The upshot, for busy people:
- On May 11, 2022, the Senate confirmed President Biden’s appointment of Alvaro Bedoya to fill the vacant Democratic seat on the Federal Trade Commission (FTC).
- Commissioner Bedoya’s confirmation gives the Democratic commissioners a voting majority on the Commission, and we expect the FTC will pursue actions previewed by Chair Lina Khan.
- These include long-awaited privacy and other rulemakings, more anti-discrimination enforcement, a harder look at platforms and other “dominant intermediaries,” additional studies and even more merger scrutiny, including possibly greater use of prior approval provisions in merger consent decrees.
Breaking the deadlock. When Chair Khan first was installed in June 2021, she had a 3-Democrat voting majority in the 5-member FTC, which included then-Commissioner Rohit Chopra before he left to lead the US Consumer Financial Protection Bureau (CFPB). As a result, the Commission approved a number of measures on party-line votes, including to withdraw support for the joint vertical merger guidelines, to change agency policy on prior notice and approval provisions, to finalize a Made In The USA labeling rule, to make amendments to the Gramm-Leach Bliley Act’s Safeguards Rule and to pre-authorize investigations into several key areas. That pattern changed once the Commission lost its third Democratic commissioner last fall. Since October 2021, the 5-member FTC has been operating one Democratic commissioner short, leaving Chair Khan with a split 2D-2R Commission. Lacking a majority, Chair Khan has only been able to advance matters with bipartisan support.
But with Commissioner Bedoya on board, Chair Khan may have the votes to press ahead on a number of her priorities. While the presence of a new commissioner likely will change the Commission in countless subtle ways, these are the major areas where he likely will make an immediate impact:
- Privacy rulemaking. In December 2021, the agency announced that it might initiate a rulemaking starting in February 2022 on cybersecurity, data privacy and algorithmic bias. That deadline passed without any action. The rule’s possible provisions are not yet clear. If the agency follows the precedent from its other recent proposed rulemakings, this proposed privacy rule likely will aim to codify the legal theories FTC has employed in prior enforcement actions. These certainly would include prohibitions on misrepresentations regarding cybersecurity protections or data collection/sharing practices, among many others. And Chair Khan has recently cast doubt on the effectiveness of the normal means by which companies obtain user consent to access and share data. But FTC rulemaking is more involved than the notice-and-comment process under the Administrative Procedure Act. In addition to a proposed rule and a final rule, the FTC must issue an advanced notice of proposed rulemaking, prove that the practices at issue are “prevalent” and, if requested, hold a hearing where concerned individuals can present their own evidence and, if necessary, cross-examine the FTC’s evidence. A privacy rule could take years to finalize, even before any court challenges.
- Fair lending. Upon entering office, Chair Khan indicated a desire to focus on practices that harm “marginalized communities.” In a March 2022 fair lending settlement with an auto dealer, Chair Khan and Commissioner Slaughter issued a separate statement that said they also would have alleged that the defendants’ disparate impact discrimination was an unfair practice under Section 5 of the FTC Act. As we explained in a prior Legal Update, this theory has the potential to dramatically expand the FTC’s antidiscrimination work, as Section 5 lacks many of the limitations of the FTC’s primary fair lending authority—the Equal Credit Opportunity Act. Using this expanded authority, the FTC could, for example, enforce fair lending rules in connection with loans to businesses (ECOA is limited to loans for household purposes) or potentially against practices not related to credit at all. Commissioner Bedoya may provide a third vote for that approach.
- Transaction review. The agency, along with the Antitrust Division of the Department of Justice, recently solicited comments concerning the agencies’ merger guidelines “aimed at strengthening enforcement against illegal mergers.” Lines of inquiry included how, if at all, the guidelines’ analysis should treat buyer power in labor markets and whether the unique characteristics of digital markets warrant different treatment in evaluating transactions. Commissioner Bedoya will likely provide a third vote for tougher guidelines. He may also provide support for more intensive merger review, such as issuance of more “second requests” for information during the merger-approval process and more litigation challenging deals, including perhaps after they close.
- Antitrust enforcement. In September 2021, Chair Khan identified “dominant intermediaries and extractive business models” that act as gatekeepers to certain industry participants and questioned contract terms such as certain noncompete provisions. Expect to see more litigation around these issues with Commissioner Bedoya’s support.
- Platform enforcement. Another of Chair Khan’s priorities was to focus enforcement on dominant intermediaries and other dominant platforms. How this will play out is not clear, but this likely means that the Commission will prioritize cases against larger companies, not small frauds.
- Personnel. Although the two Republican commissioners have approved unanimously many appointments, the Division of Privacy and Identity Protection—responsible for the agency’s privacy docket—remains headed by an acting director. The permanent position has been vacant since November, and the reason for the delay is unclear. But expect that Commissioner Bedoya will have substantial input here.
But even with a full slate of commissioners, the FTC will continue to face resource constraints. Commissioners have regularly asked Congress for more funding, in part, to handle an increased pace of merger filings. Also, some senior career staffers have left the agency, and staff satisfaction scores are down significantly since last year. So even with clear leadership direction at the commissioner level, the agency may not be able to tackle all priorities immediately.
What does this all mean? The FTC seems poised to embark on a wide range of priorities. So expect scrutiny or enforcement to pick up, particularly involving larger companies, fair lending, and deals. And be on the lookout for privacy rulemaking, along with the ability of industry to participate more actively.