Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Khan testifies before House subcommittee on FTC budget request, (May 15, 2024)

By Peter Reap, J.D., LL.M.

The FTC also released its FY 2023 Annual Report, summing up its latest accomplishments.

In testimony before the House Appropriations Subcommittee on Financial Services and General Government on May 15, 2024, FTC Chair Lina M. Khan submitted the agency’s fiscal year 2025 budget request and argued in favor of proposed levels of $535 million and 1,443 full-time employees (FTEs), an increase of $109 million and 55 FTE. In her testimony, Chair Khan detailed how the agency is using its current funding and noted the value it provides to the American people and highlighted the FTC’s accomplishments over the past year since her previous appearance before the subcommittee. As Khan was testifying, the FTC also released its Fiscal Year 2023 Annual Report outlining the agency’s work during that period.

Khan—prepared remarks. Khan’s prepared remarks featured these notable FTC accomplishments in the last 13 months:

• Finalized a rule to ban noncompete clauses, which would raise workers’ wages by $524, create over 8,500 new businesses, and lead to between 17,000 and 29,000 more patents annually;

• Proposed a rule to ban junk fees that conservatively cost consumers $90 billion a year;

• Prompted pharmaceutical companies to take down junk patent listings on inhalers and slash costs for millions of Americans from hundreds of dollars down to $35;

• Challenged the largest supermarket merger in U.S. history, alleging that it would raise grocery prices and reduce wages for hundreds of thousands of workers;

• Uncovered evidence of an oil executive attempting to collude to reduce output, which would result in Americans paying higher prices at the pump;

• Ordered data brokers to stop selling consumers’ sensitive geolocation data that can reveal which doctors they visit, where they worship, and where they live;

• And continued to hold companies accountable—including through record-setting penalties—when they deceive the public about their products being “made in the USA”

The remarks attributed funding increases over recent years as a significant contributor to these accomplishments, while bemoaning that the FTC’s enacted budget for FY 2024 of $425.7 million represented a 1% reduction from the previous year. This reduction, along with mandatory pay raises, “means significantly less to support the FTC’s critical mission.”

The hard work of the roughly 1,320 FTC staff saved consumers nearly $3 billion last fiscal year, according to the remarks. The increases in the 2025 budget would help ensure that the agency can absorb rising costs and would be partially offset by fees collected from Hart-Scott-Rodino filings and pursuant to the Telemarketing and Consumer Fraud and Abuse Prevention Act.

The prepared remarks went on to discuss the work done to fulfill the agency’s two major missions - Consumer Protection and Competition. In the Consumer Protection area, the remarks detailed work to prevent fraud and deceptive business practices; safeguard consumer privacy and data security; and ensure fairness for workers, entrepreneurs, and small businesses. The Competition section described merger enforcement efforts to combat consolidation, enforcement efforts to stop anticompetitive conduct outside of the merger context, and policy and research development projects. A final section of the remarks, Enhancing the Commission’s Technical Expertise, described the launch of a new Office of Technology (OT) to support the agency’s law enforcement and policy work.

Khan—hearing questions. Chair Dave Joyce (R-OH) began the questioning by asking about the FTC’s controversial new rule that would ban all noncompete agreements by asking under what statutory authority the FTC promulgated the rule. Khan replied that it was promulgated under section 6(g) of the FTC Act, which says that the FTC can issue rules as part of its work; and Section 5 of the Act which prohibits unfair methods of competition; and the FTC is determined that noncompete clauses constitute such unfair methods of competition.

Joyce asked if the rule carried economic and political significance and may be subject to the Major Questions Doctrine? Khan replied that in the final rule the agency lays out why it does not believe it is subject to the Major Questions Doctrine, explaining that although the agency was initially not confident about what the scope of the rule should be, because they received over 26,000 comments to the proposed rule with a wide variety of details about the harm that noncompetes were doing across the economy, that they believe the final rule was “the right place to land.”

Ranking member Steny Hoyer (D-MD) then asked about what the FTC would not be able to do if the requested budget increase was not approved. Khan said it would mean the agency would be forced to institute fewer lawsuits and investigations to protect consumers.

Ranking member Rosa DeLauro (D-CT) asked Khan what actions the FTC has taken to reign in high food prices. Khan discussed the agency’s recent study on the grocery industry which found that consolidation can aggravate supply chain problems.

Rep. Steve Womack (R-AR) asked Khan about robocalling – stating that the FTC has not yet fixed the problem – “right?” He congratulated her on bringing enforcement actions in the area buy reiterated that the problem is not fixed. Womack then mentioned that Khan comes from academia where she argued and supported a dramatic increase to the FTC’s regulatory enforcement powers and has a record of being anti-merger – “are there any mergers that are good for the economy, in your view,” he asked? Khan replied that 98% of mergers proceed without a second question from the government and Womack quickly interrupted to say that this is just because they are beyond your reach, right? Khan smiled and to replied that some mergers present “legal issues” and the FTC has an obligation to protect consumers from illegal consolidations. She also mentioned the FTC’s win at the Fifth Circuit in the Illumina/GRAIL merger case, to which Womack added “even a broken clock is right twice a day.”

FTC FY 2023 Annual Report. The FTC’s Annual Report for 2023 describes the work it did to vigorously enforce the nation’s antitrust and consumer protection laws in a constantly evolving modern economy. As artificial intelligence and algorithmic decision-making tools proliferated, the FTC’s enforcement and policy efforts have been forward-looking—enabling the agency to stay on the cutting edge as these technologies develop, according to the agency.

“The FTC is focused on ensuring that American consumers, workers, and entrepreneurs can enjoy honest markets and the economic liberty that fair and free competition provides,” said Chair Khan. “As detailed in this report, the work of our talented and dedicated staff in FY 2023 made Americans’ lives better in meaningful and material ways—from safeguarding people’s access to affordable healthcare to protecting people’s sensitive data from unchecked surveillance.”

In releasing the report, the agency made special note of these FY 2023 efforts to protect consumers:

• Suing Amazon for difficult to cancel Prime subscriptions;

• Conducting the largest telemarketing sweep in U.S. history;

• Stopping a money-making scheme that claimed to use artificial intelligence to boost earnings; and

• Filing privacy protection suits against Amazon, Microsoft, BetterHelp, and Ring;

and these antitrust efforts:

• Suing Amazon for illegally maintaining its monopoly power and raising prices;

• Challenging U.S. Anesthesia Partners and private equity firm Welsh Carson for monopolizing anesthesiology practices in Texas; and

• Blocking anticompetitive mergers, including IQVIA’s proposed acquisition of Propel Media, Inc.

News: Antitrust ConsumerProtection FederalTradeCommissionNews