Senator Hawley proposes putting the FTC under DOJ control

Senator Hawley proposes putting the FTC under DOJ control

Vocal tech critic Sen. Josh Hawley wants to overhaul one of the main enforcement agencies in charge of regulating the tech industry on privacy and competition matters.

In a new policy proposal released Monday, the Missouri Republican suggests having the Federal Trade Commission (FTC) operate within the Department of Justice (DOJ), eliminating the commission structure altogether. The proposal is likely to raise alarms about removing the independence of a key regulatory body, especially as Democrats have speculated about Attorney General William Barr’s closeness to President Donald Trump.

The FTC currently operates as an independent agency charged with regulating consumer protection issues and enforcing federal antitrust law. It’s steered by a panel of five commissioners who vote on rules and cases. No more than three commissioners can be from the same party. The DOJ, on the other hand, is part of the executive branch, making it accountable to the president.

Hawley’s proposal would blow up that structure, relegating the FTC to becoming a division of the DOJ and transferring all antitrust and merger review authority to the DOJ’s Antitrust Division. Instead of five commissioners, the FTC would have a single director who would need to be confirmed by the Senate every five years and report directly to the attorney general.

“The FTC isn’t working,” Hawley said in a statement alongside the announcement. “It wastes time in turf wars with the DOJ, nobody is accountable for decisions, and it lacks the ‘teeth’ to get after Big Tech’s rampant abuses.”

Under the current antitrust enforcement structure, the FTC and DOJ Antitrust Division go through a process known as clearance in which each agency signs off on the other taking on a particular case. Cases are typically cleared to the agency that has the most expertise in the relevant field. The FTC typically takes hospital merger cases, for example, because of its extensive experience reviewing them.

But the sprawling businesses of Big Tech companies have challenged some of the conventional areas of expertise of each agency and their high profile nature has made them the subject of contention. Last year, the heads of the FTC and the DOJ Antitrust Division admitted to Congress that they had argued over which agency should be in charge of the Big Tech investigations. Both FTC Chairman Joe Simons and Assistant Attorney General Makan Delrahim agreed that if given a blank slate, they likely would put antitrust enforcement under one roof.

“It would be hard to imagine a system being designed at the first instance like we have today,” Delrahim said at a September hearing. “It’s not the best model of efficiency.”

In his policy proposal, Hawley cites the FTC’s decision to close its earlier investigation into Google without bringing an action against the company as an example of its allegedly insufficient enforcement.

“The FTC’s inaction allowed Google to entrench its market share for years using deception,” the paper says. Hawley also criticizes the FTC’s $5 billion settlement with Facebook over privacy concerns and the agency’s clearance of acquisitions that have helped them grow in size and power.

Other lawmakers have attempted to breathe new life into FTC enforcement in digital markets through new federal privacy legislation. Several bills suggest creating a new bureau within the FTC devoted to enforcing a new federal privacy law. One bill in the House of Representatives proposes establishing a new federal agency to handle digital privacy enforcement. But Hawley’s proposal takes a broader approach, rethinking the FTC’s operations across its various functions.

In addition to assisting the Antitrust Division in merger review and conduct cases, Hawley’s plan would give the FTC new responsibility to review digital markets through a new “Digital Market Research Section” made up of “technologists, economists, and market specialists.” The section would be expected to generate studies to assist DOJ enforcement litigation and inform Congress. Hawley’s plan suggests the division could study how companies use data to learn about potential rivals, how they use behavioral psychology to influence consumer choices and the “selective enforcement of terms of service,” among other topics.

On top of restructuring, Hawley suggests giving the FTC more tools to aid its enforcement and tightening up other rules around its operations. He says Congress should give the FTC the ability to impose fines on companies for first-time violations and empower it to limit data collection by companies and enforce data portability requirements, like those spelled out in his ACCESS and Do Not Track Acts. To ensure states can take enforcement into their own hands when the FTC fails to act, the plan suggests, Congress should also empower state attorneys general to concurrently enforce laws the FTC is currently tasked with handling.

Hawley also wants to tighten ethics laws to prevent FTC and Antitrust Division staff from working for or representing firms with more than $30 billion in annual revenue for two years after leaving those sections. Ethics laws currently require senior FTC officials to abstain from representing a firm in front of the agency for a year after leaving and refrain from ever working on a matter they personally had a role in at the FTC.

Finally, Hawley says Congress should “eliminate constitutionally problematic aspects” of the FTC’s fact-finding, which is binding in federal court. He says Congress should give defendants the right to contest facts in court, as is generally granted by the Constitution when a government agency brings a case to court. Hawley argues this will actually lead to greater enforcement because it would allow “courts to correct errors that would ordinarily cause enforcement to be too lax.”

It remains to be seen how other lawmakers will respond to Hawley’s proposal, but the FTC’s Simons is likely to oppose it. At the congressional hearing last fall, he said that because of the FTC’s unique qualities, “if you were just going to have one agency, you might want to have one that looked more like the FTC than the Justice Department.”

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