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FTC Alums: 5 Institutional Challenges For The FTC
Law360, New York (August 23, 2016, 10:44 AM ET) -- The presidential election in
November will bring changes to the Federal Trade Commission, which has been in the
unusual position of having just three commissioners since Julie Brill left in March. What
are the biggest issues facing the FTC? Former commissioners share their thoughts in
this Law360 Expert Analysis series.
Five important institutional challenges confront the Federal Trade
Commission. All deal with fundamental assumptions that guided the agency’s
creation. These challenges are policy perennials and will face the agency
regardless of who wins the 2016 presidential election.
1. Administrative Adjudication
William E. Kovacic
Congress created the FTC in 1914 mainly to develop antitrust doctrine and
policy through administrative adjudication rather than by litigation in the
federal courts. Without the administrative resolution of disputes, the rationale
for creating a multimember body largely evaporates. Today the FTC’s
administrative adjudication docket has no active nonmerger competition
cases. Take out merger matters filed in conjunction with district court
preliminary injunction cases, and the pipeline is empty.
In two of his State of the Union addresses, President Obama expressed his interest in simplifying the
organization chart of the federal government. In reciting areas in which two or more federal agencies
occupy the same domain, he did not mention antitrust enforcement, but he could have. A future
president — it could be a Democrat as well as a Republican — could seek to combine the antitrust
functions of the U.S. Department of Justice and the FTC into one body. If administrative adjudication is
not a robust element of the agency’s program, the case for retaining the commission in the mix of
options suffers. A strong administrative docket will not emerge by accident. It requires a conscious effort
to select suitable cases and prosecute them through the agency’s administrative process.
2. Effective Deliberation
Since the late 1970s, the government in the Sunshine Act has constrained the ability of the FTC (and
other federal independent regulatory commissions) to deliberate in private. The Sunshine Act requires
that all discussions of agency business involving a quorum of the agency’s members (e.g., three persons
on a board of five) must take place in public, except in limited circumstances (such as the discussion of a
proposed law enforcement matter). Spontaneous private discussions among three or more
commissioners about agency policy or programs are out of the question. The constraint does not
encumber the staff of the members. Subordinates can meet privately and attempt to broker deals; their
principals cannot.
As it now stands, the Sunshine Act hinders the collegial deliberation and consultation that were vital
bases for creating the FTC. No less important, the act impedes the type of routine interactions that build
a sense of common cause, facilitate planning, coordinate effort and discourage the formation of factions
that can grow when seriatim bilateral conversations are the chief means of discourse. The result is an
often blurred message that emerges from the public expression of views by individual commissioners. If
this disability cannot be corrected, the rationale for sustaining a multi-member decision making model
weakens significantly.
3. Jurisdictional Gaps
The 1914 legislation that created the FTC excluded various actors from the FTC’s jurisdiction: common
carriers, banks and not-for-profit institutions. These fields of endeavor have changed dramatically over
the past century or so, but, with a few exceptions, they remain beyond the FTC’s authority. For example,
by reason of the common carrier exemption, the FTC cannot apply its competition, consumer
protection, or privacy powers to telecommunications and transportation services.
For years, the gaps have yielded an awkward division of labor between the FTC and various other federal
bodies, such as the Federal Communications Commission. The effective implementation of the do-notcall regime required the adoption of one rule by the FTC and a second rule by the FCC to cover
telecommunications services providers. In area after area, the FTC expends considerable energy to
determine where its mandate ends and the remit of another regulator begins. Boundary disputes are
not uncommon, despite the friendly face that the Commission and its counterparts try to put on their
relationships.
The jurisdictional holes are assuming increasing significance in one of the FTC’s most significant policy
domains: data protection and privacy. By classifying broadband as a telecommunications service, the
FCC’s Open Internet Order — upheld recently before the U.S. Court of Appeals for the District of
Columbia — would appear to oust the FTC from playing a central role for data protection and privacy —
for that matter, antitrust and consumer protection — in a massively important and expanding area of
the economy.
The outcome of the FCC litigation simply expands the range of actors which collect and transmit massive
amounts of sensitive data — e.g., charities, banks and universities — and stand comfortably outside the
FTC’s mandate. Unless these jurisdictional deficiencies are cured, it is easy to imagine that, as part of a
comprehensive review of the country’s data protection and privacy framework, Congress not only will
adopt a comprehensive privacy law but also will create a new institution — a stand-alone data
protection authority — to implement it. The FTC would be forced to watch a major part of its program
spun off to another body, just as it saw most of its financial services consumer protection functions
migrate to the Consumer Financial Protection Bureau.
4. A Fully Cooperative Federal Enforcement Joint Venture
In creating an administrative agency to supplement enforcement by the executive branch, Congress saw
the Department of Justice and the FTC as performing complementary roles. The agencies cooperate on
an as-needed basis — for example, in issuing revised horizontal merger guidelines in 2010 — but the
collaboration does not realize the possibilities that that wholehearted integration of effort could yield.
The two agencies do not release a common statement of aims each year, either for domestic policy
making or for international relations. The lack of a common program for the agencies’ international
work impedes the articulation of a coherent U.S. position on key policy issues and thus diminishes the
impact of the U.S. voice abroad. As described more fully below, there is considerable room for the two
federal agencies to improve the quality of U.S. competition policy through a willing, rather than
reluctant, program of cooperation.
5. Mapping a Common Competition Policy
The FTC has unique tools — the ability to create new competition policy norms through the application
of Section 5 of the Federal Trade Commission Act, the capacity to perform market research and issue
detailed policy studies, and the authority to function as the nation’s specialist trade regulation court
through its administrative adjudication process. The DOJ and the FTC should cooperate actively in
considering how these powers can be used to advance U.S. competition policy. Among other steps, such
cooperation should map out what the agencies regard to be the appropriate reach of antitrust doctrine
and evaluate which mix of approaches — federal court litigation, FTC administrative adjudication, the
use of Section 5 — might attain them. Given the stakes for U.S. competition law, the DOJ must be a
participant in discussions about the application of Section 5, as well as a partner in developing a
program to use the FTC’s adjudication and market studies powers.
A valuable further step would be to extend this interagency cooperation to include more regular and
comprehensive deliberations with the antitrust departments of state governments about the
appropriate content of U.S. competition policy. The United States has no equivalent to the European
Competition Network, which joins up the European Commission and the national competition
authorities of the EU member states in the sharing of information, the allocation of enforcement tasks
and, increasingly, the formulation of a common strategy. The U.S. lacks this degree and quality of policy
integration, and it suffers for it.
—By William E. Kovacic, George Washington University Law School
William Kovacic is global competition professor of law and policy at George Washington University, a
visiting professor at King's College London and nonexecutive director of the United Kingdom Competition
and Markets Authority. From January 2006 to October 2011, he was a member of the Federal Trade
Commission and chaired the agency from March 2008 to March 2009. He was the FTC’s general counsel
from June 2001 to December 2004.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its
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information purposes and is not intended to be and should not be taken as legal advice.
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