News
July 8, 2021

FTC Open Meeting Announces Expansion of FTC’s Antitrust Enforcement Focus

Advisory

On July 1, 2021, the Federal Trade Commission (FTC or Commission), under new Chair Lina Khan, hosted its first open meeting in decades. According to the FTC, the meeting was the first in a series of monthly open meetings to “open the work of the Commission to the public.”1 Following brief statements, the Commissioners voted on a series of actions impacting both the FTC’s consumer protection and competition missions. Each of these Commission votes was split sharply along partisan lines with the Democratic majority voting in favor of each change and the two Republican Commissioners voting in opposition. Commissioner Christine Wilson noted her displeasure with the process that included just a week’s notice and a meeting format that “omits our knowledgeable staff and precludes a dialogue among the Commissioners.”2

Despite Republican opposition, the FTC voted to take a number of significant actions, including two that have the potential to significantly impact the FTC’s competition mission: (1) rescission of the FTC’s 2015 “Statement of Enforcement Principles Regarding ‘Unfair Methods of Competition’ Under Section 5 of the FTC Act” (the 2015 Statement) (which signaled a change in the FTC’s antitrust enforcement focus) and (2) authorization of omnibus resolutions to allow the use of compulsory process to investigate conduct in several key areas.

Statement on “Unfair Methods of Competition”

Section 5 of the FTC Act prohibits “[u]nfair methods of competition in or affecting commerce[.]”3 The Commission brings virtually all of its actions under Section 5. However, there has long been debate about whether Section 5 does and should reach conduct beyond what the other antitrust laws reach. That additional reach is sometimes referred to a standalone violation of Section 5. It is generally accepted that an invitation to collude may be a standalone Section 5 violation, but courts and the FTC have rarely expressed definitive views as to what else that statute may cover beyond what the antitrust laws already cover.

In an effort to provide some clarity for courts and businesses as to how the FTC would approach standalone Section 5 cases in the future, a bipartisan majority of the Commission (three Democrats and one Republican) issued the 2015 Statement.4 The 2015 Statement articulated three principles that the FTC would use in deciding whether to challenge conduct as a standalone Section 5 violation: (1) “the Commission will be guided by the public policy underlying the antitrust laws, namely, the promotion of consumer welfare;” (2) “the act or practice will be evaluated under a framework similar to the rule of reason, that is, an act or practice challenged by the Commission must cause, or be likely to cause, harm to competition or the competitive process, taking into account any associated cognizable efficiencies and business justifications; and” (3) “the Commission is less likely to challenge an act or practice as an unfair method of competition on a standalone basis if enforcement of the Sherman or Clayton Act is sufficient to address the competitive harm arising from the act or practice.”5

At the time, a majority of the Commission wrote that the 2015 Statement was intended to identify the Section 5 principles “on which there is broad consensus.”6 Specifically, the Commission stated, “that Section 5 is aligned with the other antitrust laws, which have evolved over time and are guided by the goal of promoting consumer welfare and informed by economic analysis.”7 According to then-Chairwoman Edith Ramirez, the 2015 Statement recognized that the FTC would “analyze business conduct by taking account of both competitive harm and any countervailing efficiencies or other cognizable business justifications.”8

Even though the 2015 Statement contained “no detailed code of regulations for the business community at large,” it did include “concepts widely used in antitrust law, such as ‘consumer welfare,’ ‘rule of reason,’ ‘harm to competition,’ and ‘cognizable efficiencies.’”9 These references to commonly-accepted tools for evaluating conduct under the antitrust laws provided businesses with at least some measure of predictability for FTC enforcement under Section 5, while preserving the FTC’s ability to use a case-by-case approach.

Despite that flexible approach, new-Chair Khan expressed concerns that the 2015 Statement limited the FTC’s enforcement ability under Section 5. She argued that the 2015 Statement’s adoption of a rule of reason framework means that “it declares that the Commission’s authority under Section 5 is largely conterminous with the Sherman Act.”10 This, she asserted, “largely turns standalone Section 5 into a dead letter.”11

In their joint statement on the withdrawal of the 2015 Statement, the Democratic Commissioners wrote that “the 2015 Statement abrogates the Commission’s congressionally mandated duty to use its expertise to identify and combat unfair methods of competition even if they do not violate a separate antitrust statute.”12 The Commission therefore withdrew the 2015 Statement “to restore the agency to this critical mission.”13

The Democratic Commissioners’ joint statement noted that they “will consider whether to issue new guidance or to propose rules that will further clarify the types of practices that warrant scrutiny under” Section 5. In the meantime, they will use “prosecutorial discretion” “consistent with legal precedent” to determine which cases should be brought under Section 5.14 Dissenting Commissioners Christine Wilson and Noah Philips expressed concern with that approach as the withdrawal of the 2015 Statement removes guidance and adds uncertainty for businesses that wish to comply with the antitrust laws.

It remains to be seen what standard the FTC will propose to replace its 2015 Statement. Regardless of the form of any new guidance, Chair Khan has made no secret of her view that the “consumer welfare” standard the 2015 Statement embraces is inadequate to tackle what she sees as antitrust abuses in the current economy.15 Rather than focus on consumer benefits (such as low prices), the current Commission appears also focused on conduct that may harm individual competitors or create an uneven playing field without an immediate impact on consumers. Specifically, Chair Khan has written that the antitrust authorities should also ask: “whether a company’s structure creates certain anticompetitive conflicts of interest; whether it can cross-leverage market advantages across distinct lines of business; and whether the structure of the market incentivizes and permits predatory conduct.”16

FTC Authorizes Investigations into Key Enforcement Priorities

Shortly after withdrawing the 2015 Statement, the FTC took its first steps to expand its antitrust enforcement efforts by authorizing FTC staff, for the next ten years, to use compulsory process (such as civil investigative demands and subpoenas) to investigate seven enforcement priorities: (1) repeat offenders; (2) technology companies and digital platforms; (3) healthcare businesses including pharmaceutical companies, pharmacy benefits managers, and hospitals; (4) harms against workers and small businesses; (5) harms related to the COVID-19 pandemic; (6) proposed mergers; and (7) consummated mergers. These priorities are no surprise as they have long been a focus of FTC enforcement. However, this Commission action is notable because it both marks a departure in the process from prior FTC practice and expands the scope of conduct typically covered by FTC compulsory process resolutions.

In the past, the FTC has not relied on these sorts of “omnibus” resolutions in its competition investigations.17 Instead, FTC staff typically conducted an initial investigation into identifiable conduct by a company or group of companies. If FTC staff determined that there was enough evidence or concern to launch an in-depth investigation, then staff would typically recommend to the full Commission that it authorize the use of compulsory process pursuant to FTC’s Rules of Practice.18 The FTC would authorize the use of compulsory process when it found such action to be in “the public interest” and execute a resolution that explains “the purpose and scope of the investigation, the nature of the acts or practices under investigation, and the applicable provisions of law.”19 Once the full Commission authorized the use of compulsory process in an investigation, only a single Commissioner’s sign off was required to issue the actual subpoena or civil investigative demand.

Chair Khan remarked that these “omnibus” authorizations “would streamline investigations that fall within these subject areas, enabling more expeditious investigatory process.”20 In particular, she noted their application to merger investigations. Chair Khan commented that while the Commission has unanimously approved such compulsory process resolutions in merger investigations in the past, even requiring FTC staff to request authorization creates “extra bureaucratic hurdles” that “slow down and hobble investigations unnecessarily.”21

As a result of the FTC’s July 1 decision, FTC staff now need approval from only one Commissioner before issuing a subpoena or civil investigative demand to a particular company as long as it concerns one of the broad areas of priority enforcement. Although the Commission has rarely rejected an FTC staff recommendation to authorize the use of compulsory process, these authorizations now remove full Commission oversight into the launch of in-depth investigations into particular companies or specific conduct.22 Since the FTC Chair has more direct influence over FTC staff compared to other Commissioners through her appointment of senior staff (such as the Director of the Bureau of Competition and the Director of the Bureau of Economics), this decision gives her even more control over individual investigations than she otherwise would have.

In addition, although the language of the resolutions themselves is not public, it appears that they cover a wider range of conduct than in the past. Commissioner Wilson, in her dissenting statement, expressed concern “that authorizing investigations into ‘exploitative,’ ‘collusive,’ ‘coercive,’ or ‘predatory’ acts or practices will lead to investigations outside the bounds of judicially recognized antitrust principles[.]”23 Indeed, during the meeting, Commissioner Philips moved to replace the “exploitative,” “collusive,” “coercive,” and “predatory” language with the statutory “unfair methods of competition” language. The Democratic majority rejected that request.

Conclusion

When combined with the withdrawal of the 2015 Statement, the FTC’s authorization of compulsory process in a number of areas pursuant to broadly-worded resolutions sends a clear message that this Commission is going to expand the scope of its antitrust enforcement priorities. The FTC will now examine conduct it views as “exploitative,” “collusive,” “coercive,” and “predatory”—even if such conduct has not been traditionally viewed as unlawful under the antitrust laws. Although it remains to be seen whether courts will agree with the FTC’s new approach, businesses are likely to experience more burdensome investigations and should be cautious as they consider mergers and acquisitions, as well as their business strategies given increased FTC scrutiny.  

© Arnold & Porter Kaye Scholer LLP 2021 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.

  1. FTC Press Release, FTC Announces Agenda for July 1 Open Commission Meeting (Jun. 24, 2021).

  2. Dissenting Statement of Commissioner Christine S. Wilson regarding Open Commission Meeting on July 1, 2021 at 2.

  3. 15 U.S.C. § 45(a)(1).

  4. FTC Statement of Enforcement Principles Regarding “Unfair Methods of Competition” Under Section 5 of the FTC Act (Aug. 13, 2015).

  5. Id.

  6. Statement of the Federal Trade Commission On the Issuance of Enforcement Principles Regarding “Unfair Methods of Competition” Under Section 5 of the FTC Act at 2 (Aug. 13, 2015).

  7. Id. at 1.

  8. Address by FTC Chairwoman Edith Ramirez to the Competition Law Center at George Washington University Law School at 7 (Aug. 13, 2015).

  9. Id. at 9.

  10. Remarks of Chair Lina M. Khan on the Withdrawal of the Statement of Enforcement Principles Regarding “Unfair Methods of Competition” Under Section 5 of the FTC Act at 1 (Jul. 1, 2021).

  11. Id. at 2.

  12. Statement of Chair Lina M. Khan Joined by Commissioner Rohit Chopra and Commissioner Rebecca Kelly Slaughter on the Withdrawal of the Statement of Enforcement Principles Regarding “Unfair Methods of Competition” Under Section 5 of the FTC Act at 1 (Jul. 1, 2021).

  13.  Id.

  14. Id. at 7.

  15. See generally Lina M. Khan, Amazon’s Antitrust Paradox, 126 Yale L.J. 710 (2017).

  16. Id. at 717.

  17. “Omnibus” compulsory process resolutions historically have been a more commonly-used tool for the FTC’s consumer protection mission.

  18. See 16 C.F.R. § 2.7(a).

  19. 16 C.F.R. § 2.6.

  20. Remarks of Chair Lina M. Khan on the Investigatory Resolutions at 1 (Jul. 1, 2021).

  21. Id.

  22. See Dissenting Statement of Commissioner Christine S. Wilson regarding Open Commission Meeting on July 1, 2021 at 9-10 (Jul. 1, 2021).

  23. Id. at 10.

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Matthew Tabas
Matthew Tabas
Senior Associate
Washington, DC
Samantha Shulman
Senior Associate
Washington, DC
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