Explainer Episode 40 – FTC’s New Strategic Plan and the Future of Agency Action
Ashley Baker and Asheesh Agarwal discuss the FTC’s Strategic Plan for 2022 – 2026, which sets out the FTC’s priorities over the next five years. Ashley and Asheesh discuss goals that the FTC would like to achieve, their shift from the historically used consumer welfare standard to a public interest standard, and challenges to the FTC’s assertion of jurisdiction to keep an eye on.
Although this transcript is largely accurate, in some cases it could be incomplete or inaccurate due to inaudible passages or transcription errors.
[Music and Narration]
Introduction: Welcome to the Regulatory Transparency Project’s Fourth Branch podcast series. All expressions of opinion are those of the speaker.
Steven Schaefer: Hello, and welcome to the Regulatory Transparency Project’s podcast. My name is Steven Schaefer, and I’m the Director of the Regulatory Transparency Project. We have two stellar experts to discuss today’s topic related to FTC’s 2022-2026 Strategic Plan and related issues. As always, The Federalist Society takes no position on particular legal or public policy issues. All expressions of opinion are those of the speaker.
Ashley Baker is the Director of Public Policy at the Committee for Justice. Her focus areas include the Supreme Court, regulatory policy, antitrust, and judicial nominations. Ashley is also the founder of the recently formed Alliance on Antitrust coalition. She has testified before the United States Senate on the topic of antitrust law.
Asheesh Agarwal is an attorney who has served in senior roles at the Department of Justice and Federal Trade Commission. At the FTC, Agarwal served as Assistant Director of the Office of Policy Planning, where he led initiatives to help consumers and examine barriers to the growth of e-commerce. Asheesh currently serves as an advisor to the American Edge Project and the U.S. Chamber of Commerce on competition issues. Ashley, over to you.
Ashley Baker: Thank you, Steve. And thank you for having us. This is certainly a very exciting time to be working on anything related to antitrust and the FTC. A lot going on right now. I’ll start out with the FTC’s Strategic Plan. One of the things that are a little bit more under the radar, that a lot of people might not have noticed, is that about a month ago the Federal Trade Commission released and requested comments on its Strategic Plan for the years 2022 to 2026.
So, by way of background, since 1997, Congress has required independent agencies to release these sort of strategic plans, in which they talk about their mission, they talk about their priorities, and set goals for the next four years. And this year’s Strategic Plan — it had a number of changes that we’re going to quickly go over. But the more notable or more broad changes to the strategic plan comes in the form of an overview of what it states should be the agency’s mission and their mission statement.
So first, most notably, the commission replaced its previous focus, which was on protecting consumers, with a focus on protecting the public. And that’s the term it used. It sounds like semantics, but this is really a pretty significant difference, because protecting — they’re moving to more of a public interest standard, and that can get into a lot of other issues, other than what the FTC has traditionally done. And the FTC has traditionally protected consumers against business practices that cause more tangible harm, so things like identity theft or price fixing or misleading advertising — things that cause harm to the consumers.
So, shifting away from that is pretty notable. The other really big change is that for about 25 years now, the FTC has had a mission statement that it’s defined as protecting consumers and competition by preventing anti-competitive, deceptive, and unfair business practices through law enforcement, advocacy, and education, without unduly burdening legitimate business activity.
And, for the first time ever, the Federal Trade Commission has now struck the clause, the “without unduly burdening legitimate business activity” entirely, did not make notation of it, did not talk about that, did not even note it in a footnote. And I think that’s very significant, and very significant in light of the FTC’s recent actions in litigation, and also in their move towards rulemaking, is that legitimate business activity is on the table and they’re moving to this public interest standard of what’s subjectively fair, what’s not fair, as opposed to what actually harms consumers.
Asheesh Agarwal: Well, Ashley, you are spot-on in your analysis of the FTC’s new Strategic Plan. A huge problem is that it divorces the FTC’s mission from its traditional moorings in consumer welfare, and creates a lot of uncertainty for the business community, as well as gives a lot of discretion to government regulators to impose their own preferred social values on the antitrust laws.
So, for example, traditionally, as we know, the FTC has focused on consumer welfare. And the idea is, when the FTC is reviewing a proposed merger or a business practice, it looks to see, is that business conduct going to help or hurt consumers? In other words, is it going to raise prices or lower prices? Is it going to mean less quality products? Is it going to mean fewer choices for consumers? All very, very, objective criteria. And, across administrations, over the last 40 years, that’s been the rule.
Well, under the FTC’s new Strategic Plan, they incorporate this public interest standard, which is much more vague, and gives regulators much more discretion. So, for example, the Strategic Plan says, specifically, that the FTC focuses on investigating and litigating conduct that causes or is likely to cause substantial injury to the public. This includes not only monetary injury, but also, for example, unwarranted health, safety, and privacy risks. So, health and safety risks — my understanding, historically, is that was something that was administered by OSHA. And OSHA was responsible for ensuring workers’ health and safety.
In this new world, what does that mean, concretely? So, for example, let’s say you have a merger between two parties. And we’ll just say, for these purposes, unambiguously, the merger is going to lead to lower costs for consumers, but also lead to layoffs, thereby harming workers. So, would the FTC, then, disapprove the merger because some workers might get laid off? And, believe me, nobody wants to see people lose their jobs. But that really hasn’t been the FTC’s job or mission to date. So it just creates a lot of uncertainty. And, Ashley, I’d be curious for your views as to how you think the FTC might administer this new public interest standard, going forward.
Ashley Baker: Well, that’s a great question. And I think the fact that no one really knows — part of it, it is designed to be a little bit more malleable. Those terms, in general, when used by any agency, whether it’s public interest or the fairness sort of standard that they’re injecting in here, that does leave for a lot of room to do things which they justify in future actions, which — that might be rulemaking. Whether or not they have authority to do that rulemaking, that’s another issue. We can get into that as well, but there’s a lot in there.
There’s a lot to unpack in there. But there’s also a lot that can stem out of this. And, of course, the agency can go back to their Strategic Plan and kind of use that to justify future actions. But, in some cases, I don’t think that’s necessarily correct. I think they’re moving into a lot of areas now, in which they don’t necessarily have that statutory authority, such as unfair methods of competition rulemaking. That’s certainly on the table right now under Section 5, and other areas in which they don’t necessarily have the direct statutory authority under the text of the FTC Act.
Asheesh Agarwal: Well, Ashley, you’re absolutely right about that. And another thing that I would flag for folks who are interested in the direction of the agency, going forward, is Commissioner Christine Wilson’s dissent from the Strategic Plan, in which she criticizes the agency’s leadership for incorporating more progressive policy values into the agency’s mission. So, for example, the FTC’s mission statement now says that it supports consumers and that it seeks equity for historically underserved communities.
Now, I will say that I fully agree that all of the FTC’s laws should be enforced on behalf of all Americans, and that absolutely includes minority communities and veterans and LGBTQIA+ communities. They’re all consumers, and they all deserve the protection of those laws. But when you talk about equity for underserved communities, again, it just introduces a lot of discretion for the agencies to maybe enforce the laws in ways that have not been traditionally understood as helping consumers, and even doing things that might objectively harm consumers in the name of equity for some other group. So I just think there’s a lot of ambiguity as to what’s going to happen, going forward.
Ashley Baker: And back to that point, too. I think that sort of terminology — there are also some really fundamental rule of law problems with that. As you’re pointing out, we need to certainly apply our laws equally to everyone, to all consumers. And that’s very much in line with the rule of law, equity, or this sort of fairness in competition, the way that they’re describing it. That’s more of an arbitrary application of the law, not applying it to everyone equally, but, let’s say, for example, applying it to competitors. They’re moving towards this fair competition sort of standard, in which it’s basically saying, “Is a company harming their competitor?”
But that’s how competition works. There are certain types of harms that you cannot commit. There are things that are very clearly illegal. But competing, in and of itself — that is going to be unequal to the other company. So it’s not really the job of the agency to bring things to a level playing field for all the actors, whether that’s the consumers and the companies, and be able to kind of micromanage that. It’s their job to apply the laws that we have on the books equally, and not put subjective policy preferences into them. So I view that, overall, as alarming.
Asheesh Agarwal: Well, Ashley, you just put your finger on the button, because the mantra for the past four decades has been “The antitrust laws protect competition, not competitors.” And, quite frankly, that principle is what has separated — one of the things that has separated our economies from Europe, and has allowed our economy to become very dynamic. And I think that the FTC’s Strategic Plan, and some of what’s happening in Congress, suggests some back-sliding from that core principle. And I think it’s really troubling.
I’d love to pivot a little bit to talk about how the FTC’s actions are going to be received in the courts. As you know, just in the last two years, the Federal Trade Commission was slapped down unanimously by the Supreme Court in a case called AMG Capital. And this November the Court is hearing oral argument in another case involving Axon Enterprises. Ashley, would you like to kind of lay the framework for what that case is about?
Ashley Baker: Sure, absolutely. And you’re right, this is an interesting time for these issues to appear in the Court. And they’re appearing in the Court alongside a lot of other agency actions. And, in my opinion, they’re appearing in the Court right at the worst time for the FTC. There have been a lot of great judges confirmed to the bench who have really solid views on administrative law and the rule of law, and separations of powers, more generally.
So let’s get to the first case, though, which is Axon v. Federal Trade Commission. Axon is a case that the Supreme Court will hear this fall. Actually, oral arguments are on November 7. The issue in the case is whether or not Congress impliedly stripped federal district courts in jurisdiction over constitutional challenges to the FTC structure and their procedures, by granting the courts of appeal, and whether or not the Congress granted courts of appeals jurisdiction to affirm, enforce, modify, or set aside the commission’s cease and desist orders.
So, essentially, here what their case is about is if there is an FTC action against a company, and that company also has a collateral constitutional claim against the Federal Trade Commission — whether that’s to the agency structure, or to whether or not they have certain statutory authority, any number of constitutional claims — do they need to exhaust those administrative proceedings in the in-house process before that constitutional claim can get to federal district court?
And the FTC, by way of background, their litigation can go through two avenues, really. And one is they can bring suit in federal court. And the other is, in a lot of cases, they are able to bring lawsuits in through their own in-house administrative tribunals, in which they have their own administrative law judge and the company is arguing against the FTC’s own lawyers. That process works out in favor of the Federal Trade Commission most of the time. I don’t know what the current statistics are on that, but it’s at least, like, 85 percent or so of cases are in the Federal Trade Commission’s favor. So the deck is stacked against them.
But if the company has a tangential claim that the FTC’s action was unconstitutional for various reasons, so they have to get through that entire in-house process before they can bring that to federal court, because a lot of companies don’t exist by the time that process is over. A lot of companies don’t actually get to exhaust in-house administrative process. LabMD, that’s one example of a company that was pretty much obliterated by that process. Committee for Justice, we filed an amicus brief in this case. And we go through some of those examples as well.
And not only are there concerns about that, from a constitutional standpoint, and that the federal — the venue for this is, appropriately, federal court. Nothing is — the text of the FTC Act impliedly strips federal court’s jurisdiction in any way, shape, or form. And there are some obvious constitutional problems with that.
Asheesh Agarwal: Well, Ashley, I will say, in all sincerity — not only because you’re my fellow panelist for this — that your brief, the Committee for Justice amicus brief in this case, does the most thorough job, I think, of laying out the constitutional framework, and going through some of the case law surrounding the ongoing constitutionality of the FTC in some recent cases in which the Supreme Court has been looking to rein in the discretion of independent agencies.
It’s just a fascinating case, because if you go back and you look at the Ninth Circuit’s opinion — which was written by a former colleague of mine, Judge Ken Lee, and also joined by the judge who I clerked for, Judge Eugene Siler — they said that their decision doesn’t really make a lot of sense, because you have to go, they ruled that somebody has to go through the FTC’s administrative process before bringing these constitutional challenges, while acknowledging that the administrative law judges at the FTC — or really, this goes for any agency — don’t have the ability to rule on the constitutionality of whether the agency is properly structured.
So it seems like an exercise in futility to make companies spend 18 months, two years, in litigation, when they can’t really ever get a meaningful result through that process. So I think that, based on the trend of where the Supreme Court has been going, I think that the FTC has a real uphill climb in the Supreme Court. We’ll have to see. But it’s a really very important question, because, as we’ve talked about, as we just talked about, the FTC has been very much expanding its mission to encompass other values and to assert authority for itself that isn’t necessarily tied very closely to its statute, the FTC Act. At least, as that has been interpreted to date.
So we have a situation where the FTC is becoming much more vigorous in its rulemakings, and some of the legal theories that are springing. At the same time, the Supreme Court is considering whether it’s possible to short-circuit that administrative process and go to federal court directly. And, Ashley, I’m curious as to your views as to how you think this is all going to play out.
Ashley Baker: Well, one point that I want to go back to in Axon, though, and underscore quickly, that also sort of answers your question, is Axon is ultimately, the case is about due process. And the agency, as a whole, has had a bit of an issue with due process recently. But also, the case about whether or not — so the due process concerns, they really underscore the need for a timely, meaningful, judicial review. And there’s no — you used the term “short-circuit the administrative proceeding process,” and those constitutional claims, though, I would not consider that short-circuiting them. I don’t think that they had the authority to put those — require them to go through the in-house process to begin with, and that the appropriate venue is federal court.
And it’s an interesting time, though, for a lot of these cases to come up, especially given that some of the judges that they’re going to be [inaudible 00:18:22] their track record on due process and separation of powers and judicial review — they’re all quite outstanding on those issues. And there are quite a number of other cases that underscore these due process issues. And agency actions, like you said — for example, a few weeks ago, I believe they said that the FTC now is reviewing every single merger that Meta — formerly known as Facebook — or acquisition, every business transaction that they undergo. And that’s a very uneven application of the law.
I’m not saying that they shouldn’t review those. I am saying that if they’re going to review every single transaction of one company, then they shouldn’t single one out and not the others. I think maybe you could add a bit more clarity to what the Federal Trade Commission, though, is doing in that case, and with that litigation, in general.
Asheesh Agarwal: Yeah, so, writ large, Ashley, I think you’re spot on into where the justices on the Supreme Court are. I’ve sort of quipped with friends that progressives definitely have three votes at the Federal Trade Commission. And that does allow them to move forward with a lot of more aggressive rulemakings and cases. But the problem for them is they probably only have three votes on the Supreme Court. And I think they’re going to face some real headwinds from justices who believe in more of a unitary executive model and narrower adherence to statutory language.
Justice Kavanaugh, when he was a judge on the D.C. Circuit, he wrote an opinion really questioning the ongoing relevance, the ongoing vitality, of the Federal Trade Commission, and the decision of Humphrey’s Executor that upheld it. But to your point about Meta, this is just a classic example of a case in which the FTC is exercising a lot of discretion. So, according to public reports, the FTC’s chair, Lina Khan, overrode a recommendation of the career staff not to bring that lawsuit. The case, by any traditional metric, is not one that violates the antitrust laws. It involves a proposed acquisition by Meta of a fitness app called Within Unlimited.
There’s no meaningful allegation that Within or Meta have any sort of monopoly power in the fitness app space, in virtual reality, or much of anything else. Yet the FTC is seeking to block that merger on this theory of potential competition. And the idea is, well, if Meta buys Within, then maybe, at some point in the future, they’ll exclude competitors. It’s really a very shaky discretionary theory. And, unfortunately, I think that is the direction where the FTC is right now.
Steven Schaefer: And what — for those in our audience who are listening, who are not practitioners in this area, or familiar in this area — what, when the FTC reviews Meta’s prior business transactions, or another similarly situated corporate entity, what powers does the FTC have, if they find that there’s something that violates the law? So, for example, can they independently litigate? Can they issue fines? Can they deny a merger? Or what are some of those powers that the FTC has?
Asheesh Agarwal: Yeah, sure, exactly, and all of the above, depending on what, exactly, played out. But, most typically, and what happened here, if the FTC is reviewing a merger and they find that it’s anti-competitive, they can withhold approval from the merger. And in the overwhelming majority of instances, companies will just walk away from a deal if that happens, because it’s very expensive and time-consuming to litigate. The FTC can also sue to block an acquisition, which is what’s happening here. Or, oftentimes, the FTC might negotiate with a company to sell off certain assets to alleviate some of the competitive concerns.
But what’s just surprising here is that you have a situation where there’s really no argument that there’s any overlap, any meaningful overlap between what Meta does and what Within does, or that there’s any real market power here. And if the FTC continues down this road, it seems like they can just pick and choose proposed mergers to block, based on very arbitrary criteria that aren’t apparent to the business community at all.
Ashley Baker: I would add to that too, in addition to all the actions that the FTC can take, because they’re taking these actions, and because they’re doing it in a certain way, there’s this broader deterrence effect as well. And, as Asheesh just mentioned, that a lot of deals are just kind of abandoned in the boardroom. But there are also a lot of transactions that kind of aren’t even really even thought about.
And there’s the problem, too, with venture capital funding. VCs are less likely to fund startups when they don’t have an exit strategy. I know the suit against Meta for the Within acquisition, that really did draw a lot of ire out of the venture capital and startup community, who are all afraid of what business implications it has, in their instance, specifically.
Asheesh Agarwal: Well, and it’s not just that. You see that the FTC’s administrative law judge ruled against the commission in the Illumina-Grail proposed merger. That’s what we call a vertical merger, where there’s not a lot of overlap, not a lot of competitive concerns, at least to a lot of observers. The FTC also lost in this Altria-Juul merger, which, again, raises some of the same concerns of constitutional issues that Ashley outlined. You have five commissioners who vote out this complaint, and then later — sort of acting as prosecutors — and they later sit as sort of appeals judges. And it raises some constitutional questions there.
So there’s a lot of pushback, I think, at the agency, both internally and, certainly, externally, from the business community and from some in Congress. And I expect we’ll see a lot more of that, like, over the next year.
Steven Schaefer: And Asheesh, just for those listening, what is a vertical merger? And what would that be distinguished as, a horizontal merger? Or what would be a different form of merger?
Asheesh Agarwal: Yeah, so a vertical merger is the idea that you’re combining companies that are in related markets, so they’re not competing directly against each other. So, for example, if Pizza Hut makes pizzas, and if they were to buy a tomato sauce distributor, that would be an example of a vertical merger, because they’re not directly competing with each other. And what Pizza Hut would say — not that it’s almost lunch time — is that “Hey, us buying this related company is going to cut our costs and allow us to present a better product, a cheaper product for consumers.” So that would be an example of one.
Steven Schaefer: Great. Well, thank you for your analysis today. I just wanted to ask, before we left, if — starting with you, Ashley, is there one or two takeaways that you think would be helpful for the audience to consider?
Ashley Baker: Gosh, I’m not sure exactly where I’d begin. There’s just so much going on right now. But I think, for the audience here, particularly for The Federalist Society audience, there’s a lot coming up in the courts and also within the agencies that will eventually make it into court. And I think keeping an eye on the Axon case, which I have said is — oral arguments start November 7. We’ll see an opinion of that by the end of this Supreme Court term.
There are some cases in lower court too that are very interesting. And then there are those broader issues that are raised by cases such as Axon and Illumina-Grail, and a number of other cases right now, including one that Walmart filed that addresses a lot of big-picture issues, regarding Humphrey’s Executor, and the commission’s structure and what, exactly, they have authority to do, whether or not they’re an independent agency. But, I think, watching these cases as they go through the courts and make it to court, is going to be really interesting over the next year or two years.
Steven Schaefer: And Asheesh, do you have any final thoughts, or one or two takeaways that you think the audience should consider?
Asheesh Agarwal: Yeah, I’d say two takeaways for people who don’t closely follow this area of law and policy. Number one is expect a lot more oversight of the Federal Trade Commission, and, writ large, the Biden administration’s competition agenda, from the courts and from Congress, because it really is very aggressive, compared to prior democratic administrations.
And, number two, I think we should all be vigilant to ensure that we don’t throw away a bipartisan policy framework that has really allowed the American economy to become the leaders in the world. We don’t punish our most successful companies in the United States because they are too big. That’s what other parts of the world do. And, quite frankly, that’s part of why our economy has taken off.
Steven Schaefer: Well thank you both today for sharing your expertise and your insight. And thank you to the audience, as well. If you’d like to hear more content like this, please check us out at regproject.org, that’s regproject.org.
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