The Expected Impact of the Election and Republican Control of Congress on the FTC

The election of Donald Trump as president, combined with forthcoming Republican control of Congress, likely means significant change in how the Federal Trade Commission (FTC or Commission) is structured and approaches policymaking. This Holland & Knight publication aims to help businesses and decision-makers prepare for how a revamped FTC may affect them.

A High-Level Perspective: Four Points

Point 1. In the past, Donald Trump has criticized the FTC for acting like a "fourth branch of government." With the expected departure of current FTC Chair Lina Khan, a reduction in aggressive interventions, broad legal interpretations and rulemaking is on the horizon. The makeup of the Commission will change, as will senior management, with the directors of Consumer Protection and Competition being named by the new or acting FTC chair.

Point 2. Khan's time in office has seen the FTC go after big tech in a big way. That may change under a Trump-appointed Commission. In October 2024, President-Elect 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." During Khan's administration, the FTC has challenged Microsoft's purchase of a video game maker and Meta's purchase of a virtual reality company. (However, courts allowed the deals to move forward in both cases.) Khan also went after Meta and Amazon, accusing them of abusing monopoly power.

Point 3. Historically, the FTC has acted in an apolitical manner and has not been philosophically extreme one way or another. Therefore, changes in presidential administrations did not lead to major changes at the FTC. As the Khan tenure demonstrated, those days are gone, and the election results with Trump as president and the Congress in full control by Republicans will have a significant impact on the FTC.

Point 4. All of this doesn't mean business can exhale and relax. Even with these changes at the federal level, 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 are still essential. So is staying in touch with regulatory and legal developments on many fronts.

Structural Impact of the Election on the FTC

Currently, three Democrats and two Republicans make up the five-member Commission. One of the Democrats is Khan, and her term actually expired in September 2024. However, commissioners are able to stay onboard even after their term expires until the Senate confirms their replacements.

Shortly after Inauguration Day on Jan. 20, 2025, it is anticipated that either Commissioner Melissa Holyoak or Commissioner Andrew Ferguson, both Republican, will be designated by President Trump as the new FTC chair or acting chair. Ferguson was the former chief counsel for Sen. Mitch McConnell (R-Ky.), and Holyoak was Utah's former Solicitor General. At that point, there still will 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 a majority is needed in order to take action at the FTC.

Even if Khan decides to leave right after the inauguration, there would be a stalemate at 2-2. So, if the Commission wants to file a complaint, dismiss an action or start a process to rescind a rule, a majority vote is required.

Note that, historically, new administrations were slow in nominating and confirming appointees for the FTC. For example, former FTC Chair Joseph Simons was not appointed until at least a year after the 2017 inauguration. However, that will not happen this time. Presumptive Trump Administration cabinet member Elon Musk said that Khan would "be fired soon" in a social media post on Oct. 31, 2024.

It is anticipated that within the first quarter of 2025, a Republican commissioner (or a new permanent Republican chair) will be confirmed. Again, the Republicans control the Senate, so the confirmation process will very likely be expedited.

With respect to current matters at the Commission, it is expected that a new FTC chair will be examining the entire pipeline of FTC investigations and may well move to close or modify investigations that are inconsistent with its priorities and their interpretations of the law.

Finally, with respect to structural changes, note that a new FTC chair or acting chair will most likely replace all of the bureau directors – very quickly. That may well have an immediate impact on consumer protection matters, as Samuel Levine, current director of the Bureau of Consumer Protection, was an advisor to former FTC Commissioner Rohit Chopra, the current director of the Consumer Financial Protection Bureau. But beyond those senior management appointments, it is expected that FTC staff and their managers will remain.

Look Into the Future: Anticipated Substantive, Interpretive and Policy Changes

Rulemakings

Under 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 completed Rule Concerning Subscriptions and Other Negative Option Plans (Negative Option Rule).

As has been noted, the FTC has proposed amendments to the Negative Option Rule. The proposed changes are calculated to combat unfair or 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 loud. Petitions have been presented, and trade associations including the Interactive Advertising Bureau (IAB) and National Cable Television Association (NCTA) have made their concerns very clear.

It also is noted that Congress, through the Congressional Review Act (CRA), can void rules promulgated by a prior administration. Specifically, the CRA is a tool that Congress can use to overturn certain federal agency actions. 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 a 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 a presidential veto, the rule at issue cannot go into effect or continue in effect.

How a New Commission Could 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 Shoppers' Confidence Act (ROSCA).

As you may recall, ROSCA 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 beyond online sales practices.

It is anticipated there will be much less expansive interpretations of the law and, rather, a focus on statutory language. A much more textualist approach is expected to prevail. The new Commission is expected to focus on data and economics since, historically, Republican Commissions have been more interested in economic analysis.

Technology, Artificial Intelligence (AI) and Issues of Privacy on the Front Burner

Concerns about social media advertising and marketing, sites that control or moderate content, and deplatforming may well be raised.

Deplatforming is the act of removing a user, group or entity from a digital platform, such as a social media channel or 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 that involves balancing 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 in the past, but they may well be teed up in a new Commission and be on the front burner.

Enforcement Actions and Investigations

As stated earlier, Republicans are not shy about bringing enforcement actions. Under Simons, the FTC brought multiple record-setting civil penalty actions. That may well continue. Additionally, although the Commission will still be focused on legitimate players, a focus on major brands may well be relaxed, and a greater focus on the fraudulent actors who engage in egregious law violations is expected.

With respect to strategy and advocacy considerations, in defending companies and individuals in law enforcement investigation, a more pro-business advocacy strategy is anticipated. In addition, advocates defending companies in FTC matters can be more aggressive due to the U.S. Supreme Court's decision earlier this year in Loper Bright Enterprises v. Raimondo.

In Loper Bright, the Supreme Court, in a 6-3 decision, held that 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, core concepts such as "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 and a balancing of interests is required. Indeed, a pro-business philosophy values innovation, and regulators in a new administration will not want the government (or an agency of nonelected officials) to chill what it perceives as growth and opportunity.

Likewise, what constitutes "deception" can be impacted. Now, with a pro-business philosophy, how will the concept of a "reasonable" consumer be defined? Will "caveat emptor" – the principle of "let the buyer beware" that places the responsibility on the buyer to perform due diligence and assume the risk of a purchase – be adopted?

And what level of substantiation is appropriate for advertising claims? A more pro-business philosophy would give businesses more freedom to promote their products. 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.

Though the staff of the agencies may be inclined to be more pro-consumer and believe that "greed" should be tamed given their tenure over a Biden or Obama (or even a Clinton) administration, their managers (bureau directors or a new senior management team) and the ultimate leadership (the commissioners themselves) likely will reject attempts for the staff to operate the way they did under Khan. It is expected that such progressive approaches will be tamed substantially.

Still, Do Not Be Careless with Compliance

Even with these changes at the federal level, 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 are still essential.

Over the coming months, we may hear rhetoric such as "Let the marketplace tame misconduct. Not regulators. Not the government. Not nonelected officials. Not the administrative state." That may give many to think that the "good ol' days" are here again and that anything goes, so there should be no worries anymore and that compliance concerns are a thing of the past.

Such thinking would be a mistake – a huge mistake.

As noted earlier, federal investigations and inquiries will continue. And because of this rhetorical or philosophical approach, an increase in volume and intensity in investigations and actions by Democratic state attorneys general (AGs) is anticipated.

To be realistic: Many AGs are simply energized, and they see opportunities to become relevant political players in this current environment.

There will be other stakeholders beyond AGs, and ensuring compliance management and tuning into developments must still be top of mind, notwithstanding a pro-business, antiregulatory philosophy at the federal level.

After all, in addition to state AG actions, there are:

• watchdog groups that will be more aggressive in outing misconduct, which could impact the brand of businesses that are outed
• lawsuits by consumer groups and trade associations
• letters by Congress members identifying unfair business practices by named companies
• petitions by trade associations identifying alleged misconduct by companies and industries
• actions by NAD (the National Advertising Division of the Better Business Bureau) that will target misleading and deceptive advertising and marketing practices by companies
• social media bloggers and influencers, who will attempt to shame companies and executives
• media reports identifying people and companies that harm consumer interests
• consumer class action lawsuits
• claims by competitors
• legislative activity in states such as California, New York and Massachusetts that can be highly prescriptive in nature and
• potential actions by other organizations and individuals

Looking to the future of how businesses will be run and developed, there will be emerging issues such as AI, which may be politically neutral. There also will be major developments in technology and social needs in the very near future.

As the Tift Merritt quote goes, "You have to be vigilant about keeping your own fire alive." Relatedly, Donald Trump himself said: "For entrepreneurs, ignorance is not bliss. It's fatal. It's costly. And it's for losers. You either get organized, or get crushed."

For more information or questions about a specific matter, please contact Holland & Knight Partner and Co-Chair of the firm’s Consumer Protection Defense and Compliance Team Anthony DiResta. Mr. DiResta is a former regional director at the FTC.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.