With Republicans narrowly taking control of the House of Representatives and Democrats maintaining a slim majority in the Senate in the 118th Congress, companies should be prepared for significant private sector oversight and investigations from both parties and both chambers.
Incoming GOP House committee chairs have made clear they plan to target private sector industries and companies that were involved in the COVID-19 response, associate too closely with China, and promote certain climate and social policies. Companies that received funding awarded by the Biden Administration should also expect congressional scrutiny. For example, in a recent oversight letter directed to Secretary of Energy Jennifer Granholm, the likely new chair of the House Energy and Commerce Committee, Rep. Cathy McMorris Rodgers, compared Biden Administration spending on the U.S. Department of Energy’s loan programs to the energy company Solyndra—which famously prompted significant House GOP investigations into the company’s ties to the Obama White House.1
In the Democratic-controlled Senate, scrutiny of the private sector will continue, particularly for industries perceived as underregulated, such as Big Tech and cryptocurrencies.
But First, Crypto
Questions regarding the future of cryptocurrency regulation loom large over both chambers. There is immediate bipartisan interest in hearings and investigations before the end of the year regarding the recent collapse of the cryptocurrency exchange FTX. Leaders from both sides of the aisle have promised to investigate the collapse and the loss of billions of dollars of customer deposits. The current Democratic Chair and the incoming Republican Chair of the House Committee on Financial Services announced a bipartisan hearing on December 13, 2022 where they will examine “the collapse of FTX and the broader consequences for the digital asset ecosystem.” The Committee expects to call individual and corporate witnesses, such as “Sam Bankman-Fried, Alameda Research, Binance, FTX, and related entities, among others.”2 In the Senate, Sen. Sherrod Brown (D-Ohio), who chairs the Banking Committee, recently said, “[i]t is crucial that our financial watchdogs look into what led to FTX’s collapse so we can fully understand the misconduct and abuses that took place. I will continue to work with them to hold bad actors in crypto markets accountable.”3 In addition, the Senate Agriculture Committee recently announced that it will hold a hearing on December 1, 2022, to examine the collapse of FTX and discuss potential legislative action. Chairman of the Commodity Futures Trading Commission Rostin Behnam is slated to testify.
At the same time, regulators at the U.S. Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission have complained that current law limits their ability to effectively engage in enforcement over the crypto industry. Crypto companies should expect Congress to continue to broaden its oversight activity in the 118th Congress in service of longer-term legislative fixes to the regulatory regime.
Likely Areas of Focus for Congressional Oversight in the 118th Congress
Although this list is not exhaustive, it reflects some likely priorities in the new Congress. As we have seen in the past, priorities can shift quickly with public opinion or media attention on certain issues or controversies.
“Big Tech”
While interest in Big Tech has been bipartisan—with Republicans and Democrats both pursuing aggressive antitrust litigation aimed at large tech companies—House Republicans have indicated they plan to use the majority to investigate alleged bias against conservatives, privacy and cybersecurity, and companies’ stances on social issues such as climate change, LGBTQ+ rights, and reproductive rights.
Rep. Jim Jordan, who is likely to become the chairman of the House Judiciary Committee, said last year that if Republicans took the House, he would establish a subcommittee to investigate “Big Tech,” censorship, and cancel culture.4 Accompanying a bill this year to “rein in Big Tech abuses of Section 230 protections,” Reps. Jordan and McMorris Rodgers released a statement noting that “Big Tech is out to get conservatives” and “is increasingly becoming a destructive force to freedom of speech in America.”5
Given the frequency (and newsworthiness) of hearings featuring major Big Tech executives in the last Congress, it is likely that House Republicans will continue to convene similar hearings in support of their legislative and oversight agendas.
With Democrats holding control of the Senate, tech companies can expect a continued focus on antitrust issues and how platforms handle disinformation, hate speech, and violent extremists.
Environmental, Social, and Governance (ESG) Policies and Investments
Companies and financial institutions are increasingly choosing to make investments based on environmental, social impact, and governance issues—investments that often reveal a progressive stance on policy issues like climate change or diversity and inclusion. House Republicans have criticized the use of these criteria, alleging that ESG investments allow companies to improperly use their financial clout to further liberal ideologies or agendas. We expect both public sector and private sector oversight relating to ESG issues.
Likely incoming House Financial Services Committee Chair Patrick McHenry has identified oversight of the SEC’s recent proposals to amend rules and forms to provide consistent standards for ESG disclosures as a top priority. Rep. McHenry has also made clear that members of the Financial Services Committee “are interested in the climate debate and how industry has taken it upon themselves to act to limit the production of American energy.”6 Rep. Blaine Luetkemeyer, who serves on the Financial Services Committee and will likely become chairman of the Subcommittee on Consumer Protection and Financial Services, has expressed interest in holding hearings with large investment advisers about pushing a “liberal” agenda.7
At the same time, with Democrats maintaining control of the Senate, companies can expect Democratic senators to continue to press banks and investment firms about their investments in fossil fuels and treatment of their employees.
COVID-19 Funding
House Republicans have signaled that they plan to target the White House and federal agencies involved in preparing for and responding to the COVID-19 pandemic. Incident to those investigations, private sector companies that received pandemic relief funding will likely also fall within the scope of congressional investigations. House Republicans have already begun to question allocations by the Biden Administration of pandemic relief funding, raising concerns about wasteful spending. Other potential subjects of COVID-19 related oversight include entities involved in the response, such as testing and vaccine research.
Associations with China
Recent Congresses have seen bipartisan efforts to understand China’s influence over domestic issues, and House Republicans have indicated they plan to continue those efforts as committee chairs. In 2020, then-Minority Leader Kevin McCarthy established a Republican-led task force to “counter current and emerging cross-jurisdictional threats from China,”8 and the GOP has since focused on Chinese influence and painted the Biden Administration as overly reliant on and deferential to China.
Specifically, companies with Chinese supply chains will likely be of immediate interest. Rep. Cathy McMorris Rodgers, the likely next chairwoman of the House Energy and Commerce Committee, said, “[w]e've seen the Biden administration and the Democratic majority putting hundreds of billions of dollars toward promoting wind and solar and electric vehicles, but those supply chains are largely controlled by China. I’m very concerned about this dangerous dependence upon China.”9 Companies invested in clean energy or producing renewable energy products will almost certainly be a target for the GOP. Rep. McMorris Rodgers has also indicated that the House Energy and Commerce Committee will be investigating life sciences companies conducting clinical trials in China.
Spending Under Federal Legislation
Republicans have stated their intent to closely scrutinize spending under the Biden Administration’s two most significant legislative accomplishments, the Inflation Reduction Act of 2022 and the Infrastructure Investment and Jobs Act of 2021, which together directed over $1 trillion in federal spending. Last month, Republicans on the House Energy and Commerce Committee sent a letter to the Department of Energy requesting information about how funding will be allocated, invoking the Committee’s 2011 investigation into Solyndra that it says “revealed a series of failures within the Department’s loan program that undermined taxpayer interests.”10 Companies receiving funds under those laws, and particularly companies focused on clean energy and combating climate change, are likely GOP targets.
Responding to Congressional Inquiries
Responding to congressional inquiries requires different strategic considerations from typical white-collar litigation or lobbying, and knowledge of House and Senate rules and practices is important to avoiding critical missteps that could expose firms to undue legal or public relations crises.
[1] Letter from House Committee on Energy and Commerce Ranking Member Cathy McMorris Rodgers, Subcommittee on Energy Ranking Member Fred Upton, and Subcommittee on Oversight and Investigations Ranking Member Morgan Griffith to Secretary of Energy Jennifer Granholm (Oct. 11, 2022).
[2] Press Release, U.S. House Committee on Financial Services, Chairwoman Waters, Ranking Member McHenry Announce December Hearing to Investigate FTX Collapse (Nov. 16, 2022).
[3] Press Release, Senator Sherrod Brown, Brown Statement on FTX (Nov. 10, 2022).
[4] Jordan Pledges to Go After Big Tech With New Investigatory Panel If GOP Retakes the House, Washington Examiner (Nov. 4, 2021).
[5] Press Release, House Energy and Commerce Committee Ranking Member Cathy McMorris-Rodgers and House Judiciary Committee Ranking Member Jim Jordan, Rodgers, Jordan Release New Legislation to Rein in Big Tech Abuses of Section 230 (July 28, 2021).
[6] The Potential New House Financial Services Chair, Politico (Nov. 9, 2022).
[7] Republicans to Probe ‘Cancer’ of ESG Investing After Midterms, Washington Post (Nov. 2, 2022).
[8] Press Release, U.S. House Speaker Kevin McCarthy, Leader McCarthy Announces China Task Force (May 7, 2020).
[9] GOP Vows Intense China Focus If They Flip the House, Politico (Oct. 10, 2022).
[10] Letter from House Committee on Energy and Commerce Ranking Member Cathy McMorris Rodgers, Subcommittee on Energy Ranking Member Fred Upton, and Subcommittee on Oversight and Investigations Ranking Member Morgan Griffith to Secretary of Energy Jennifer Granholm (Oct. 11, 2022).
