On September 22, 2021, FTC Chairperson Lina Khan published a memorandum to FTC staff urging the agency to unite behind her vision and priorities for the agency, and announcing that the elite vanguard leading Khan’s effort will be acting Bureau Directors Sam Levine and Holly Vedova, both of whom will become permanent directors of the Bureau of Consumer Protection and the Bureau of Competition, respectively. Khan has previously indicated that the FTC needs to throw off its bureaucratic chains of past approaches and practices and be more aggressive in enforcing both consumer protection and competition laws. Given the implicit and explicit criticism in her prior communications, the memorandum appears to be an effort to gather support among FTC staff for her approach. An overarching theme of the memorandum is that the FTC may be blurring the lines between the FTC’s consumer protection and competition missions by increasing collaboration between the Bureau of Consumer Protection and the Bureau of Competition. While many prior chairpersons have expressed this ambition, Khan appears ready to make that aspiration operational.

Chairperson Khan starts her strategic discussion by announcing that the agency will be taking a “holistic approach to identifying harms.” In elaborating on this “holistic approach,” she frequently combines references to individual consumers and businesses, and highlights nontraditional harms of anti-competitive activity, many of which are familiar to consumer protection, for example, disparate impact, privacy violations, and asymmetrical bargaining power. Her message is clear: the distinction between antitrust and consumer protection will no longer be as defined as it was in the past. Also clear are the consequences: once this boundary is eliminated, the FTC can use the merger review process to conduct discovery on consumer protection violations, perhaps hoping the cost and threat of that inquiry will deter merger activity.

Against this “holistic” premise, Khan identifies three policy priorities:

  1. Revising antitrust enforcement to focus on “significant actors.” Khan cites “rampant consolidation” and “the ongoing merger surge” as motivating her proposal to focus on “scrutinizing dominant firms” and “focus [FTC] resources on the most significant actors.” To that end, she proposes to work with the DOJ to revise the existing merger guidelines, which she considers to be outdated and lacking empirical support. She also identifies as a policy goal deterring illegal transactions as a way to reduce the enforcement burden. While there is limited insight into what these new guidelines will include, based on the memorandum, it seems likely that the guidelines will support the goal of addressing the “systemic problem” of “market power.”
  2. Addressing “dominant intermediaries and extractive business models.” Continuing her overall theme of examining “asymmetric” business models, Khan expresses her suspicion of companies that function as “gatekeepers and dominant middlemen,” which she asserts has allowed such companies “to hike fees, dictate terms, and protect and extend their market power.” She specifically calls out “the growing role of private equity and other investment vehicles” as a reason “to examine how these business models may distort ordinary incentives” and “facilitate unfair methods of competition and consumer protection violations.” This policy goal demonstrates a clear intent on the part of the FTC to expand its traditional focus on targets of consumer protection enforcement actions. This may mean increased scrutiny of companies such as payment processors, or businesses that provide support services that the FTC concludes enable other businesses to engage in unfair practices.
  3. “Taking aim” at unfair contracts. Finally, Khan assails a number of contractual provisions that, in her view, may “hamper a free and fair economy” and “constitute unfair methods of competition or unfair or deceptive practices.” These include, but are not limited to, non-compete provisions, repair restrictions, and exclusionary clauses, which Khan asserts have been presented to “consumers, workers, franchisees, and other market participants” as “take-it-or-leave-it” requirements by “dominant firms.” On their face, these proposals have the potential to alter the fundamental nature of consumer and commercial contracts. In the context of the FTC’s broad enforcement power, common contractual terms other than those listed in the memorandum, such as arbitration clauses and forum and choice of law provisions, as well as common techniques for acceptance, such as shrink-wrap and click-wrap, could easily be rendered unlawful or, at best, too risky to employ.

In fact, the latter result may be a critical part of achieving the goals set out in the memorandum: using uncertainty as an enforcement tool. The FTC has announced that it has withdrawn its Vertical Merger Guidelines but has not announced new ones. By declaring these other broad initiatives without much in the way of specifics, Khan appears to be using confusion and doubt to deter conduct she disfavors.

The “Operational Objectives” in the memorandum provide one additional clue as to Khan’s vision. As some may recall, the FTC had regional offices in Boston and Denver that were closed during the Reagan administration, as part of a policy of interpreting the FTC’s role more narrowly. Khan, in contrast, plans to increase the number of offices and put the FTC in more communities. This is yet another indication, among many, that Khan is eager to return the FTC to the “Pertchuk” era.

Chairperson Khan’s plans for the agency appear to be truly revolutionary. How those plans will be implemented by the agency and treated by Congress and the courts remains to be seen.