JANNA BROWER
After nearly 100 years, the stars may finally be aligned so that the Federal Trade Commission can live up to its original promise. The FTC, a small agency created in 1914 during the Progressive Era, was endowed with a potent authority for promoting competition and consumer protection that it has never fully used. This includes investigative authority over virtually all businesses, backed by subpoena power and the capacity to demand reports of data that corporations would rather withhold from public view.
The FTC and its antitrust big brother, the Justice Department, have for generations competed, not partnered. Now the stage is set for a more productive collaboration, with the FTC taking more far-reaching and innovative approaches to corporate giantism. Recently President Obama’s chief antitrust enforcer at the Justice Department, Christine Varney, announced a return to aggressive antitrust enforcement. What was not generally noted by the press was that Varney had previously served as a Democratic FTC commissioner and has a deep commitment to the agency’s broad mandate. After decades of Justice Department antitrust chiefs looking down their noses at the FTC’s efforts to expand its antimonopoly reach, the agency now has an ally and partner at Justice.
Under the Bush administration, the FTC performed useful, if modest, tasks and emerged with its competent and committed investigative and prosecutorial staff intact and uncorrupted. Under its chair, William Kovacic, a veteran antitrust enforcer, the FTC went after anticompetitive mergers, recession-spawned debt-collection abuses and Internet fraud, and stubbornly refused to cooperate with the Bush Justice Department’s efforts to eviscerate antitrust enforcement.
The FTC has even more progressive leadership now. Its new chair, Democrat Jon Leibowitz, appointed by Obama from among the sitting commissioners (thus, not needing Senate confirmation), has been a vigorous proponent of strong agency action in critical areas of consumer protection, such as children’s advertising that promotes obesity, and more vigorous antitrust action. This FTC has brought action to stop brand-name pharmaceutical companies from paying generics to stay off the market as part of their patent settlements. These agreements cost consumers billions of dollars. The three other sitting commissioners–two Republicans and one independent–believe in the agency’s mission and are prepared to take progressive, even radical, action. For example, one of the Republicans, Thomas Rosch, a lively relic from the days when Republicans believed in competition and rigorous antitrust enforcement, recently exhorted the FTC to use its broad antitrust mandate to break up those “too big to fail” corporations that have bedeviled the Obama administration’s economic recovery strategies. “Antitrust laxity during an economic recession can result in a deepening of economic contraction,” Rosch declared. The progressive economic adage “Bigness can be badness,” heresy under the Bush administration, is back.
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The FTC is the pre-eminent enforcer in consumer protection, but it lacked the support or enough resources from Congress to expand its reach to the plague of corporate assaults on consumers exacerbated by the recession. This, too, has changed. For the first time in decades, the Senate and House authorizing and oversight committees and the judiciary committees are pressing the agency to act more aggressively on the consumer-protection and competition fronts and are prepared, as needed, to strengthen its enforcement powers.
This changed Congressional dynamic surfaced in a recent FTC oversight hearing presided over by the new chair of the Senate Commerce Committee, Jay Rockefeller. Commissioner Pamela Jones Harbour was testifying on the FTC’s enforcement measures against predatory debt collection practices. Rockefeller peppered her with admonitions: with a couple of million people facing these problems, why was he supposed to be impressed by thirteen recent FTC cases? The effort was appreciated but it just didn’t count anymore. “People will just keep slipping underwater. It’s like murder, murder without blood.” What the agency needed was a cop mentality–send people to jail. Hold them up to ridicule. Word gets out in the underworld, he said. Shortly after that, FTC chair Leibowitz responded indirectly by naming David Vladeck to direct the agency’s Bureau of Consumer Protection. Vladeck served as lead litigator, and later director, of Ralph Nader’s Public Citizen litigation group for nearly thirty years, continuing his advocacy as a law professor at Georgetown University Law School.
But Congress needs to take action to unleash the FTC’s full potential. First, it remains a small agency with broad and complex responsibilities and cumbersome procedural burdens, especially in rule-making. Here, the FTC’s champions in Congress can make certain that Congress supplies more resources and streamlines the FTC’s authority. The agency also has a chronic problem of setting priorities: wherever it turns, there are corporate malefactors, large and small, deserving of prosecution. Last year then-chair Kovacic prepared a broad review of the FTC’s effectiveness on the occasion of its approaching 100th anniversary. In his report he called for a larger staff and mission for the FTC’s independent Policy Planning Office to set priorities for the agency–especially apt to its mission of helping to restore a healthy and competitive economy. But the effort needs more than planners; it needs many more prosecutorial troops on the ground.
The second problem facing the FTC is the hangover from eight years of reactionary Bush judicial appointments hostile to FTC cases. (These cases invoked innovative legal theories that aimed for such goals as denying mergers or breaking up huge conglomerates and cited not only traditional anticompetitive theories but broader theories of harm to the economy and the public welfare.) This impediment, too, could be significantly ameliorated by clear legislative authority.
Perhaps the FTC could have its most valuable impact not from developing new cases or rules–which could take years to wind through hostile courts–but by using its existing powers to launch broad investigations that would provide the evidentiary foundation for new legislation strengthening the FTC’s competition and consumer-protection authority. In earlier times, such investigations were requested, even mandated, by Congress, through the FTC’s authorizing committees: the Senate and House Commerce committees, now chaired, respectively, by Rockefeller and the leading consumer advocate in Congress, Henry Waxman. A simple Senate or House resolution initiated by either committee could launch a serious investigation of the need to break up existing corporate giants whose size constitutes not just an anticompetitive threat but a broader threat to society. Even a joint request from Waxman and Rockefeller, followed by the necessary appropriations, could set such investigations in motion. For example, the FTC is prohibited from investigating the insurance industry, our next unfolding financing scam, by a lobbyist-engineered legislative prohibition. But that ban could be overridden by a simple request from the House and Senate Commerce committees.
President Obama has peopled his antitrust and consumer-protection agencies with exactly the right advocates. A little encouragement from his administration to the already willing Congressional leaders could initiate fundamental change we can believe in.
