Archives For aicoa

Welcome to the FTC UMC Roundup for the middle of July. As we sit between the Fourth of July and August recess, the  first images from the James Webb space telescope are a nice way to put the day-to-day grind of antitrust law into perspective. In part, that’s my way of saying that as Congress rushes towards recess, POTUS is out of the country, and several Senators are fighting Covid (we hope all get well soon), it hasn’t been the busiest week in antitrust law. But it’s also a useful framing for this week’s headline.

This week’s headline: Just as the Webb telescope peers back into the history of the universe, this is a week to look back into recent competition history: the one year anniversary of the President’s Executive Order on competition policy. Aspen Digital hosted a discussion about the Order with National Economic Council director Brian Deese. As one would expect, the discussion started with brief remarks in which Deese was able to very briefly outline the Order’s very several impacts over the past year. 

Deese’s remarks were followed by a Q&A hosted by NYT reporter Cecilia Kang. Kang pressed Deese on a few topics. She asked how the recent Major Questions Doctrine ruling in West Virginia v. EPA affects the administration’s thinking about competition policy. Deese’s response – undoubtedly the correct one – is that the administration is looking for areas where there is bipartisan legislative interest in Congress. She asked whether the administration would ask Senate leader Chuck Schumer (D-NY) to move on pending antitrust legislation (that is, AICOA); when Deese dodged the question about Schumer, she asked again. Curiously, Deese refused to mention Senator Schumer, instead saying that the administration has been working with the bill’s sponsors, Senator Klobuchar (D-MN) and Chuck Grassley (R-IA). (Ben Brody has a piece on the pressures being brought to bear upon Schumer to act on AICOA.)

Deese’s National Economic Council colleague Tim Wu offered some comments on Deese’s speech on Twitter, explaining that the Executive Order has “become a means of trying ensure that competition policy is in line with our macro-economic policy goals.” “In a sense, the agencies are doing microeconomic competition policy, while the Competition Council has an eye on macro effects, and is setting micro priorities from that perspective.”

Continuing with this week’s lede that there’s not much going on: AICOA continues to go nowhere, fast. Supporters of the bill are lobbying the intelligence community to assuage concerns that it could harm national security interests. A spokesperson for the Office of the Director of National Intelligence responded that “the [Intelligence Community] does not weigh in on the merits of policy options.” Conservative continue to support AICOA as a tool for cracking down on content moderation policies – contrary to Democratic assurances that it can’t be used in that way. And Access Now has sent a letter to Congress on behalf of various global NGOs arguing that AICOA is necessary to address Big Tech’s human rights violations facilitated by its “reign over the world.” Antitrust law truly is everything to everyone.

Advocacy aside, AICO continues to appear to be dead bill stalling. Cristiano Lima at the Washington Post did a whip call of its own, finding “the number of senators willing to publicly say at this point they back the bills is well short of 60.” Importantly, this includes several senators who had previously publicly supported the bill. Adam Kovacevich walks through the challenging calculus: Senator Klobuchar is focused on getting Republicans to support the bill, and is losing Democratic support along the way. He also screams the loud part out louder: “It’s awfully hard for AICOA backers to claim the bill doesn’t impact content moderation when MAGA conservatives … just come right out and say they’re backing the bill because it would stop Apple/Amazon from banning Parler.”

Lest we forget about small businesses, let’s not forget about small businesses: AICOA would be bad for them, too.

The irony of it all is mercatus uber alles. The Wall Street Journal is reporting that Amazon may be scaling back its private-label brands.

Is anything going on at the FTC? Surprisingly little. Perhaps everyone’s getting ready for the next open meeting. It’s not yet on the calendar, but rumors are flying that rulemakings could be on the agenda

A lack of activity, however, won’t keep bad news out of the FTC. In what is truly heartbreaking, if not unsurprising, news, under Chair Khan the FTC has fallen from one of the best to one of the worst federal agencies to work for in the latest “Best Places to Work in the Federal Government.” It’s not just FTC employees who have questions about Khan’s leadership. Leah Nylen reports that the US Chamber of Commerce has sued the FTC, asking for disclosure of information under FOIA that the Commission has refused to provide. The Chamber recently prevailed in its efforts to require the Commission to disclose its operations manual.

What should you be reading and watching during this lazy month of July? Well, you could start with contributions to the Truth on the Market FTC UMC Rulemaking Symposium. We have had recent contributions summarizing chapters from Dan Crane’s recent book on the topic. These chapters were presented at a recent CCIA/Concurrences conference, recordings of which are also now online. TechFreedom is hosting its 2022 Policy Summit on July 20 and on July 27 Punchbowl is hosting a conversation with Representative Eric Swalwell on “the importance of privacy and security in existing and new technologies.”

Signing off with a recommended deep read: Adam White helps to contextualize West Virginia v. EPA and the Major Questions Doctrine in the broader scheme of the Court’s recent jurisprudence. It’s easy for those in the trenches to focus on what individual opinions mean for specific agencies and issues. But these cases are dots in a much larger mosaic of shifting jurisprudential and political theory.

Happy Independence Day Week! Having started off with the holiday, this has been a relatively slow week on the antitrust front in the United States. But never fear, Europe is here to help fill out the weekly news roundup. And, even on a slow week there is plenty in the news domestically. Perhaps more important: everyone working on FTC and antitrust issues should take advantage of these respites when the come – any calm most likely is a harbinger of a storm to come.

This week’s headline is the passage of the Digital Markets Act (DMA) and Digital Services Act (DSA) by the European Parliament. The DMA has often been compared to the American Innovation and Choice Online Act (AICOA) – as of this week their biggest difference is that the DMA now is law while AICOA’s fate continues to appear fraught. For more details on the substance the DMA, we’ve discussed it on here on Truth on the Market, and both Axios and the Chamber of Commerce offer overviews.

Also on the European front, Europeans are beginning to reckon with the fact that soon Facebook may cease operations in Europe due to the bloc’s privacy rules. For pro-privacy regulators this may be viewed as a win. The rest of Europe was unavailable for comment (likely due to European privacy laws).

Back in the states the biggest news continues to be fallout from the Supreme Court’s embrace of the major questions doctrine. After a few days of misreporting on the opinion in West Virginia v. EPA as preventing the EPA from regulating greenhouse gasses, the media is now realizing that the import of the opinion goes to broader questions of the administrative state – and that it could impact tech regulation in particular.

Sophisticated thinkers have seen the potential impact of the case since before it was decided. In the days since they have been exploring the scope of the ruling and how the lower courts will implement it, discussing its implications for big tech, debating whether it will or will not limit the FCC’s net neutrality authority (answer: it will). And as numerous posts made as part of this TOTM FTC UMC Symposium have argued, it will likely substantially limit the FTC’s UMC rulemaking authority.

One thing I have wondered is how agencies will respond to the MQD in their rulemaking. Agencies often discuss the importance of their rules in an effort to justify them. Tom Wheeler was fond of discussing the Internet as the “most important network in the history of Man.” Arguing that the costs of regulatory action are very high helps to sell the benefits of regulation as substantial. But now, arguing that the costs of inaction are high might also make it easier to argue that the question being addressed in a major one – of vast political or economic significance. Will we start to see agencies downplay the importance of their work?

As usual, we can’t not have some updates on AICOA. The most salient update may be the lack of update. While Senator Klobuchar (D-MN) continues to push the bill forward, Leader Schumer (D-NY) has no apparent interest in bringing it to the floor. And even if it gets through the Senate, there may be trouble waiting in the House? Beyond that, this week saw both Zach Graves get off the fence and speak out against AICOA.

Quick hits: Protocol reports the CFPB is hoping to hire 25 technologists to help it wage war on the tech industry. Bloomberg reports the FTC is toying with the Robinson-Patman Act. And the FTC brings another right-to-repair action, this time against Weber, to prohibit warranties that are voided by independent repairs.

What you missed, What to watch? Last week’s Federalist Society discussion of Biden’s Antitrust Agenda: Mission Creep or Mission Achieved was a must-watch. Hope you didn’t miss it! If you did, you can redeem yourself by making it to AEI’s discussion with FTC Commissioner Noah Phillips on Crossing the Consumer Welfare Rubicon.

Fireworks came a bit early this year. Between the Supreme Court’s end-of-term decisions and this week’s January 6th Committee hearings, it wasn’t a week with much antitrust news coming out of either the FTC or Congress. But the Supreme Court’s made sure to keep things exciting: the opinion in West Virginia v. EPA case will reshape the regulatory landscape for years to come, including the world of antitrust.

This week’s headline is the WV v. EPA opinion. Nominally about the EPA’s efforts to regulate coal power plants, the opinion is really about the so-called major questions doctrine (MQD). Summarizing in a sentence a case that will be the subject of hundreds of law review articles and years of clarifying litigation, the MQD says that agencies can’t enact regulations of vast political or economic significance unless Congress clearly delegates them the authority and tools to do so. 

This outcome isn’t surprising – but it is nonetheless a big deal. For some general discussion, you could do worse than listening to Corbin Barthold and Berin Szóka dissecting the opinion in real-time. Focusing specifically on the FTC, commentators anticipating the ruling have argued that the MQD could substantially curtail the FTC’s UMC authority. Now that we have the opinion, that outcome seems likely confirmed.

The contours of the major questions doctrine are unclear. That is one of the most trenchant criticisms of the doctrine. But the Court’s opinion points to several factors beyond merely relating to a rule of “vast political or economic significance” (which remains the defining characteristic). Claiming new, or only rarely used, regulatory authority suggests a major question, especially if that authority would mark a “transformative expansion” in the agency’s authority. If the power is based in vague language or “ancillary provisions” of a statute suggests a major question. Or Congress having “conspicuously and repeatedly declined” to regulate the issue through legislation suggests a major question. All of these factors apply in the context of the FTC using its UMC authority, based the ancillary rulemaking authority of Section 6(g), to transformatively expand its authority to address any number of issues that are believed to be subject to FTC interest.

At the same time, those concerned about expansive UMC authority should not be too quick to think the UMC rulemaking project dead. The EPA and many other agencies to which the MQD is likely to apply, such as the FCC, have narrower scope than the FTC. While broad, the EPA’s authority is tailored to specific environmental issues; the FCC’s authority is tailored to specific communications technologies. Arguably, the FTC’s authority is more general than other agencies to which the MQD will clearly apply – unfair methods of competition can occur in any aspect of the economy.

Realistically, however, the prospects of the FTC surviving a MQD challenge if it pushes aggressive use of its UMC authority are slim. The bareness of the Section 6(g) rulemaking authority is challenge enough. But perhaps even more important is the theory underlying WV v. EPA and the MQD. Justice Roberts’s majority opinion invokes both separation of powers and legislative intent concerns. The MQD is about both whether Congress meant to, and whether it was appropriate for it to, delegate broad authority to an agency. It seems clear that if Congress wants to delegate substantial power to an agency that the Court expects Congress to be very clear about what that power is and how it is to be used. It is not enough to say “EPA, you regulate environmental stuff; FTC you regulate competition stuff.”

Turning now to other news. Can we call AICOA dead yet? Probably not, but time for Sen. Amy Klobuchar (D-MN) to save her American Innovation and Choice Online Act runs low. In addition to the academics, advocates, and Democratic senators (see last week’s Roundup for those details), social justice groups have joined the chorus expressing concerns about how AICOA might limit platforms’ ability to engage in content moderation. Alden Abbott has also brought focus to largely overlooked rule of law concerns raised by AICOA.

Speaking of other dead things, ADPPA seems to be spinning in its own grave. Late last week Sen. Maria Cantwell (D-WA), chair of the committee the bill would need to go through, said she has no plans to consider the bill in committee – and that Sen. Chuck Schumer (D-NY) has no interest in bringing it to the Senate floor. That sounds pretty dead. But the Court’s Dobbs opinion has made it deader. Over the weekend, a spokesperson for Cantwell “does not adequately protect against the privacy threats posed by a post-Roe world.” 

So, it seems likely the FTC remains the only potential privacy bulwark to which privacy advocates can turn. President Biden is already asking them to address Dobbs-related privacy issues. But query: would an FTC effort to develop rules to address privacy concerns present a major question – these are issues of longstanding Congressional debate and substantial economic and political importance? (I expect not; but I expect the issue could get into court.)

Some quick hits, literally. Today one forgets about the CFPB or its director, Rohit Chopra, at their peril. The Chamber of Commerce is trying to change this. ITIF’s Julie Carlson talks about the meteoric rise and fall of Lina Khan. The fall seems premature, but the WV v. EPA has certainly brought the ground closer. It may be a less literal hit, perhaps, but MLB’s antitrust exemption may be in its last innings. And where’s the beef? Price stabilization legislation is moving through the Senate Ag Committee.

Some parting thoughts? If you insist. Last week we mentioned this week’s Concurrences conference on the Rulemaking Authority of the FTC. It was a great event! Among other things, it introduced Dan Crane’s new, must-read, book on the topic, featuring chapters by a who’s-who of writers in the field. Several authors have previously contributed to the Truth on the Market symposium on the topic (hey, this post is part of that, too!) – and in the coming week we will have some more contributions from those authors.

Finally, a Friday afternoon read: Last week was Microsoft Internet Explorer’s last as a going concern. What can those concerned about big tech learn from the browser wars? Find out here.

The FTC UMC Roundup, part of the Truth on the Market FTC UMC Symposium, is a weekly roundup of news relating to the Federal Trade Commission’s antitrust and Unfair Methods of Competition authority. If you would like to receive this and other posts relating to these topics, subscribe to the RSS feed here. If you have news items you would like to suggest for inclusion, please mail them to us at ghurwitz@laweconcenter.org and/or kfierro@laweconcenter.org.

The fate of the badly misnamed American Innovation and Choice Online Act, S. 2992 (AICOA), may be decided by the August congressional recess. AICOA’s serious flaws have been ably dissected by numerous commentators (see, for example, here, here, here, and here). Moreover, respected former senior Democratic antitrust enforcers who have advocated more aggressive antitrust enforcement have also come out against the bill. For example, Stanford professor and former Acting Assistant Attorney General for Antitrust Douglas Melamed (who oversaw the Microsoft case for the Clinton Administration) very recently authored an article stressing that AICOA “is likely to impair innovation by the platforms.” The case has ably been made that the perverse welfare-reducing effects of multiple AICOA provisions, which impose inordinate costs (stemming, for instance, from interoperability requirements and prohibitions on “self-preferencing,” “discrimination,” and data usage) and discourage efficient vertical integration (see here), among other defects.

One aspect of AICOA that perhaps has garnered less attention is its affront to the rule of law. That deficiency in and of itself is sufficient to justify the summary rejection of this legislation by the Congress. Let’s examine it more closely.

A core element of the rule of law is that the government should apply the law neutrally to similarly situated entities. This principle is mocked, however, by the AICOA. The AICOA’s convoluted definition of “covered platform,” found in section 2(a)(5)(B) of S. 2992, focuses on rather arbitrary “monthly user,” capitalization, and sales value thresholds. Although the definitional elements were clearly designed to capture only the largest current digital platforms (all American) that have been in the public spotlight – Amazon, Facebook (now Meta), Apple, Google (now Alphabet), and Microsoft (possibly) – companies could fall within or outside the bill’s scope based on unpredictable changes in financial and user data in the future. This would lead to uncertainty as to whether particular firms were covered by the bill. It would also encourage corporate gamesmanship by specific firms as they sought to avoid the AICOA’s reach. As such, business planning would be rendered more difficult and less efficient, and the rule of law would be frayed.

A related rule of law concern is that parties be informed of the conduct they must adopt in order to avoid violating a particular law. Contemporary antitrust law does a far better job than the AICOA in satisfying this concern.

Contemporary American antitrust law has identified a few types of actions that are inherently anticompetitive, and therefore are “per se illegal” under all circumstances (bid rigging and naked horizontal price fixing and market division). Most business behavior, however, is assessed on a case-by-case basis under the antitrust “rule of reason,” which only condemns behavior whose anticompetitive effects outweigh its procompetitive effects. Rule of reason analysis prohibits  behavior that inefficiently weakens the competitive process and excludes rivals for no legitimate business reason, and thereby tends to reduce consumer welfare. Mere harm to individual competitors (due say to more efficient or innovative production techniques) is not condemned. Specific enforcement agency guidance through speeches, enforcement actions, and enforcement guidelines have developed over time on a bipartisan basis to clarify what competition on the merits means in particular circumstances. As former Acting Assistant Attorney General for Antitrust Andrew Finch explained in a 2017 speech, enforcers’ emphasis has been giving notice about enforcement principles that allows private parties to reasonably predict the legal consequences of their actions:

[S]tability and continuity in enforcement are fundamental to the rule of law. The rule of law is about notice and reliance. When it is impossible to make reasonable predictions about how a law will be applied, or what the legal consequences of conduct will be, these important values are diminished.

In comparison with existing antitrust law, however, AICOA, does a very poor job of fostering predictability regarding what is prohibited. As Professor Melamed explains, it makes it unclear what it means when it uses the key term “material harm to competition”— whose absence a covered platform must demonstrate in order to avoid liability under the bill. Specifically, as Melamed stresses:

[T]he bill does not include the normal antitrust language (e.g., “competition in the market as a whole,” “market power”) that gives meaning to the idea of harm to competition, nor does it say that the imprecise language it does use is to be construed as that language is construed by the antitrust laws. . . . The bill could be very harmful if it is construed to require, not increased market power, but simply harm to rivals.

Rule of law predictability is further undermined by other ambiguous AICOA terms, which also threaten to harm competition and innovation, as Professor Dan Spulber points out (citations omitted):

The new [proposed platform-related] antitrust laws may have adverse effects on innovation and competition because of imprecise concepts and terminology. The American Bar Association Antitrust Law Section expressed concerns about “ambiguous terminology in the [AICOA] Bill regarding fairness, preferencing, materiality, and harm to competition on covered platforms.” The Section recommended that “these definitions direct attention to analysis consistent with antitrust principles: effects-based inquiries concerned with harm to the competitive process.”

Finally, AICOA also is in tension with the rule of law by placing the onus first on private parties to show that they have not violated the law (have not caused “material harm to competition”) when they have engaged in certain types of specified behavior deemed “problematic” under the bill. This is at odds with the approach under the antitrust rule of reason, in which the government first must show harm to competition before the defendant is required to justify its behavior as having procompetitive welfare-enhancing features. The AICOA’s placing of the initial burden on parties is troublesome, because the particular actions that trigger an initial presumption of illegality (self-preferencing, limitations on competitor access to the covered platform, certain “discriminatory” acts, certain restrictions on interoperability, certain use of nonpublic data, and so forth) are efficient and welfare-enhancing in many situations. Thus, AICOA undoubtedly would lead to the presumptive condemnation of much procompetitive conduct. Platforms that fell just outside AICOA’s coverage would not face this risk, because their similar conduct would be under the rule of reason. In short, the AICOA would lead to disparate treatment of identical conduct by similar firms, based on the bill’s arbitrary jurisdictional line-drawing. In conclusion, the AICOA sows confusion and undermines legal stability, continuity, and predictability. As such, it is an affront to the rule of law and should not be enacted, without regard to its substantive policy merits.