Podcast - The Election's Impact on the FTC Will Bring Big Changes, But Being Vigilant Must Remain a Priority

Welcome to another podcast of Clearly Conspicuous. As we've noted in previous sessions, our goal in these podcasts is to make you succeed, make you aware of what's going on that impacts the federal and state consumer protection agencies, identify developments and trends and give you practical tips for success. As always, it's a privilege to be with you today.

Election Impacts and Republican Control of Both Houses of Congress on the FTC

Today we discuss the future of the Federal Trade Commission. I'll address the impact of the election of Donald Trump as president and of the Republicans taking control of both houses of Congress on the FTC. I come to this podcast as a former director at the Federal Trade Commission, as a regional director, with an understanding of what happens at both the staff and management levels. There is much to cover and after a high-level overview, my remarks will cover three topics.

1. The election's impact on the structure and makeup of the FTC.
2. The likely substantive, interpretive and policy changes that will take place at the commission.
3. I’ll be very practical. Even though we will have a new FTC that is going to be more favorable to business, I'll address what you or what companies need to be aware of that can give you concern or even create a crisis.

So let's begin with an overview, a high-level perspective. There are four points I want to set forth.

1. In the past, Donald Trump has criticized the FTC for acting like a "fourth branch of government." Lina Khan is chairperson of the commission and her approach and agenda will soon be history. The makeup of the commission will change, as will a change in senior management with the directors of the Consumer Protection and Competition Bureaus being named by a new chair or acting chair of the FTC.
2. FTC Chair, Lina Khan's time in office has seen the FTC go after big tech in a big way. That may well change under a Trump-appointed commission. In October, for example, Donald Trump warned that breaking up companies can be a "very dangerous thing because the U.S. did not want to lose out to China on having great tech companies." After all, during Khan's administration, the FTC has challenged Microsoft's purchase of video game maker Activision and made us purchase a virtual reality company within Come also went after Meta and Amazon, accusing them of abusing monopoly power.
3. Historically, the FTC has acted in an apolitical manner, not philosophically extreme one way or the other. Therefore, changes in administration did not lead to a major change at the FTC. However, as the Khan tenure demonstrates, those days are gone and the election results with Donald Trump as president and the Congress in full control by the Republicans will make a significant impact on the FTC.
4. All of this doesn't mean business can now just exhale and relax. Even with these changes at the federal level, all companies and executives need to realize that state consumer protection agencies and other stakeholders are highly energized and other circumstances can cause trouble or even a crisis. Compliance and risk management strategies, therefore, are still very essential. So staying in touch with regulatory and legal developments on all fronts is necessary.

Democratic vs. Republican: The Structural Impacts on the FTC

Okay, we're done with the overview, so let's get into the detail. Let's start with the structural impact. Currently, we have three Democrats and two Republicans that make up the five-member commission. One of the Democrats is Chair Lina Khan, and her term actually expired in September of this year. However, commissioners are able to stay on board even after their term expires until the Senate confirms their replacement. Shortly after January 20th, 2025, either Republican Commissioner Melissa Holyoke or Republican Commissioner Andrew Ferguson will be designated by Trump as either the new FTC chair or the new FTC acting chair. Andrew Ferguson was the former chief counsel for Senator Mitch McConnell. And Melissa Holyoke was Utah's former solicitor general. And that point there will still be two Republicans and three Democrats. So there are some real practical limits as to what the new chair can actually get done. Given the fact that you need a majority in order to take action at the FTC. Even if Lina Khan decides to leave right after the inauguration, you then have a stalemate at two. So if the commission wants to file a complaint or dismiss an action, or start to rescind a rule through a process, a majority vote is required. I note that historically, new administrations were slow in nominating and confirming appointees for the FTC. For example, former Chair Joseph Simmons was not appointed until at least a year after the 2017 inauguration. But that won't happen now. Billionaire and Trump supporter and influencer Elon Musk, an adviser to Trump who spoke with Zelensky of Ukraine with Trump recently, said that Khan would be "fired soon," in a social media post on October 31st. I anticipate, therefore, that within the first quarter of 2025, a Republican commissioner or permanent Republican chair will be confirmed. Again, the Republicans control the Senate, so the confirmation process will very likely be expedited. With respect to the current matters at the commission we can expect that the new FTC chair will be examining the entire pipeline of investigations by the FTC and may well move to close or modify investigations that are inconsistent with their priorities and their interpretations of the law. Finally, with respect to the structural changes, I note that a new FTC chair or acting chair will certainly replace all of the bureau directors very quickly. That may well have an immediate impact on the consumer protection matters, as Samuel Levine, the current director of the Bureau of Consumer Protection, was an adviser to FTC Commissioner Rocky Chopra, the current director of the Consumer Financial Protection Bureau. But beyond those senior management appointees, we can certainly expect that the FTC staff and their managers will remain. 

A Look into the Future: Structural Changes of the FTC

Let's now move from the structural changes that are certain and let's look into the future. Let's look into the crystal ball and anticipate what substantive, interpretive and policy changes will take place. My predictions, which are, after all, informed guesses based on my observations as a former director at the FTC, my being defense counsel for dozens of investigations conducted by the FTC and one who is engaged in compliance management and risk assessments, the philosophical deregulation themes coming from the talk in the election, from the highly critical views of many Republicans, of FTC Chair Lina Khan, and from the dissents of Republican commissioners over the last few years.

• So let's first look at rulemakings. Under Chair Khan, the FTC was quite successful in rulemaking. Clearly, that will no longer be the case. The new commission will take steps to prevent most rulemakings that haven't been completed and may even attempt to undo some of the rules that have been finalized, including the recently finalized Negative Option Rule. As many of you may recall, the FTC has proposed amendments to the rule concerning subscriptions and other negative option plans. The Negative Option Rule, or proposed changes, are calculated to combat unfair, deceptive business practices, including recurring charges for products or services consumers do not want and cannot cancel without undue difficulty. But the cries of burdensomeness and overprescription have been very, very loud. Petitions have been presented and trade associations, including the Interactive Advertising Bureau and the National Cable and Telecommunications Association, have made their concerns very clear. I also note the Congress, through the Congressional Review Act, can void rules promulgated by a prior administration. Specifically, the Congressional Review Act is a tool Congress can use to overturn certain federal regulatory action. The CRA was enacted as part of the Small Business Regulatory Enforcement Fairness Act in 1996. The CRA requires agencies to report the issuance of rules to Congress and provides Congress with special procedures in the form of joint resolution of disapproval under which to consider legislation to overturn rules. If a CRA joint resolution of disapproval is approved by both houses of Congress and signed by the President, or if Congress successfully overrides presidential veto, the rule at issue cannot go into effect or continue in effect.
• Second, let's now look at the new commission and how they will interpret the law. It cannot be disputed that under Khan's leadership, the Commission has broadly interpreted certain laws, including the FTC's Unfairness Authority and the Restore Online Consumer Confidence Act. As you may recall, Rostker is a law that aims to protect consumers from unfair and deceptive online sales practices. The act was signed into law by President Barack Obama in 2010. But under Khan, the FTC has interpreted the law to go way beyond online sales practices. So we can anticipate a much less expansive interpretation of the law and rather a focus on statutory language. Clearly, a much more textualist approach will prevail. We're sure the new commission will focus on data and economics. Historically, Republican commissions have been more interested in economic analysis.
• Third, let's realize that technology, artificial intelligence and issues of privacy will be on the front burner. Concerns about social media, advertising and marketing sites that control or moderate content and de-platforming may well be raised.

What Is Deplatforming?

Let's step back for a second and talk about deplatforming. Deplatforming is the act of removing a user, a group, or an entity from a digital platform such as a social media site or a blogging website. This is usually done by the platform's owners or administrators in response to a violation of the platform's rules or guidelines. Deplatforming is a contentious issue, however, that involves a balancing of the need for a safe online environment with freedom of speech. Some say that deplatforming is an effective way to maintain online safety, while others argue that it can lead to users migrating to alternative platforms. These are issues that the FTC has not delved into before, but they may well be teed up in a new commission and be put on the front burner.

The FTC Enforcement Actions, Loper Bright and Chevron Doctrine

Finally, let's talk about enforcement actions and investigation. Let me note at the outset that Republicans are not shy about bringing enforcement actions under Simmons. The FTC brought multiple records setting civil penalty action, and that may well continue. And although the commission will still be focused on legitimate players, I suspect that a focus on major brands may well be relaxed and we can expect to see a greater focus on the fraudulent actors who engage in egregious law violations. Now, with respect to strategy and advocacy considerations in defending companies and individuals and law enforcement investigations, we can clearly take a much more pro-business advocacy and a more aggressive strategy, if you will. And as advocates defending companies in FTC matters, we can be more aggressive due to the Supreme Court's decision last term in Loper Bright. In Loper Bright Enterprises versus Raimondo the Supreme Court in a six-three decision held that the Chevron Doctrine, which grants significant deference to agency interpretations of federal statutes, conflicts with the Administrative Procedure Act's command that courts, not agencies, are to decide all relevant questions of law and interpret statutory provisions. To be sure, ladies and gentlemen, core concepts like unfairness and deception may well be interpreted differently. What constitutes "unfair business practices" will likely be interpreted differently, as unfairness and abuse are inherently subjective. It's a balancing of interests. Indeed, a pro-business philosophy values innovation. And regulators in the new administration will not want the government or an agency of non-elected officials to chill with it perceives as growth and opportunity. Likewise, what constitutes deception can be impacting. Now with a pro-business philosophy, how will the concept of a "reasonable consumer," be defined? Will caveat emptor be adopted? Let the buyer beware, which is a principle that places the responsibility on the buyer to perform due diligence and assume the risk of a purchase. And what level of substantiation is appropriate now for advertising claim? A more pro-business philosophy could well give businesses more freedom to promote their products. Again, the mantra may well be let the marketplace, not the regulators, tame what makes consumers buy. Let the communications flow freely. Again, the principle of caveat emptor may be adopted for what a reasonable basis is for making claims. While the staff of the agencies may be inclined to be more pro-consumer and they may believe that greed should be tame given their philosophy personally or given their tenure over a Biden or Obama or even the Clinton administration, their managers, that is the bureau directors, a new senior management team and indeed the ultimate leadership, the commissioner themselves will reject attempts for the staff to operate the way they did under Khan. We can expect such progressive approaches to be tamed substantially. 

Practical Advice: Risk Management Strategies Are Still Important

Now let's get practical. Do not be foolish. Even with these changes at the federal level, all companies and executives need to realize that state consumer protection agencies and other stakeholders are highly energized now. And other circumstances can cause trouble or even in a crisis. Therefore, awareness, compliance and risk management strategies are still essential. Over the coming months, we may hear rhetoric like this: Let the marketplace tame misconduct, not regulators, not the government, not unelected officials, not the administrative state. That may well give comfort and even give many to think that the good old days are here again. Anything goes. So we shouldn't worry at all. And the compliance concerns are a thing of the past. Let me say this as clearly as I can. Such thinking would be a mistake. It would be a huge mistake. As noted earlier, federal investigations and inquiries will still continue. And just because of this rhetorical or philosophical approach, we'll certainly see an increase in volume and intensity in investigations and actions by the Democratic state attorneys general. Let's be realistic; many AGs are simply energized and they see opportunity to become relevant political players in this current environment. And the governors of these states will certainly want their AGs to be friendly to consumers; after all, consumers are the voters and there will be other stakeholders beyond the attorneys general. And compliance management and being tuned in to developments but still be on the front burner and top of mind not withstanding a pro-business, anti-regulatory philosophy at the federal level.

After all, in addition, the state attorneys general and their actions there are

• watchdog groups that will be much more aggressive in outing misconduct and which could impact the brand of businesses that are outed.
• lawsuits by consumer groups. And trade association.
• letters by Congress members identifying unfair business practices by name companies.
• petition by trade associations, identifying alleged misconduct by companies and industries.
• actions by the NAD, the National Advertising Division of the Better Business Bureau, which will target misleading and deceptive advertising and marketing practices by companies.
• social media, bloggers and influencers who will attempt to shame companies and personnel and executives.
• media reports identifying people and companies that harm consumer interests.
• consumer class action lawsuits.
• claims by competitors.
• legislative activities in states like California, New York and Massachusetts that can be highly prescriptive in nature.

And that's not all, folks. I could go on for several more minutes. And in looking to the future of how businesses will be run and be developed, there will be emerging issues like artificial intelligence, AI, which may be politically neutral. There will be major developments in technology and social needs in the very near future that will clearly get attention by the regulators at both the federal and the state level. As the quote goes, you have to be vigilant about keeping your own fire alive. But in closing, I want to quote from Donald Trump himself, "For entrepreneurs, ignorance is not bliss. It's fatal. It's costly and it's for losers. You either get organized or you get crushed."

Concluding Thoughts

Now, I realize this has been much the cover, but here is the key takeaway. The FTC will change. It will be much more pro-business in this approach. The idea that regulators need to tame down what they perceive to be deceptive or unfair business practices is history. And any thinking that federal administrative agencies are in the best position to tell businesses how to conduct their affairs will be soundly rejected. Yet while there clearly will be a philosophical change in examining business affairs, that definitely doesn't mean that no investigations will take place or the compliance management can be put on the back burner. To be blunt and to be transparent, that type of thinking can be fatal. The states will be hyperenergized for a whole bunch of reasons, and progressive state legislators, trade associations and consumer groups won't be intimidated. Keep focused on looking out for what's in the best interests of your customers. Continue to develop policies. Procedures and practices that submit with the laws and regulations demand. Continued training to effectively implement these policies and procedures. Continue to engage in advertising and marketing that's transparent and accurate. Be aware of technological developments and changes. And continue to be aware of legal and regulatory developments. Indeed, ignorance is not bliss and being lax is not a good business strategy. So, ladies and gentlemen, stay tuned to further programs as we identify and address the key issues and developments and provide strategies for success. I wish you continued success and a meaningful day. Thank you.