Feds + State Attorneys General = A New Enforcement Landscape

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The National Association of Attorneys General just concluded one of its premiere events of the year, the Capital Forum, in Washington DC.  With many Attorneys General, staff, and members of the private sector in attendance, it has been an excellent opportunity to exchange ideas and hear from the AG community about their concerns and priorities.  While we will provide our readers with updates on some of the important topics discussed this week, we wanted to highlight two substantive sessions that focused on partnership with federal regulators.

The first brought together New York Attorney General Letitia James, Nebraska Attorney General Doug Peterson, FTC Chair Lina Khan, and DOJ Assistant Attorney General for Antitrust Jonathan Kanter.  Both Khan and Kanter gave opening remarks emphasizing their view that we are in a “critical moment” in competition enforcement and that an “all hands on deck” approach is necessary to address it.  As such, most of the discussion described ways FTC and DOJ would be working to implement President Biden’s Executive Order on Promoting Competition in the American Economy, which includes a “whole-of-government approach” to maintain fair competition.  Khan and Kanter both discussed the intersection of antitrust and consumer protection law in implementing the order – noting that increased consolidation of a marketplace allows more consumer protection violations to occur, and conversely, increased consumer protection violations can allow a company to gain an unfair advantage in the marketplace.

Both enforcers discussed the critical role State Attorneys General play and the need for increased partnerships between federal enforcers and the states.  Chair Khan was quite direct in some of the rationale – she noted that in the area of consumer protection, it had become important for the FTC to work extremely closely with AGs recently because doing so allows the FTC and regulator partners to recover monetary redress with authority that the FTC alone not have, as confirmed by the U.S. Supreme Court in AMG Capital Management v. FTC.  Drawing on an anecdote from his youth, Attorney General Peterson asked whether States would be treated like a kid brother in this partnership, and told to be quiet and sit in the corner.  Both Khan and Kanter disagreed that States have ever been seen that way or will be treated that way in future, noting that States are trailblazers and equals to the federal enforcers.  Chair Khan also described her intention to put more resources into the FTC’s regional offices, in part to be able to more directly engage with the States.

While the sentiment of equality was well received by the Attorneys General, in a later session Rohit Chopra, the new Director of the Consumer Financial Protection Bureau, acknowledged that historically, some federal agencies have seen things differently.  Citing past relationships with the Office of the Comptroller of Currency and preemption of state laws that he pointed to as the reason for the subprime lending crisis, Chopra promised a different approach from his CFPB.  He has called on his office to find ways to expand the State enforcement authority of federal law, including by clarifying States’ rights to pursue a number of violations directly under the CFPB Act.  In addition, he has asked his office to find ways to allow the States to directly access the CFPB’s Victim Relief Fund (and its over $400 million balance) to provide redress to consumers in State actions, even without any CFPB involvement in the case.

Unpacking all of this, these three federal agencies charged with consumer protection at the federal level seem to be signaling a new kind of enforcement landscape (and vastly different than any I experienced in my 20+ years working for a State Attorney General).  All three fully adopted the concept that States are the “laboratories of democracy” – they are closer to the ground and able to more quickly and easily identify issues impacting consumers, and are often the ones to pass innovative laws and regulations to address those issues.  Putting all that together, we are left with some takeaways:

Federal enforcers intend to make use of the power, tools, and resources of the States.  The federal enforcers all acknowledged that States are able to spot issues first, can move more quickly, and may have tools that they don’t have.  This unprecedented push for stronger state-federal partnerships reflects their acknowledgement of this fact and undoubtedly will lead to having the federal government more involved in investigations that may largely be under state law.  It will be instructive to watch how Attorney General Peterson’s concern about the silencing of state input plays out in this relationship.

This joint approach is going to be used to combat perceived gaps in big tech and privacy enforcement.  In addition to the ability to seek redress as noted by Chair Khan, she and AAG Kanter also described the need for an updated “tool kit” – noting their views that current laws aren’t sufficient to deal with today’s economic realities and the digital marketplace.  Both also discussed privacy concerns regarding the accumulation and use of consumers’ data, calling for a move away from the notice and consent framework. As states get out in front with new legislation including comprehensive privacy laws, expect joint investigations to involve more federal enforcer collaboration into how those new laws are utilized.

State Attorneys’ General role in consumer protection will be on full display this coming year.  Not only will increased state/federal partnership put even more emphasis on the already prominent role State Attorneys General play in consumer protection, but as we previously reported, Iowa Attorney General and NAAG President Tom Miller has made consumer protection his presidential initiative this year, specifically in the technology sector.  We will report more on this initiative – but expect to see State Attorneys General leading the conversation on enforcement priorities and importantly, how companies and Attorneys General can form partnerships to help educate consumers on pervasive frauds.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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