There’s a new sheriff – er, chairwoman – in town over at the FTC, and she’s planning to shake things up. During the Commission’s first open meeting in more than 20 years, Chairwoman Khan announced a new era of streamlined, widespread rulemaking, and increased public participation, transparency, and fairness. However, as every single vote broke along party lines, with the Democratic majority steamrolling Republican requests for increased dialogue, public comment periods, and expert input, the open meetings may be little more than political theater intended to cover a massive change in how the FTC operates. In fact, public comments were relegated to the end of the meeting, after votes were already cast, and the commissioners were given only five days, the bare minimum time, to consider the new rules and regulations. In the words of Commissioner Phillips, the Democratic majority wants to make regulating “easier, not better.” And after yesterday’s votes, it seems likely that the “new” FTC will look a lot like the FTC of the 1970s, which was widely criticized as a body of five unelected officials with broad, self-granted and oft-exercised power to regulate the economy badly. According to Commissioner Wilson, “if we don’t acknowledge the mistakes of the past, we are doomed to repeat them.”
Below are some highlights from the meeting.
Made in the USA Rule
By a margin of 3-2, the commissioners voted to finalize the Made in the USA Rule, which allows the FTC to impose stricter sanctions against deceptive “Made in the USA” claims on product “labels.” The new rule formalizes the FTC’s prior position that to be Made in the USA, “all or virtually all” of the product must made in the United States, but violations of the new rule now are subject to harsh civil penalties. The rule also extends the definition of a label beyond physical products to certain online labels, though it stops short of covering advertising more broadly, or agricultural products under the purview of the USDA.
Commissioners Chopra and Slaughter lauded the new rule, citing its deterrent effect and benefit to small businesses and families who rely on the “Made in the USA” label. Chairwoman Khan also voted in favor of the rule.
Commissioner Phillips, one of two dissenting voices, felt the new, more expansive rule exceeds the FTC’s congressionally granted power to regulate Made in the USA “product labels,” and urged the FTC to either abide by the current bounds of the rule, wait for Congress to act, or properly use its own rulemaking power. Commissioner Wilson agreed, and further expressed concern regarding the short notice for the meeting, lack of staff and public comment on the rule, and the format of the meeting, which precluded dialogue between the commissioners.
Section 18 Rulemaking Procedures
The Democratic majority of commissioners also voted to streamline the procedures for rulemaking under Section 18, including giving the FTC commissioners greater control over proceedings, and enabling the chair or another commissioner to serve as chief presiding officer (as opposed to an administrative law judge).
According to Commissioner Slaughter, the changes will remove self-imposed red tape and allow the FTC to exercise its prosecutorial discretion for a wide variety of redress, including against data abuses and fraudulent event ticket sales, thereby bringing the Commission back in line with its statutory grant of power. Commissioner Chopra agreed, adding that the updated rules would combat the agency’s perceived powerlessness.
Recalling what she sees as the agency’s history of overregulation, Commissioner Wilson warned that the updated rule would usher in another period of unfettered FTC rulemaking and politicize the rulemaking process. In his dissent, Commissioner Phillips also raised concerns about the lack of internal checks on the agency and questioned the FTC’s decision to hold this vote without a comment period and allow members of the public to speak only after the votes were cast. We will be sharing more on what these rule changes mean for advertisers.
“Statement of Enforcement Principles Regarding ‘Unfair Methods of Competition’ Under Section 5 of the FTC Act” (2015)
The majority (Commissioners Khan, Chopra, and Slaughter) also voted to rescind this policy statement issued by the Commission in 2015. In doing so, they hope to enable the FTC to comprehensively combat unfair methods of competition through both consumer protection and antitrust enforcement actions.
Commissioners Wilson and Phillips disagreed, noting that the statement was a product of bipartisanship and expressed widely held beliefs, so its repeal is undemocratic and further politicizes the antitrust enforcement process. The dissenting voters also feared that the statement’s absence will create uncertainty and confusion.
Finally, the Commission voted along the same party lines to enact a series of resolutions that will streamline its investigations, including by allowing a single commissioner to approve the use of compulsory process, and empowering the commission to compel information from third parties and investigate adjacent misconduct, allowing antitrust investigations to follow the model used in consumer protection investigations. Commissioner Khan predicted the resolutions will relieve overburdened staff and cut back on red tape. The majority’s goal is to combat unlawful business processes across the economy, especially in the COVID-19 arena and technology, labor, digital platforms, healthcare, and pharmaceutical sectors, and, furthermore, to crack down on repeat offenders and closely monitor mergers.
Repeating her prior concerns, Commissioner Wilson noted that because of the majority’s short timeline for the vote, she was unable to gain valuable outside perspective and expertise on the resolutions or ask her staff or fellow commissioners about ambiguities in the same. Commissioner Phillips warned against allowing a single commissioner to unleash the FTC’s considerable investigative power, which will burden the economy and generate expenses for both the target of the investigation and the taxpayer.
We will have more on these developments in the coming weeks.
* The authors would like to thank Summer Associate Camille Mangiaratti for her assistance in writing this article.