FTC Policy Unpacked: Achieving Change at the Federal Trade Commission

Emily Manning: Hello everyone, and welcome to this Federalist Society Virtual Event. My name is Emily Manning, and I'm Deputy Director of Strategic Partnerships with the Federalist Society. Today we're excited to host a discussion titled "FTC Policy Unpacked: Achieving Change at the Federal Trade Commission." We're joined today by Professor J. Howard Beales III, the Honorable Timothy J. Muris, the Honorable Maureen K. Ohlhausen, and our moderator today is Svetlana Gans, partner at Gibson, Dunn & Crutcher, and former Chief of Staff at the Federal Trade Commission. If you'd like to learn more about today's speakers, their full bios can be viewed on our website, fedsoc.org. After our speakers give their opening remarks, we will turn to you, the audience, for questions. If you have a question, please enter it into the Q&A function at the bottom of your Zoom window, and we will do our best to answer as many as we can. Finally, I'll note that as always, all expressions of opinion today are those of our guest speakers, not the Federalist Society. With that, thank you for joining us today. And Svetlana, the floor is yours.

Svetlana Gans: Great. Thank you so much, Emily, and thank you all for joining us today for this panel, which poses a very interesting question, how best does one achieve lasting change at an administrative agency? And in particular, the Federal Trade Commission. FTC Chair Khan has sought to implement aggressive and profound changes at the Federal Trade Commission from novel approaches on antitrust to groundbreaking rulemakings. But will these efforts have lasting effects? Today's discussion will highlight the results of new extensive research by two of today's panelists, Professors Muris and Beales, published by the Competitive Enterprise Institute, who are also co-sponsors of today's event. And thank you CEI for all of your work on those two projects. So rather than focusing on the substantive merits of Chair Khan's new policy priorities, the report instead analyzes the process of developing and implementing change at the agency, and how those approaches differ from earlier attempts and the lessons learned.

Before we dive into this interesting discussion, let me quickly introduce our esteemed panel. Tim Muris is George Mason University Foundation's Professor of Law at the Antonin Scalia Law School and Senior Counsel at Sidley. He was Chairman of the Federal Trade Commission from 2001 to 2004. He was Director of the Bureau of Consumer Protection from 1981 to 1983, and of the Bureau of Competition from 1983 to 1985, and an Assistant to the Director of the Office of Policy Planning and Evaluation from 1974 to 1976. Maureen Ohlhausen is a Co-chair of the Wilson Sonsini Antitrust Practice Group, where she advises industry-leading clients on complex antitrust and litigation matters. Maureen served as a commissioner and acting chair of the FTC. As chairman. Maureen directed all aspects of the agency's antitrust work, including merger review, conduct enforcement, and all consumer protection enforcement, with an emphasis on privacy and technology issues.

To date, Maureen is the only FTC commissioner to have received the Robert Pitofsky Lifetime Achievement Award. Howard Beales is a Professor of Strategic Management and Public Policy at the George Washington University School of Business. He was Director of the Bureau of Consumer Protection at the Federal Trade Commission from 2001 to 2004. He was an Associate Director for Policy and Evaluation in the Bureau of Consumer Protection from 1983 to 1987, and was an Assistant to the Director from 1981 to 1983, and a staff economist from 1977 to 1981. Thank you so much for being here. And again, thank you to CEI for the report and your work on that report. So, Tim, let me turn it over to you. Your analysis is a different perspective of the Biden Administration. Can you describe that perspective and how you and Howard decided to present that view?

Timothy J. Muris: Well, first let me thank CEI for sponsoring our work, and the Federalist Society for sponsoring this webinar, and you Svetlana and Maureen, for your participation. The Biden, FTC they've condemned their predecessors as they walked in the door as lax, a backwater, feckless and other similar epithets probably most famously with brand new chair Khan at his side, President Biden almost three years ago now said he dismissed the previous four years of, of FTC and DOJ as an experiment failed. And thus, and thus, the new team sought fundamental change. Now it's been almost three years as you mentioned, Svetlana, there's been a lot of debate in which we've participated about the substantive changes that the FTC has made from the previous 40 years.

And we ask a different question, the one that, the one that you raised, which is how successful are they at that revolution - at laying the groundwork for change that lasts? Now because this is the third time, in the last 50 years - 50 plus years - that someone's walked into the FTC with the same attitude, the attitude that the place is broken and needs to be changed. We compare the three, the first was in nine following the 1968 election. The second was following the 1980 election, and this is the third. So we have some points of comparison. Now, Howard and I have a long combined history working in the government. Much of it is at the FTC, and a lot of that is at the beginning of administrations 40 years ago and 20 years ago. And what we found and what we found verified what's in the academic literature, that you can get a lot more done at the beginning of an administration than you can get done later. And that makes it particularly appropriate to consider the Biden FTCs beginning because that beginning is over and they can never reclaim it. You get one shot at your beginning. And as you'll see, we believe they've wasted that precious beginning in trying to accomplish fundamental change.

Svetlana Gans That's really, really interesting. Howard, so can you talk through the criteria that the analysis uses in judging the success or failure in, in implementing change?

1. Howard Beales III: Sure. And I just wanna second Tim's thanks to CEI and the Federalist Society, and to you and to Maureen for their support and for this event. We start by considering norms. Norms are really important for letting people with strong opinions work together in places where they need to work together and in places where they agree. And a current example of some relevance is whether there actually should be antitrust jurisdiction at the Federal Trade Commission where presumably majority and minority commissioners are in substantial agreement. Unique to the Biden administration has been a substantial breaking of the norms that helped to make the place work smoothly. And, we'll talk about that in more detail. Second thing we consider is managing the staff.

 Even if you're coming in as a fundamental change agent the people who are actually gonna have to do the work are largely the career staff members who are already there. And how you recruit those people to a new agenda and to pursue a new agenda is a crucial question in determining your likely success in achieving that change. We consider based largely on the previous two eras that Tim mentioned, the two keys to successful policy change. One is the extent of agreement about the need for change which was high in previous eras, and, and much less consensus about the need for change at the beginning of the Biden administration. The second thing that we consider is the extent of agreement about what the new policy should be. And again, there's considerably more disagreement at the beginning of the Biden administration than there was in the two previous change eras. After laying that groundwork we apply that framework to the Biden Administration's approach to change considering the degree of consensus and considering the degree of support for the policies that they're pursuing. And then finally, we conclude with some lessons learned based on the three change eras that we considered.

Svetlana Gans: Thanks so much, Howard. Tim, both you and Howard talked about the two earlier change eras. Can you just provide a brief description of when and what those were?

Timothy J. Muris: Sure, sure. Howard and I were alive then, and, and probably a lot of the audience was not. And also, one thing I forgot to mention is that I'm speaking today for myself and not my two employers, the state of Virginia and the Sidley Law firm. Look,When Casper Weinberger became chair, literally on January 1st, 1970, he had free reign. And the reason he had free reign, he had free reign for a redo. There were two major reports in 1969, one under the auspices of Ralph Nader which included a fellow who, who was fairly soon to become Richard Nixon's son-in-Law. And the other president Nixon asked, after that report, he asked the ABA - this was the full ABA, not the ABA Antitrust Section - to do a report. Both the ABA and the Nader reports were scathing and I mean scathing.

 And that gave Weinberger free reign. Although he was there only seven months, he did major things. He reorganized into the FTCs modern structure, and that was extremely important. It also allowed him to remove 60% of the existing managers. His successor was Miles Kirkpatrick, who replaced - who had been the head of that 1969 ABA study. And he continued Weinberg's efforts with the staff, and eventually they replaced 30% of the FTC staff they had inherited. That's important to keep in mind when we talk about staffing and staffing issues in the current era. Now, with Weinberger's help in closing a, a lot of dead wood, the Weinberger-Kirkpatrick era reinvigorated the FTCdeemphasized in competition, the Robinson Patman Act, and in consumer protection, the so-called Woolies, the Textile Wool and Fur Acts, they were acting - in that first Nixon term - they were acting consistently with the policy views of the day. But the academic views changed, especially about concentration.

 And also judges changed throughout the decade. And the FTC didn't adjust. In fact, it doubled down on Deconcentration. And then - this was after Kirkpatrick left - the FTC decided it could use unfairness and rulemaking to remake major sectors of the American economy. All of this led to a backlash that almost destroyed the FTCand hence by the 1980 election - and when we arrived, Howard and I were part of the Reagan team that arrived in October, 1981 - there was again a mandate for change. This time it was because, not because the FTC had done too little, but because the FTC had done too much. That began the 40 years that President Biden and Chair Khan decry.

The vision was not that the FTC was the star player, but that the FTC was the, you know, was the cop on the beat providing rules of the road, and the result was highly successful. If you look at the Global Competition Review, it had ratings of multiple dozen competition agencies around the world. The FTC was the only one that through the Trump administration. And, and that's, we're talking over 20, we're talking 20 years, received a five star rating every year. The only one of all those agencies around the world. And now Chair Khan pulled the FTC out of those rankings. So that's what the 40 years led to.

Svetlana Gans: So, Howard, take us to the present now. Tim described the, the, the two earlier change eras. Do you wanna go and tell us now about the Khan change era and kind of a brief overview there?

1. Howard Beales III: Sure. As Tim mentioned, in the two early eras reorganization was used as an important tool for managing the career staff. There was a complete reorganization in the Weinberger-Kirkpatrick era. There was a reorganization of the Bureau of Consumer Protection in the Miller years as a way to deal with career staff and find out who was willing to support the new agenda and who was not. Khan came in with a view of the staff that implied the need for major staff changes. She didn't trust the staff but she didn't take steps to gain effective control of the operating bureaus. Instead she tried to use outsiders, often unpaid outsiders assigned to the office of policy planning, and not to the operating bureaus where case and enforcement decisions are actually made. But there's limits on what outsiders can do, and in particular, they can't perform essential government functions like making policy or supervising the staff.

But to get control of the staff, that's exactly what you need to do. It's very hard to do with outsiders. It needs to be done from within the agency. And it's something that was very slow to happen in the Khan administration. Considering the degree of consensus about change, there was certainly some dissent about prevailing policies at the beginning of the Biden administration in both parties, frankly. But there was no widespread consensus that change was necessary. There was nothing like the characterization of the FTC as the little old Lady of Pennsylvania Avenue in 1970, or the National Nanny in 1980. There was just not that kind of support - widespread support - for change. Even shortly before the election, the Neo-Randisian approach was frequently dismissed as "hipster antitrust" not exactly the foundation for successful change.

There's even less consensus about what new policies ought to look like and in particular, less consensus in the judiciary. In fact, the Khan administration likely faces a hostile judiciary which has been a key player in developing and imposing the consumer welfare standard that the Neo-Randisians reject. To address the hostile judiciary requires a careful strategy to build foundations for how you're gonna make change. None of that careful strategy is apparent. They filed cases and lost, but that's a, that's, that's a show. It's not a strategy for how you're actually gonna succeed in achieving legal reform or legal change.

Svetlana Gans: Thank you. So Maureen, let's turn to you now. I think of you as a change agent when you were the chair of the FTC. So what's your reaction to what you've heard so far?

Maureen K. Ohlhausen: Thanks Svetlana, and thanks to you and the Federalist Society, and to Tim and Howard, I'm really honored to be on this panel talk, talking about such an interesting topic and, and one of my favorites, the FTC. Now, it's really interesting to me to have read the report and really to have been kind of a witness to so much of what's gone on. This 40 year history, I was actually at the FTC for more, for more than half of that. I was at the FTC during eight different chairs, including myself as a chair. So I've seen a lot of transitions, and I've seen a lot of attempts to kind of change direction and often you know, very successful attempts to kind of redirect resources and redirect staff. And I do think norms are a very, very important part of that.

 One of the things that I often harken back to is something I did not as a commissioner or chair, but when I was head of the Office of Policy Planning under Chairman Kovacic and helped create the FTC into our second century report in anticipation of the FTC's hundredth anniversary, which was in 2014. And it's very fitting. We're coming up on its 110th anniversary to reflect on some of these things. But, the ability to marshal the resources that you have at an agency and so much of that clearly is staff and the ability to deal successfully with your colleagues. So when I was the acting chair for a year and a half it was just myself - I'm a Republican - and my Democratic colleague Terrell McSweeny, and one might think that could be a recipe for gridlock and dysfunction, but I think because of the norms at the FTC of trying to find common ground, the norms of bringing staff in and motivating staff and making them part of the team, we were really able to be, I think, very, very productive during that time, and Svetlana, you were, you were there as part of it, and that doesn't mean just bringing kind of the same old, same old cases.

You can bring, you know, cutting edge cases. You can do things that push the envelope a little bit. We brought a killer acquisition challenge against CDK and Auto/Mate. We brought a challenge to a consummated merger in Ottobock and Freedom Innovations. We brought a part three merger challenge litigated through the administrative proceedings at the FTC in Tronox/Cristall. But I think it was that foundation of these kinds of norms that really helped with that, and getting staff on board. Kovacic's report into our second century really talks about using those resources and building that kind of support for what, for what you're doing across constituencies so that they - they don't have to always agree with what you're doing - but they have to understand what you're doing and why, why you're doing it, to avoid creating, you know, huge blow back that ultimately undermines your ability to get things done. So I think those were some very important lessons that previous change agents have used either successfully or unsuccessfully to make changes at the FTC.

Svetlana Gans: Great. Thank you so much for that. Tim, Howard, any reactions to what Maureen was saying?

Timothy J. Muris: Well, what Maureen is talking about occurred within the 40 years, and, and it's important to recognize that the 40 years were not, you know, static. One of the points we make at the end, the, the reason the 40 years were a period, you could identify as 40 years is, it was, it was bipartisan. But the changes that occurred over time, the changes from the Clinton and Obama administrations, there were modifications in what, in what we started, and in, and in some ways, changes. When we came back in 2001the Pitofsky and Jodi Bernstein had, had, had really done a wonderful job with the fraud program. The internet, you know, hadn't existed when we were in the Reagan administration, and it was a major source of issues. And they launched a major FTC program, and lots of things like that occurred over time. You know, we did initiatives that we started on the consumer protection side, like with international fraud or with hospital mergers, which took at least a decade to come to fruition. And so there were people who worked on things and handed them off to the next, to the next group of people. And that was a very important part of the success of the 40 years.

Svetlana Gans: All right. So let's turn to the contents of the report and the recommendations. And just to remind the audience we are taking questions. If you have a question, please insert it in the chat, and then we will leave some time at the end for Q&A as well. But kind of going to the, to the report you know, one of the chapters focuses on people. So Howard, can you just describe some of the key conclusions of that chapter of the report and your analysis?

1. Howard Beales III: Sure. What was perhaps unique about the beginning of the Biden Administration was that Khan arrived with pretty open hostility to the career staff. It started with standing at the president's side and branding the staff part of the 40 year failed experiment. It continued with the selection of Chopra's attorney advisors, Commissioner Chopra's attorney advisors as the senior management of the Bureau. Chopra's disdain for the career staff was very well known within the agency. Selecting his staff for the senior positions was both unprecedented and a very strong signal to the staff about how they were likely to be treated or respected. In many respects, this was a surprising choice because much of the staff would likely have been receptive to a more progressive agenda, at least in part, probably not all of it, but, but almost certainly some of it.

A very early action that sort of summarized the tenor of the relationship was the prohibition on any public appearances by staff, including public appearances that had been previously scheduled. And then the suggestion that the staff should give misleading reasons for the cancellation that rubbed staff the wrong way. The result was a remarkably rapid decline in morale. Khan started in mid-June and by the time of the office personnel management's annual survey of employees in November and December, FTC had fallen from the best agency measured by staff agreement that senior level senior leaders maintain high standards of honesty and integrity to worst, best to worst in six months. That is certainly a rapid, if not a record decline in staff morale. There's a similar result on the staff's respect for senior leadership. The result was that a lot of people left. A lot of experienced managers left, a lot of institutional knowledge and frankly, high levels of talent and experience, left the agency and were no longer available to implement a new agenda. The view of staff implied the need for major changes but major changes were not forthcoming. Khan instead relied on attrition and people trickling out the door.

Svetlana Gans: Maureen, any feedback on that aspect?

Maureen K. Ohlhausen: Well, I mean, I think it, I think it is interesting and really a missed opportunity by the current leadership at the FTC. Maybe they're trying to sort of remedy some of that. But you know, I completely agree. My experience as an acting chair at the beginning of the Trump administration, I mean, I don't think anyone thought, you know, that career staff would be there sort of saying like, hooray, it's the beginning of the Trump administration (chuckles), right? But they were very helpful and, and cooperative. Morale remained high. We really got a lot done. And you can't sort of, I think you know undervalue that one, you know, incredibly main resource where even if you are bringing a - particularly I would say, not even - particularly if you are trying to bring cutting edge cases to bring very aggressive theories, having experienced litigators, experienced staff, you know, who can know how to investigate, who know how to put together a complaint, who know how to, you know, put together the evidence that you need to win, I think that's really important because, you know, talking about how to make a lasting change, it's not through policy statements, and it's not through guidelines.

I mean, those can all be undone, you know, swept away in the next administration. It's really through achieving victories in court. And part of what has been, I think, denigrated as the, you know, failed 40 year experiment include important things like the activist case - pay-for-delay won in the Supreme Court. That was a bipartisan effort across many administrations during that 40 year period, and a key area of pharmaceutical competition. If that's a failure, you know, it's a little bit puzzling to see what's a victory. So I do think having the staff who have that knowledge, who can bring winning cases and put together, you know, a winning complaint all the way through a victory before the Supreme Court, it, it's, you know, you, you don't just you know, sort of find that on the street corner. It's people who have had the experience bringing these kinds of cases. And so not taking advantage of that, I think is a real missed opportunity.

Svetlana Gans: The one thing, and I'm not sure if the report talks about this, but I'm curious about the number of political staff. I'm not sure Tim or Howard, if you talk about that in the report, or if you have any reactions to that question?

Timothy J. Muris: Well, we, we, we don't directly talk about that, but we talk, we talk about a related point, which is I think, quite important. They have this attitude corresponding to the deep state. When, when Rohit Chopra came in, there was a report released that listed him as the, as the principal or the first author, the lead author from the Roosevelt Institute. And, and it, it's a belief reflected in something called the Revolving Door Project, that career civil servants even, and people who work in DC law firms are tainted and not to be trusted. And it's reflected in what Howard said about not taking over the bureaus and trying to bring in people to work, you know, alongside the bureaus, not following the rules in who was hired.

And it's so strange because if you look, if you look at the - if you look at the typical DC law firm would have many people who were in their late thirties, early forties, Democrats who support the Biden administration with great expertise, very much would love to work in the Biden administration. And those, and, and they needed that expertise. They needed it in litigation, they needed it in rulemaking, and especially for the first few years, they were completely unwilling to take it. And that, that makes no sense to us. I could understand how you might be suspicious of certain people in setting policy, but, you know, once a policy is set, you need people who can implement it. In the Reagan administration, when we sat down and we were young when, and we wanted to do fraud cases, you know, we couldn't have done a fraud case for the gun put to our head, but we went out and found people who could and we didn't care, you know, whether they voted for Ronald Reagan or not. What we cared about was that they were committed to going after fraudsters, and they knew how to do it. And that, and that was a completely different attitude than the attitude here. And that's a form of political attitude that is hampering the ability to get things done.

Svetlana Gans: Okay. Howard, did you have anything on that question?

1. Howard Beales III: No I just - You know let me, let me go back briefly to the question of outsiders because you know, pretty much every administration has made extensive use of outside consultants for policy advice. But there's a difference between using outsiders for policy advice to try to think through the details of a policy and how it might work in conjunction with the staff and the staff's awareness of the legal authorities and the legal limits and trying to run the place through the outsiders. What happened in the Khan administration is not so much turning to outsiders for advice, which is fine and normal and perfectly reasonable but trying to use outsiders to make decisions and to implement policy when there's a specific statutory restriction that says they can't. And that's a very different approach to people and outside people than has typically been the case.

Timothy J. Muris: And the strange thing is, I always hired academics to, you know, look at particular projects. It never would've occurred to me not to pay them, not to have them sign confidentiality agreements, and not to follow the rules. I mean, but that's what happened. I mean, and that's part of, that's part of when you're hostile to the career staff. I mean, I knew enough, you know, to follow those rules, but even if I didn't, I would've turned to people inside. And they, and they apparently neither knew that, they should have, there were rules to follow, nor did they ask anybody. I mean, it's astonishing.

Svetlana Gans: Okay. Let me turn to the next topic in the report, which is law reform. So Tim, do you wanna take that one and walk us through your conclusions on that issue?

Timothy J. Muris: Sure. Look, it's, it at the end of the day, and Maureen mentioned this a while back you know, a lot of this is about winning in court. And that's what legal change requires. If you go back in history, the Nixon administration originally had a, a receptive judiciary, and one of the problems in the seventies, as I mentioned, is when the judges changed, the FTC didn't. Throughout the 40 years the FTC had had success. A lot of that success was built around things like the consumer welfare standard, which of course, the people running the agency now don't like. The problem is, if you don't like the things that the judges enforce, then you need a strategy for changing it. But as one former staffer said, and I'm quoting here, "Chair Khan came in with a bunch of answers, but no actual strategy."  And, we found that was true even something that everybody knew she was going to do which was - given her background - which was to sue Amazon, the FTC had a major investigation that had been going on for quite a while when she came in, she obviously wanted to sue them. It still took 27 months. I mean, there was a lot of slowness there. Obviously there are issues that case and other cases raised which is another missed opportunity in terms of the unfair methods of competition statement. That statement as Commissioner Wilson said in her dissent, is a "know it when we see it" standard which is the opposite of what the commission carefully did in defining unfairness for the other part of Section Five, which are not unfair methods, but unfair acts or practices.

Now, the "know it when we see it" isn't gonna convince anybody who's not already convinced. And the problem is, this commission, this commission has got to convince people who are hostile to their views. And so that was a missed opportunity. The covenant not to compete rule is another example that may be even a worse example. They're relying on, I mean, Commissioner Chopra - when Lena Kahn was working for him - they wrote an article, but it relies on a 50-year-old case that most legal scholars think is out-of-date. They rejected alternatives. They could have tried Section 18 that they could have tried bringing big cases, but they went down this road that doesn't seem to be particularly successful. I know that Eric Posner had an article - a short piece in ProMarket published today, but that analysis seems straight out of the seventies to me.

Now, look, there's another strategy here, or maybe another strategy here, but this isn't about changing the law. This is about performance. On that scale they're doing well. I mean, they're getting a lot of publicity, that's a lot of what happened in the seventies, too. Of course, the FTC garnered massive headlines with very little to show at the end of the day for the headlines. Of course, the people who got the headlines were long gone when things crashed around the people who were, who were left, and without a strategy to deal with a hostile judiciary, that's where things are headed here.

Svetlana Gans: Maureen, any reactions on the legal reform?

Maureen K. Ohlhausen: Yes. Look, I, I agree that the unfair methods of competition policy statement and then pairing that with a claim to have sort of almost unbounded rulemaking authority under unfair methods of competition, even to preempt all the states as well is quite, you know, is quite a bold move. But I also think it puts the agency at risk, not just of losing this case. You know the challenge to their UMC rulemaking authority that we're seeing play out in the Fifth Circuit now, but losing more than that. One of the first things when I was commissioner, when I came on board, was that the agency was pushing the boundaries of using its discouragement authority and removed the policy statement on that.

And I objected, and I objected over time to how they kept pushing boundaries on this. And then sure enough, when it finally kind of created enough pushback, the Supreme Court took the AMG case, and 9-0 said the FTC didn't have the authority. So that's the kind of thing you are risking when you sort of push through any sort of restrictions and any sort of boundaries. I think people were stunned that it was a 9-0 decision. And I know some folks at the FTC at the time you know, were quite hostile to the Supreme Court's decision, but you, you can't say that's just sort of, you know, right wing reactionaries (chuckles) when you lose 9-0 in the Supreme Court. But what happened to the FTC was, they lost a useful power.

And then when they went to Congress to say, "Well, could we get this for, you know, getting money back in the hands of consumers?" there was a lot of suspicion in Congress about, well, how are you gonna use that power? What's that authority? The FTC is kind of, you know, a small agency in a lot of ways compared to other federal agencies, and its statute is, you know, very, very vague. 

And it doesn't necessarily have a natural constituency in Congress. You know, there's the Senate Commerce Committee, there's the Judiciary Committee where, you know, kind of the agency's a little bit betwixt and between. But one of the things that I used to say, having been a little bit of a student, is avoid doing things - of the FTCs past histories - avoid doing things that unite your enemies. And that's one of the things, that a lesson I think that played out in AMG, think it, you know, it's a risk here that you are pushing forward through all these different restrictions. We had the Axon case calling into question the constitutionality of the FTCs part three process. I think that there is a risk that by biting off so much at one time, the FTC could really lose a lot of powers that it's used, I think, quite well and quite effectively to benefit consumers and competition over time. And I think previous leadership at the FTC, including someone like Robert Petofsky, really understood that, right? It's not that he was a leader who was hesitant to try to make changes to push forward, you know, to move antitrust, you know, forward if he thought it was too constrained. But he really did understand, I think the risks that kind of doing it in a very aggressive, very unbounded way could have for the agency, and not just for the agency as an institution, but for who it serves - consumers and competition.

1. Howard Beales III: I would just point briefly to what we talk about in the report as an example of successful legal change hospital mergers where it started with a careful empirical study to establish that hospital mergers that had been approved under a standard that we thought was too permissive in fact had bad consequences for consumers. It was followed with an administrative case that was essentially a test case and followed with successful cases embraced by the courts at all levels, that led to a change in the approach to hospital mergers, but it built a foundation in order to persuade courts to make the change. And that's what's been lacking in the Khan administration.

Maureen K. Ohlhausen: And could I just add one more example to that and I completely agree with what Howard said. Is the FTCs work on the state action doctrine, looking at the kind of two broad protections against, you know, competition that some of the states bodies were benefiting from. They were really competitors getting together, and they had some gauzy cloak of state authority over them. And you know, under Chairman Muris, we did a report on that - state action report - we did research, came up with test cases and had two Supreme Court victories, Phoebe Putney and North Carolina Dental that embodied this, this, and put - enshrined, I should say - into law the fact that you can't just kind of say, "Oh, well, we have some, some minor amount of state authority, therefore we can, we can keep all of our competitors out of the marketplace." And I think those are really good examples of lasting change and lasting benefits by taking, I think, this more measured approach.

Timothy J. Muris: Well, and it started - just to, to add a sentence -  the work on state action started in the eighties. And, and the report Maureen is talking about, the one that was done 20 years ago was led by one of the FTC's most famous alumni, Senator Ted Cruz.

Svetlana Gans: All right. So let's turn to the norms topic. I know you spent some time on it in your report, and then I wanna open it up to questions before we conclude, being mindful of time. So, Howard, can you walk us through the norms discussion and the report and your conclusions there?

1. Howard Beales III: Sure. The Khan administration started with breaking norms; it was unprecedented to name someone nominated as a non-chair commissioner as chair. Somebody nominated as chair typically gets a different level of scrutiny in the confirmation process. That didn't happen because the administration chose not to tell the Senate that Khan was becoming the chair. Another really good example, I think, of the breaking of norms is the recusal decision by Chair Khan, or the refusal to recuse in the Microsoft-Activision merger Khan told Congress during her confirmation that if a question arose about appearances of conflict, she'd consult the DAEO and act accordingly. The consultation, it turns out, was oral only. It apparently only asked about the law and didn't ask for advice. And to the DAEO's knowledge, it resulted in the only case in which an FTC employee chose to participate against the DAEO's recommendation.

 Another place where norms have been breached is in providing information to Congress. The commission historically has been very forthcoming - often to the chagrin of people who work there - in providing information to Congress, even if it could be potentially embarrassing. Subpoenas have been exceedingly rare. Now there's a subpoena and an ongoing fight about compliance with that subpoena. And the commission is asserting a deliberative privilege that certainly has not been widely asserted before in order to deny information that Congress feels it needs to do its oversight role. Another place where norms have been breached is in meetings with respondents. Respondents were routinely told that recommendations were forwarded and given an opportunity to meet with senior management and with the commissioners, those were often very useful to the staff. In a lot of cases, respondents heard that there was support where they didn't expect support that led to settlements rather than litigation that could have happened much more quickly in some important cases. The commission hasn't even told respondents that a matter was before the commission or, or that the decision was pending. And finally, norms have been breached about information to minority commissioners. Commissioner Wilson in one case, could only find out what information staff had asked for in a second request by asking the company under investigation. Now, that's not the way information ought to flow in any agency. You shouldn't have to talk to the targets of the investigation in order to figure out what the agency is asking for. So the breach of norms has been unprecedented and extensive and unfortunate.

Svetlana Gans: All right. So I don't see any questions in the chat or the Q&A. And we have, you know, a few minutes left. Maureen, I don't know if you want to opine on the norms issue that Howard was discussing, or I, I'm happy to ask, we do have a Q&A, but let me ask-  let me ask this question from the audience. Given that there has been a large exodus of career staff and the Democratic commissioners vote in line with Khan, do you believe there is a strong appetite for change, or will there be inertia post-Khan?

Timothy J. Muris: Maureen, do you wanna take a crack at that? I'll be glad to talk, too.

Maureen K. Ohlhausen: Yeah. so I think it really depends. There's a saying in Washington that "personnel is policy, right? And so I think who would follow as the leader of the FTC, I think is really key. There may be some rebuilding that would require experienced litigation teams at the FTC that would be necessary, if a lot of the sort of institutional knowledge and expertise has departed. So I, I think, you know, but the FTC is an agency that's risen from the ashes before. And I think if it's got, you know, a really good vision for doing good things, like I was a fan and continue to be a fan of the FTC, I think it is within careful sort of delineation of what its authority is and its powers.

I think it can be an enormously impactful and important and beneficial agency for U.S. Consumers and for our economy. It has had, you know, international - as Tim mentioned - respect and stature and served American interests really well around, around the world. I hope it can continue to do that. So I do think sort of if, if new leadership from either party that comes in understands that about the agency and respects it's history not saying that they're necessarily straight-jacketed by it but that they understand how the agency has succeeded in the past and where it's succeeded, and how it's - how it's done that, and, and uses those tools to, to move the agency forward. You know, I like to be an optimist that you know basically maybe its best days are still ahead.

Svetlana Gans: So there are a few additional questions in the Q&A, so let me just go through them. So one questioner asks, "Can the speakers address the rule changes adopted under the present administration in particular with regard to agency process, for example refiguring the role of administrative law judges to the rulemaking Section 18 process, et cetera?"

1. Howard Beales III: Well, Tim and I have a separate paper on the changes in the rulemaking process for Section 18 rules where we argue that the effect of the changes is to increase political control and reduce the opportunities for public participation. The goal of Congress in setting up special procedures for the FTC was to ensure more reasoned decision making, more based on evidence. The rule changes and the way they've been implemented in the Section 18 rulemakings that are ongoing are really very contrary to that whole approach to rulemaking.

Svetlana Gans: Okay, another question. Can the Biden administration regain its footing at the FTC If there is a second term, and what are your thoughts on the ability of the two newest commissioners to contribute to the correcting of the agency's reputation and mission?

Maureen K. Ohlhausen: So let me address that. So I was a commissioner and acting chair for six and a half years. I was in quote, "the majority" for three months of that entire time, even when I was the chair (chuckles), I was not in the majority. Given the bipartisan and collegial nature of the FTC during that time period, I felt that I was able to contribute a lot. And I think the current FTC Republican commissioners, if given the opportunity, can as well. One of the things that I always felt was that the leadership, you know, the chairs and the leadership of the bureau would want to hear my views and if they could get me on board they would try.

And I remember someone saying to me once, "Oh, are you up at the FTC writing a lot of dissents?" And I said, "Well, dissenting is losing. I would prefer not to have to dissent. I think that's a better outcome." And I think the current FTC Republican commissioners are coming to the job, I think with a very collegial, wanting to be part of, you know, that "bringing the agency forward" attitude. And I hope that that can be reciprocated, because I do think the agency is more successful and operates better in that kind of environment.

Svetlana Gans: Another question. Can you discuss the revival of the Robinson Patman Act as an example of the broader breach of norms and possibly as raising some significant due process concerns?

Timothy J. Muris: Well, I wouldn't say it's necessarily a breach of a norm. If, and this is a giant "if", and we haven't seen what they're going to do, if they're really gonna try to do it within the law, but that will be very hard because what's left of the Robinson Patman Act is not very much, if anything,

Svetlana Gans: Right. Another question. Do you think the majority is regretting that they are setting a bad precedent, or are they winning by losing, which I hear they’ve said?

Timothy J. Muris: Yeah, that strategy, you know, that's a way to, to :kiss the pig" as (chuckles), as people used to say when they were, you know, when they were faced with something that they didn't like. Look at it, they're not even getting, necessarily getting good descent because, you know, these cases are not written by panels with dissenters. You know, what they're saying is well, the judge said, you, you could bring this case but you haven't, you know, you don't have the facts here. I'm not sure how, how particularly reassuring that is. The truth is, in merger law, for example, they're winning cases that are on more traditional theories, the kind of strictly horizontal cases, and they're losing cases like the, you know, like the cases they lost out on the West coast, the ones against Meta and Microsoft that are very non-traditional and whatever good language they think they got is not gonna change those results in future cases.

1. Howard Beales III:There, there is, and we talk about this at some length in the paper, a significant part of what they've done in mergers is to try to increase cost and uncertainty in the hope of deterring mergers without regard to whether they have any competitive consequences or not. And that certainly is the flavor of the expanded filing requirements that they've proposed with an enormous increase in paperwork burden for mergers that most of which are not worth investigating and historically have not been investigated. And that is deliberately seeking attacks on mergers without regard to the legal requirements for when a merger is allowed and when it's not.

Maureen K. Ohlhausen: And just to add one, one point on that, you know, one of the things the agency has argued in several cases is that it can assess a merger without having to take into account the remedies that the parties have proposed. And they've lost that. And now that's really been enshrined into case law, including in the Ninth Circuit, Microsoft-Activision. But also, even though, you know, Illumina-Grail is kind of technically a win, the court also said no, that you have to assess it based on the proposed remedy. So you can, you can have a victory in some ways and, and still end up with some precedent that makes it you know, more difficult the next time around.

Svetlana Gans: All right. We have one more question in the Q&A, and then we'll do a one minute speed round of what comes next and what do we think? So the last question here is what do you make of the FTC filing major cases against Amazon, Kroger, and Apple in jurisdictions all around the U.S. but not in DC where antitrust expertise is highest?

Timothy J. Muris: Well, they're certainly looking for what they regard as friendly courts. I'm not sure there's much more to it than that.

1. Howard Beales III: I'm not sure forum shopping is a well thought out legal strategy for reform.

Maureen K. Ohlhausen: I would just mention just one fine point on that. The FTC is interested in using its administrative litigation to try to kind of I think put its stamp on the case law, kind of apart from the circuit courts and the district courts. But if they rule against the defendant, the defendant appeals, the defendant gets to appeal to the circuit of its choice. So there's a limitation on how far they can even use administrative litigation as a way to avoid forms they don't like.

Svetlana Gans: Yeah, and it's interesting now there's three administrative law judges, so that's interesting. Alrighty. With just a few minutes left, let's do one minute of speed round. Where, what does the future hold? Where do we go from here? Tim, let's start with you.

Timothy J. Muris: Well, look, I think we're gonna - a lot will obviously depend on the election as we state at the end of our paper at this stage in the, in the two change eras, in 1972 was before the, the 1970s went astray. And in 1984 was when the FTC still had a lot of dispute because the former chairman was out there calling artillery on his position - as he himself said. So a lot could change in the future, but without, without a coherent strategy, what we're seeing is activity - lots of activity - and that's why we began the paper. And we ended the op-ed that we published in the Wall Street Journal yesterday with the quote from John Wooden - I went to UCLA while, while he was still the coach, I used to go down and watch him practice - and he said, and I think it's it's great wisdom, he said, "Never mistake activity for achievement." And we have lots of activity here that's not likely to lead to achievement.

Svetlana Gans: All right, Howard, one minute for you.

1. Howard Beales III: You know, there's been an impressive display of norm-busting, but it's not clear to what end. And it may be that the end is itself norm-busting. That's certainly consistent with the political divisions that are not confined to the FTC by any means. But it is a sad day for the FTC if the whole point is to not be civil as opposed to building a civil agency where people can work together despite often strongly held differing views.

Svetlana Gans: All right. Maureen?

Maureen K. Ohlhausen: If we're talking about lasting change, I think the two sources that we've talked about are courts or Congress. And I think one of the challenges for the FTC is if it's not being successful in court, has it created a situation where Congress doesn't feel confident about giving it additional power or is it going to be a good steward of those powers? And I, I think it's important for the agency to keep that in mind, that there is, you know - for example, there's a privacy law being considered right now that would give the FTC broader authority - is, you know, that going - you know there are concerns about, well, what will the FTC do with that? Has it been responsible? You know, those kinds of things can, I think get in the way of the FTC's success in the future. So I just think they need to pay careful attention to all the constituencies, not just sort of the ones they are maybe most comfortable with. Because in our system, you, you don't, you know, you, you can't just sort of have your own friends you know, carry you over the finish line. You need to build a broader coalition for lasting change.

Svetlana Gans: All right, so with those words, this concludes this really informative and interesting program. I want to thank Competitive Enterprise Institute again for their work on the paper and their co-sponsorship of this webinar. Thank you all for being here, and I'll turn it over to Emily to close us out.

Emily Manning: On behalf of the Federalist Society, thank you all for joining us for this great discussion today. Thank you also to our audience for joining us. We greatly appreciate your participation. Check out our website fedsoc.org or follow us on all major social media platforms @FedSoc to stay up to date with announcements and upcoming webinars. Thank you once more for tuning in and we are adjourned.