When a new commissioner arrives at the Federal Trade Commission (FTC or Commission), there are some changes to expect as that new person gets up to speed and learns how different it is to be at the FTC versus watching what the Commission does from the outside. But the addition of a new commissioner can be far more significant when that commissioner is the missing piece needed to create a new majority. Since October 2021, we have had a Commission with two Democrats and two Republicans. And any Commission action requires a “yes” vote from a majority of the Commission – three people. And now Chair Lina Khan and Commissioner Rebecca Slaughter have what should be a reliable third vote for their agenda. Now, to be clear, we would never want to suggest that a new commissioner will be a rubber stamp and automatically vote with his party commissioners, but historically, that has been the case at the FTC. There have been exceptions over the years, but generally the party in charge will stick together to implement the chair’s agenda.
In the past few months, we have seen a series of cases and rulemakings announced on the consumer protection side of the FTC, mostly with unanimous votes (but, notably, way less activity on the competition side). So for consumer protection, that raises a few questions. Are there matters that are pending at the FTC that have not been able to be voted out because of a 2-2 split? Probably. And will we see a repeat of the highly partisan activities of the Commission that occurred as soon as Khan took over and had a three-person majority, until Commissioner Rohit Chopra departed for the Consumer Financial Protection Bureau in October 2021? Hopefully not, but maybe.
We are quite confident that one such matter that will emerge in the relatively near future will be some sort of privacy rulemaking that will be framed as addressing “surveillance marketing” – which is, in and of itself, a controversial term. Khan has spoken publicly about the possibility of such a rulemaking, and the Commission said as much in a December 2021 Statement of Regulatory Priorities. That document stated that such a rulemaking will focus on what it describes as “abuses stemming from surveillance-based business models” and indicates that the Commission is “considering whether rulemaking in this area would be effective in curbing lax security practices, limiting intrusive surveillance, and ensuring that algorithmic decision-making does not result in unlawful discrimination.” There is, however, a big difference between starting such a rulemaking and actually getting it done, and you can learn more about the cumbersome FTC rulemaking process here.
And a few months ago, we saw a 2-2 vote that prevented the Commission from initiating a study on pharmacy benefits managers (PBMs). Readers may recall that the dissenting commissioners stated that they received a substantially revised version of the study documents late the night before the vote and had not had an opportunity to review it and discuss the changes with staff. Perhaps that study will reemerge, despite the fact that the Commission did initiate a different study on PBMs a few weeks later. (I will spare you the details, but the study that failed to be initiated due to the 2-2 vote was one that required a vote; the study that later was initiated is a far less rigorous “study” that did not require a vote.)
But it is probably safe to assume that there are other projects or cases that are in the queue at the FTC waiting for a possible third vote. So, what should we generally expect now that the Democrats have a majority at the Commission? One thing we can safely predict is an expanded use of the FTC’s unfairness theory in FTC law enforcement. For those new to this area, in order to allege that an act or practice is unfair, the FTC must meet a specific three-part test. An FTC policy statement on unfairness is quite important in this regard (and is one of the policy statements that was not rescinded back in 2021 when numerous other statements were rescinded). In general, we have seen the Democratic commissioners alleging unfairness violations more frequently, and Slaughter made that point in a dissenting statement in a data security case. In that case, she dissented because the complaint only alleged a violation of the Commission’s Safeguards Rule and did not allege an unfairness violation.
And more generally, we will probably see more privacy work in addition to the rulemaking discussed previously. For many years, the FTC has had a robust privacy and data security enforcement program. Commissioner Alvaro Bedoya is, by all accounts, the first incoming commissioner with deep privacy policy expertise, and he will undoubtedly get more involved in the FTC’s privacy work.
Back in June-October 2021, 3-2 votes were quite common, as were dissenting statements. It remains to be seen whether we will revert to those practices or whether more effort will be made to try to find compromise and develop bipartisan solutions. Both Republican commissioners have issued public statements welcoming Bedoya, and many of us are hoping that we will see a return to a less partisan and more balanced FTC. Time will tell.
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