Nevertheless – and forgive me if I sound like a broken record – recent reporting suggests that federal lawmakers may be making progress behind the scenes toward a workable consensus on data privacy.
During #FSFConf14's "The View from the FTC," a Fireside Chat hosted by Maureen Ohlhausen, former FTC Acting Chairman and Commissioner (a video of which is available here), Commissioner Wilson echoed that optimistic sentiment (direct link here). Describing herself as one who "tend[s] to be a Pollyanna," she stated that "I'm actually hopeful, more hopeful than I have been, because I hear there's a concerted push to get federal privacy legislation across the finish line soon."
Commissioner Wilson also reiterated her position that federal privacy legislation is necessary:
I have been advocating for federal privacy legislation almost from the day that I was sworn in as a Commissioner. And I do think it's important, I think there is a market failure that needs to be addressed. I think consumers have very little understanding of the data that's collected from them and how that data is collected, used, and sold.
I also think that businesses need guardrails, they need to understand the rules of the road. And right now we have states with conflicting opinions about what those guardrails should be, and we have a developing international regime also with conflicting ideas. And so, businesses need clarity and certainty in order to know how to comply with the law, but also to invest and to grow.
Responding to a related query regarding what the FTC can do in the interim to "to fill the gap," Commissioner Wilson noted the agency's authority under Section 5 of the FTC Act to address "unfair and deceptive acts or practices in or affecting commerce" and subject-matter-specific jurisdiction pursuant to other statutes, such as the Children's Online Privacy Protection Act (COPPA). She also highlighted a "body of consents that provide very good rules of the road."
Later in the Fireside Chat (direct link here), Commissioner Phillips, responding to a question from an audience member regarding smartphone apps, acknowledged the existence, with respect to personal data, of an "information asymmetry" – a concept familiar to those who attended Commissioner Wilson's keynote address during FSF's Twelfth Annual Policy Conference in 2020.
Given that "[c]onsumers may not understand fully what they're engaging in," Commissioner Phillips indicated his support for a "nutrition label" solution:
[O]ne of the things I've always felt would be very useful is to look more carefully at things like labels. And understand, you know, what are ways that we can get good information out to people? We do this in a lot of other areas, right?
And you think about food, right? It's maybe not efficient for me every day to, you know, if I'm at the grocery store, examine each label. But if I care, and if I want to, and the cost to you, the producer of Honey Nut Cheerios, is fairly low, that can be a really beneficial rule. A rule that is good for competition. A rule that allows consumers to shop across products, including for those features.
So let's take what are you doing with your data, right? And Apple has a version of this, in iOS 14, they have these "nutrition labels," they call them. But it's a way of taking complex subject matter and boiling it down in terms that allow people to sort of shop across products and compare. And perhaps even to create markets around features where markets may not naturally arise.
Relatedly, USTelecom's Mr. Spalter, who participated in Free State Foundation President Randolph May's #FSFConf14 "The 'Hottest Topics' in Communications and Internet Policy" Fireside Chat (a video of which is available here), earlier this week published a blog post titled "Global Privacy Leadership Begins Here at Home."
After acknowledging the Biden Administration's "efforts toward harmonizing strong consumer privacy protections around the world" via the Global Cross-Border Privacy Rules Declaration, Mr. Spalter made the salient point that "for the U.S. to truly lead this worldwide endeavor, our nation must first lead by example here at home."
He therefore "urge[d] the Administration and Congress to work together, with a sense of urgency and purpose, to [adopt national privacy legislation] in the current legislative session." Specifically, a bill that "deliver[s] consistent online privacy protections that apply uniformly across the country and to all companies in the internet ecosystem."
Wednesday, November 03, 2021
In Eyebrow-Raising Fashion, FTC Adopts New Policy Statement on Prior Approval Provisions
Last week, the FTC finally filled the vacuum it created this summer when, in a vote along party lines, it rescinded the 1995 Policy Statement Concerning Prior Approval and Prior Notice Provisions in Merger Cases (1995 Policy Statement). The new Policy Statement, perhaps unsurprisingly, heralds a worrisome return to, and expansion upon, pre-1995 practices shown to discourage pro-competitive transactions. Equally newsworthy, however, are the departures from traditional process associated with this agency action.
Prior to 1995, the Commission routinely required that consent decrees include an obligation that the combined entity provide advance notice of, and obtain prior approval for, subsequent transactions in the relevant product and geographic markets. The 1995 Policy Statement put an end to that practice.
However, and as I detailed in a July 23, 2021, post to the FSF Blog, at the FTC's July Open Commission Meeting, the agency's Democratic majority opted to rescind the 1995 Policy Statement. The two Republican Commissioners articulated their concerns about that decision.
Commissioner Noah Phillips characterized prior approval provisions as "a decade-long M&A tax on anyone who enters a merger consent" and decried the inconsistency of the majority's action with the intent of the Hart-Scott-Rodino Act of 1976 (HSR Act). He also argued that the resumed use of such provisions will create competitive disparities between those subject to consent decrees and those not so constrained – and, as a consequence, "lead to suboptimal transactions, create inefficiencies, and reduce overall consumer welfare."
Commissioner Christine Wilson explained how prior approval conditions create opportunities for "questionable exercises of enforcement discretion"; emphasized that, even with the 1995 Policy Statement in place, the FTC retained the ability to require prior notice and/or approval in consent decrees under warranting circumstances; and highlighted that "by rescinding the 1995 Policy Statement without providing further guidance, the Commission substitutes uncertainty for a policy that has worked for more than 25 years."
That void now has been addressed, but decidedly not in a manner to the liking of either Republican Commissioner.
On October 25, 2021, the FTC announced the adoption of a new Prior Approval Policy Statement (2021 Policy Statement). Per the Press Release, "merger enforcement orders will once again require acquisitive firms to obtain prior approval from the agency before closing any future transaction affecting each relevant market for which a violation was alleged, for a minimum of ten years." Prior to 1995, prior approval provisions remained in effect for a maximum of ten years.
In addition, per this expanded policy, the agency may require prior approval for:
- Transactions outside of the affected product and/or geographic markets when, based upon the application of a "non-exhaustive" list of subjective factors, it concludes that "stronger relief is needed";
- In instances where the parties abandon the proposed deal; and
- For the sale of divested assets by entities not involved in the challenged transaction.
Thus, the 2021 Policy Statement in significant ways is much more expansive than those practices in place prior to 1995.
Although there currently is a 2-2 split between Democratic and Republican Commissioners on the Commission, Chair Lina Khan and Commissioner Rebecca Kelly Slaughter were able to push through the 2021 Policy Statement with the assistance of a tie-breaking "zombie vote" cast weeks prior by former Commissioner Rohit Chopra.
However, that is not the only procedural anomaly that transpired.
While a Dissenting Statement from Commissioners Phillips and Wilson eventually was released, on October 29, 2021, it notably was not included in the initial announcement.
As a result, Commissioner Phillips took to Twitter to voice his displeasure:
The Commission issued this ill-advised policy without giving minority commissioners a promised opportunity to issue a simultaneous dissent, as has always been the practice. @CSWilsonFTC and I will issue a statement later, as planned. https://t.co/KkQLbFzdTy
— Noah J. Phillips (@FTCPhillips) October 25, 2021
Commissioner Wilson weighed in, as well:
Simply stunning.
— Christine S. Wilson (@CSWilsonFTC) October 25, 2021
Strong dissent forthcoming. https://t.co/bHFpxOJmOC
For more on Commissioner Wilson's general process-related concerns, please read "Congressional Testimony of FTC Commissioner Wilson Addresses Agency Processes, Section 13(b), and Federal Privacy Legislation," a July 2021 post to the Free State Foundation's blog.
Eventually, the official FTC Twitter account issued a mea culpa:
The Office of Public Affairs unfortunately issued the prior approval policy release prematurely and plans to update immediately upon receipt of the dissenting statement from minority Commissioners. We regret the error.
— FTC (@FTC) October 25, 2021
Nevertheless, in a footnote to their joint Dissenting Statement, Commissioners Phillips and Wilson reiterated that "[t]he policy at issue was announced without our participation, which is contrary to longstanding practice and the opposite of what was promised."
Moving to the substance of their objections, Commissioners Phillips and Wilson dismissed the 2021 Policy Statement as "yet another daft attempt by a partisan majority of commissioners to use bureaucratic red tape to weigh down all transactions – not just potentially anticompetitive ones – and to chill M&A activity in the United States."
In addition, they:
- Pointed out the various ways, noted above, in which the 2021 Policy Statement goes even further than pre-1995 practices;
- Detailed how the 2021 Policy Statement stands in conflict with procedures set forth by Congress in the HSR Act;
- Explained how "the majority oversells the benefits of its actions and significantly undersells the harms";
- Highlighted how this action further exacerbates the growing disparity between how the FTC and the Department of Justice review transactions; and
- Criticized the majority's failure to seek public input before finalizing the 2021 Policy Statement.
I urge you to read the Dissenting Statement of Commissioners Phillips and Wilson in its entirety. It can be accessed here.
Wednesday, September 29, 2021
FTC Commissioner Wilson Recruits Student Researchers to Inform and Inspire Efforts to Pass a Federal Data Privacy Law
Citing what she describes as "significant information asymmetries," Republican FTC Commissioner Christine Wilson long has advocated for a comprehensive federal data privacy law. In fact, she discussed that very issue in her keynote address at the Free State Foundation's Twelfth Annual Telecom Policy Conference in March 2020.
More recently, she partnered with Duke University on a research project designed to expedite the currently stalled legislative process.
To date, efforts to pass a federal privacy law have been stymied by partisan disagreements regarding two issues in particular.
One, whether a federal data privacy law should preempt similar state laws. As I have argued on numerous occasions, most recently in "Pressures Multiply for Congress to Act on Data Privacy," a Perspectives from FSF Scholars published earlier this month, it should.
The growing list of states with their own, inconsistent statutes – which currently includes California (both the California Consumer Privacy Act and the California Privacy Rights Act), Virginia (the Virginia Consumer Data Protection Act), and Colorado (the Colorado Privacy Act) – unreasonably complicates companies' compliance efforts and creates chaos for consumers.
Two, whether it should provide for a private right of action. It should not. Generally speaking, class-action lawsuits benefit attorneys, not consumers. Case-by-case enforcement by the FTC is the better approach.
Unable to find common ground on these questions, lawmakers have made no observable progress of late. However, the fact that the Senate Commerce Committee is holding a hearing today titled "Protecting Consumer Privacy," the first of its kind this year, perhaps offers a glimmer of hope.
Given the failure to date of Congress to pass privacy legislation, there have been repeated calls for the FTC to commence a rulemaking. On September 20, a group of Democratic Senators led by Richard Blumenthal (CT) wrote to FTC Chair Lina Khan urging her to do just that.
Notably, and in specific response to the lack of legislative momentum, at one point Commissioner Wilson herself reluctantly expressed her support for an FTC privacy rulemaking, a statement that I highlighted in a July 2021 post to the FSF Blog.
But in light of a pattern of agency actions that Commissioner Wilson troublingly regards as an "abrupt departure from regular order" – including, most recently, the September 15th decision along party lines to withdraw the Vertical Merger Guidelines that were issued in 2020, to which she and fellow Republican Commissioner Noah Phillips responded with a co-authored Dissenting Statement – she has had a change of heart.
In an Oral Statement submitted to the House Commerce Committee's Subcommittee on Consumer Protection and Commerce in July of this year, she wrote the following:
In recent months, I had become more receptive to a [Magnuson]-Moss rulemaking on privacy to address the information asymmetry between the providers of goods and services and their users. But the Commission recently voted along party lines to pare back procedural safeguards and limit opportunities for public input during agency rulemakings. Given these changes, I am less inclined to support a Mag-Moss rulemaking on privacy. Federal privacy legislation remains the optimal solution.
In an attempt to facilitate that "optimal solution," Commissioner Wilson several months ago partnered with Duke University's Professor David Hoffman, along with students from its law school and Sanford School of Public Policy, to produce "a resource for legislators" – specifically, research-driven insight into how other federal statutes have addressed these two sticking points.
The fruits of that effort, which focused on both federal statutes (ten on the topic of preemption, six regarding remedies) and the European Union's General Data Protection Regulation (GDPR), have been made available publicly here.
In a keynote address delivered at "Exploring Options: Overcoming Barriers to Comprehensive Federal Privacy Legislation," a related event held on September 21, 2021 (video available here), Commissioner Wilson offered her perspective on these findings.
While acknowledging that the research revealed that "federal statutes that preempt an entire field of law are rare," Commissioner Wilson argued that the more common approach — where Congress "establish[es] a federal floor and allow[s] states to pass more stringent laws" — is not well suited to "fields like … the Internet that transcend state and national borders."
Given that:
- "[T]he very nature of the Internet makes it likely that the most stringent state standard will become the de facto national standard," and
- A primary regulatory objective should be to ensure that businesses are subject to consistent obligations,
Commissioner Wilson suggested that a better way forward would be to ensure that those rights and responsibilities established at the federal level are sufficiently robust on their own: "If the [federal] law provides strong rights and imposes appropriate standards and obligations on businesses, as well as robust and accessible remedies, more stringent state laws should not be necessary."
She also indicated that, given the dynamic and constantly evolving nature of the online experience, she would support "vesting the FTC with carefully tailored rulemaking authority … to facilitate updating key definitions and provisions over time."
With respect to remedies, Commissioner Wilson began with the point that a strong privacy law, one that empowers and adequately funds the FTC's efforts, would undercut one of the primary arguments as to why a private right of action may be necessary – that is, the perception that current levels of enforcement are inadequate.
She also highlighted research demonstrating that "abusive class action practices increase costs for businesses – while providing little in the way of redress for consumers, changed business practices, and deterrence."
Stepping back, Commissioner Wilson then made the foundational recommendation that "we … broaden the conversation" beyond solely whether or not to include a private right of action to "focus on establishing a constructive remedial framework."
In that vein, she cited "Breaking the Privacy Gridlock: A Broader Look at Remedies" by Jim Dempsey, Chris Hoofnagle, Ira Rubinstein, and Katherine Strandburg, when making the following three points:
- Remedies should be tied to policy goals,
- No one remedy can successfully promote even a simple goal and therefore an effective law should include multiple remedies, and
- Intermediaries and third parties play a powerful role.
Asserting that "an 'all or nothing' approach will not serve the goals of privacy legislation," Commissioner Wilson suggested that alternative enforcement proposals be given serious consideration, including those that involve:
- A supervisory authority and/or third-party intermediaries, or
- A private right of action "in limited circumstances [with] substantive and procedural limits," exclusively "for specific, highly sensitive types of data," or providing only for injunctive relief.
In conclusion, she stated the following: "Ideally, the remedies contained in privacy legislation will turn on the kinds of injuries consumers may suffer."
At the same time, she teed up the question as to how the standing test set forth by the Supreme Court in its 2021 Transunion, LLC v. Ramirez decision might impact the options available to Congress.
Friday, September 03, 2021
Latest Alteration to FTC Merger Review Process Targets "Informal Interpretations"
In a series of recent posts to the Free State Foundation's blog, I have highlighted not only the many changes that the Biden FTC already has made to the way the agency reviews proposed transactions under the Hart-Scott-Rodino (HSR) Act, but also the alarms that the two Republican Commissioners, Noah Phillips and Christine Wilson, have sounded in response.
- While participating in a panel discussion on August 16, 2021, at the Technology Policy Institute's Aspen Forum, Commissioner Phillips voiced his "concern[] that some of the policies we're adopting are essentially aimed at undoing the Hart-Scott-Rodino merger review legislation."
- Commissioner Wilson, in an August 9, 2021, statement Regarding the Announcement of Pre-Consummation Warning Letters, wrote that she is "gravely concerned that the carefully crafted HSR framework is suffering death by a thousand cuts."
- Testifying on July 28, 2021, before the House Committee on Energy & Commerce's Subcommittee on Consumer Protection and Commerce, Commissioner Wilson argued that "[p]ractitioners, academics, and former enforcers across the political spectrum have expressed concern about the agency's abrupt departure from regular order and … I share these concerns."
- And in a July 23, 2021, post to the FSF Blog, I summarized the objections of Commissioners Phillips and Wilson to the majority's decision to rescind the 1995 Policy Statement Concerning Prior Approval and Prior Notice Provisions in Merger Cases.
The latest instance where agency "traditions and norms have been jettisoned" was announced in "Reforming the Pre-Filing Process for Companies Considering Consolidation and a Change in the Treatment of Debt," an August 26, 2021, blog post written by Holly Vedova, Acting Director of the FTC's Bureau of Competition.
For decades, merging entities have sought and received "informal interpretations" from FTC staff to help them navigate the complicated HSR process. As Ms. Vedova notes, [t]hese interpretations are not reviewed or authorized by the Commission, and do not carry the force of law." Nevertheless, they have proven helpful. But perhaps no longer.
The specific objective of the blog post is to highlight "one initial example of where the informal interpretation program missed the mark," that is, how the retirement of debt is to be treated when calculating the total value of a proposed transaction.
Parties to a potential merger are required to file an HSR premerger notification only if the transaction clears a certain dollar-value threshold, currently $92 million. In light of a 2006 informal interpretation, "[u]p until now, the Bureau advised that the retirement of debt should never be included in this calculation."
Effective September 27, 2021, however, "the full or partial retirement of debt should be included in calculating the Acquisition Price in any instance where selling shareholder(s) benefit from the retirement of that debt."
More broadly, however, the blog post ominously reveals that the entire "voluminous log" of informal interpretations is under review and therefore is vulnerable to revision or removal on a case-by-case basis – or, potentially, elimination altogether.
Ms. Vedova begins with the following assertion: "As the FTC continues to experience a massive surge in planned merger deals, we are looking at every step of the merger filing process to identify ways to streamline and maximize our efficiency." However, it is hard to see how this announcement will accomplish either goal, for two reasons.
One, in taking steps that will expand the number of instances where parties must include debt in the total value of a transaction, the agency is adding to its workload, as more deals will trigger the obligation to file an HSR premerger notification.
To the extent it is true "that some merging parties have responded [to the 2006 informal interpretation regarding the retirement of debt] by structuring deals in ways that they believe fall outside of the filing requirements," it is not necessarily a bad thing that the FTC will have an opportunity to review more transactions than it otherwise might. The fact remains, however, that the agency's to-do list will grow. Its backlog likely will, as well.
Two, this change will decrease, not maximize, efficiency. As Commissioners Phillips and Wilson repeatedly have noted, recent agency actions have created substantial uncertainty for the business community. That uncertainty heightens risk, disincentivizes beneficial transactions, and leads to a net decrease in overall consumer welfare.
By calling into question the continued value of informal interpretations generally, Ms. Vedova's blog post necessarily injects even greater unpredictability into the overall process.
Thursday, August 12, 2021
"Death by a Thousand Cuts": FTC Commissioner Wilson Sounds the Alarm in Response To Latest Change To Transaction Review Process
The Federal Trade Commission's Democratic majority, led by newly-installed Chair Lina Khan, already has made several modifications to the process by which the agency reviews transactions. These changes worry its Republican Commissioners.
The most recent example is a August 3, 2020, Press Release announcing that, unable to conclude its review of proposed deals within the statutory periods established by the Hart Scott Rodino (HSR) Act, the FTC has started sending letters warning those companies that proceed to closing that they "are doing so at their own risk."
On previous occasions, Republican Commissioners Noah Phillips and Christine Wilson have voiced their concerns publicly regarding this troublesome trend. For example, and as I noted in a July 23, 2021, Free State Foundation blog post, Commissioners Phillips and Wilson both issued statements objecting to the partisan decision to rescind the 1995 Policy Statement Concerning Prior Approval and Prior Notice Provisions in Merger Cases.
And in her July 28, 2021, Oral Statement to the House Committee on Energy & Commerce's Subcommittee on Consumer Protection and Commerce, Commissioner Wilson expressed alarm regarding "the agency's abrupt departure from regular order." A July 29, 2021, post to the FSF Blog reporting on her testimony recounted her conviction that "traditions and norms have been jettisoned."
In response to this latest action, Commissioner Wilson once again has made the decision to speak her mind.
In a statement released on August 9, 2021, Regarding the Announcement of Pre-Consummation Warning Letters, Commissioner Wilson declares that she is "gravely concerned that the carefully crafted HSR framework is suffering death by a thousand cuts." Grounding the August 3, 2021, Press Release in the broader context of other recent agency decisions, she argues that "these actions raise the costs of doing mergers and threaten to chill harmful and beneficial deals alike."
Before 1976, transactions were reviewed after the fact. As Commissioner Wilson recounts, this was less than ideal for all concerned: the government, businesses, and consumers. Congress, in passing the HSR Act, addressed this uncertainty by requiring that the parties to certain deals provide pre-merger notifications to the FTC and Department of Justice.
According to Commissioner Wilson, the announcement that the agency is sending warning letters, rather than completing its investigations within the time allotted by statute (or negotiating extensions thereof), suggests a return to the pre-HSR era. As the Press Release notes, the form letters make clear that the "investigation remains open" and "the agency may subsequently determine that the deal was unlawful." In the Commissioner's words, we once again find ourselves in an uncertain regulatory environment where, ex post, the FTC may attempt to "unscramble the eggs."
Questioning the stated justification for this change – an increase in the number of filings and a lack of agency resources – and referencing the fact that "[w]e know the Biden Administration has called for a review of the existing merger guidelines" that could result in the government catching a higher percentage of transactions in its net, Commissioner Wilson speculates that perhaps "something else is afoot."
In conclusion, Commissioner Wilson argues that such a fundamental change "defies the will of Congress" – and therefore should be undertaken only by Congress.
Thursday, July 29, 2021
Congressional Testimony of FTC Commissioner Wilson Addresses Agency Processes, Section 13(b), and Federal Privacy Legislation
On Wednesday, July 28, FTC Chair Lina Khan and Commissioners Noah Joshua Phillips, Rohit Chopra, Rebecca K. Slaughter, and Christine S. Wilson testified before the House Committee on Energy & Commerce's Subcommittee on Consumer Protection and Commerce.
The hearing, entitled "Transforming the FTC: Legislation to Modernize Consumer Protection," focused on 16 different proposed bills.
First, Commissioner Wilson argued that, with respect to the recent handling of agency business, "traditions and norms have been jettisoned…. [P]ractitioners, academics, and former enforcers across the political spectrum have expressed concern about the agency's abrupt departure from regular order and … I share these concerns."
As a consequence, she professed "fear that some of the [proposed] bills would give authority to the FTC that ultimately would result in stifled competition and innovation to the detriment of American consumers, U.S. industries, and our economy."
In doing so, she made reference to her:
- Dissenting Statement regarding those actions taken along party lines at the July 1 Open Commission Meeting, including the decision to rescind the 2015 Statement of Enforcement Principles Regarding "Unfair Methods of Competition" Under Section 5 of the FTC Act, and
- Oral Remarks objecting to the majority's rescission of the 1995 Policy Statement Concerning Prior Approval and Prior Notice Provisions in Merger Cases at the July 21 Open Commission Meeting, about which I wrote in a post to the Free State Foundation's blog.
Second, she addressed how Congress might respond to the Supreme Court's holding in AMG Capital Management, LLC v. FTC that Section 13(b) does not permit the FTC to obtain equitable monetary relief in federal district court.
Maintaining that "legitimate concerns of stakeholders can be addressed while also restoring the ability of the FTC to use Section 13(b) to pursue wrongdoers," Commissioner Wilson offered several suggestions to constrain Commission authority, including a statute of limitations.
Third, Commissioner Wilson reiterated her call for federal privacy legislation that preempts state laws like those adopted in California, Virginia, and Colorado: "Businesses need clarity and certainty regarding the rules of the road in this important area…. Even more importantly, consumers need clarity regarding how their data is collected, used, shared, and monetized."
In a July 15 post to the FSF Blog, I reported that Commissioner Wilson, as of June, had "reluctantly come to consider whether we should begin a privacy rulemaking proceeding at the Federal Trade Commission." In light of the process issues noted above, however, she is now "less inclined to support a [Magnuson-Moss rulemaking under Section 18 of the FTC Act] on privacy."
Video of the hearing is available here.
Posts
