The Federal Trade Commission Goes Rogue

KEY TAKEAWAYS

• FTC employee morale and trust in senior leadership have declined precipitously.
• Republican senators have championed legislation to end the practice of “zombie voting” at the FTC, under which votes from departed commissioners are counted for up to 60 days after they leave the commission.

The Federal Trade Commission has a long and bipartisan history of protecting consumers and ensuring markets are fair and free from anticompetitive actions. Chair Lina Khan has steered the FTC in an increasingly partisan and anti-business direction. For years, FTC career employees have expressed deep satisfaction with their jobs and work environment. Recently however, under the leadership of Chair Khan, employee morale and trust in senior leadership have declined precipitously.

Trust in FTC Leaders Craters

In the 2021 Office of Personnel Management Federal Employee Viewpoint Survey, more than 35% of FTC employees surveyed reported that they did not have a high level of respect for the commission’s senior leadership. When asked whether “my organization’s senior leaders maintain high standards of honesty and integrity,” 80% to 90% of FTC employees traditionally agreed. Last year, that number plunged to 53%. Senator Roger Wicker sent a letter to Chair Khan in May saying he was “deeply troubled” by the results of the survey. He asked Khan to “provide a plan for how you are going to work with all Commissioners to address this breakdown in confidence with the agency.”

an activist agenda

Khan has been a critic of big technology companies for her entire career. While still in law school in 2017, she wrote an influential antitrust article titled “Amazon’s Antitrust Paradox” that advocated for aggressive action from the FTC and other regulators to break up dominant tech companies and platforms. Khan worked as legal director of the Open Markets Institute, an anti-monopoly organization. She was a lead author of a House Judiciary Committee report on antitrust that called for significant changes to antitrust law and argued large tech companies abused their dominant positions.

Khan has been so consistently critical of big technology companies that Amazon took the extraordinary step of filing a motion with the FTC requesting she recuse herself from antitrust investigations of the company. The motion states: “Given her long track record of detailed pronouncements about Amazon, and her repeated proclamations that Amazon has violated the antitrust laws, a reasonable observer would conclude that she no longer can consider the company’s antitrust defenses with an open mind.”

Many conservatives are sympathetic to efforts to respond to the power and influence of large technology companies on the U.S. economy and culture. But they are concerned that Khan’s aggressive agenda is focused on a wide array of industries outside of tech, and her anti-business zeal applies to businesses of all sizes, including small and medium-sized businesses trying to compete with the big tech firms.

Under Khan, the FTC now requires entities that merge to obtain prior approval from the FTC for certain transactions for up to 10 years after the merger. Commissioner Noah Phillips criticized this approach as “give up and don’t make us investigate your merger, or we’ll make you pay.” He warned that “the commission has adopted several policies openly taxing [mergers and acquisitions] in a way that does nothing for competition and also disparately impacts smaller players.” The FTC has also announced investigations into supposed price gouging by large retailers, supposed price gouging by energy companies, and industry actions during the baby formula shortage.

In July, 2021, Senator Mike Lee sent a letter to Chair Khan outlining his concern with actions the FTC had taken under her direction. Senator Lee wrote: “The unifying theme of these developments is a progressive putsch to consolidate power and burden American businesses. For the sake of our antitrust enforcement regime, competitive markets, and the American economy, I hope you will change course.”

the consumer welfare standard

Chair Khan also has moved to void longstanding, bipartisan FTC policies and principles. Since 2015, the commission had operated under the bipartisan “consumer welfare” standard in exercising its power. The standard, derived from the 1890 Sherman Act, focuses on conduct that harms the competitive process and consumers. It says that “an act or practice challenged by the Commission must cause, or be likely to cause, harm to competition or the competitive process, taking into account any associated cognizable efficiencies and business justifications.”

In her 2017 article, Khan argued “the current framework in antitrust – specifically its pegging competition to ‘consumer welfare,’ defined as short-term price effects – is unequipped to capture the architecture of market power in the modern economy.” Just four and a half years later, she had the power to transfer her policy vision from the realm of academia to the real world. In one of her first acts as FTC chair, she moved to rescind the bipartisan 2015 policy and replace it with a partisan policy that could vastly expand the regulatory reach of the FTC. In July, 2021, the commission voted 3-2 to rescind the 2015 policy. Commissioner Phillips dissented, saying the decision “reduces clarity in the application of the law and augurs an attempt to arrogate terrific regulatory power never intended by Congress to a handful of unelected individuals on the FTC.”

Commissioner Christine Wilson likewise dissented, noting the consumer welfare standard had promoted “predictability, administrability and credibility in antitrust enforcement” and that “without it we can expect that antitrust enforcement will reflect political motivations rather than reasoned and objective assessments of benefits and harms to consumers.” 

zombie votes

On October 8, 2021, his final full day as an FTC commissioner before leaving to head the Consumer Financial Protection Bureau, Rohit Chopra reportedly cast votes by email on as many as 20 policy statements, cases, and potential rule-makings. The FTC included Chopra’s vote on a change in an FTC policy that passed 3-2 a few weeks later.

The practice of counting “zombie votes” of commissioners who have left the FTC has been broadly criticized. Commissioners Wilson and Phillips issued a joint statement criticizing the substance of the October vote and noted that two sitting commissioners “joined forces with a zombie vote cast weeks ago” to change the policy.

Senator Jerry Moran has introduced legislation to ban the practice of zombie voting at the FTC. He said when he introduced the bill: “Your last day in office is the last day your vote should count – whether you serve on the school board or the FTC. It’s absurd that votes cast by commissioners on outstanding issues can be counted up to 60 days past their departure. This needs to stop to protect the integrity of the commission and because it’s just plain common sense.” The measure was included as an amendment to the Consumer Protection Remedies Act at a May Commerce Committee markup.