FTC Chair's Activism Prompts a Commissioner to Resign

FTC Commissioner Christine WIlson is resigning from the Commission. (Updated)

Federal Trade Commission Chair Lina Khan has ruffled more than a few feathers since taking the Commission's helm. Not only has Khan outlined an aggressive policy agenda, she has also sought to expand the Commission's power and centralize control of the agency within her office, prompting Professor Richard Pierce to predict her term would be a "rollercoaster ride."

Khan's aggressive, progressive agenda has provoked strong opposition from portions of the business community. The FTC's move to eliminate the use of non-compete agreements has been labeled a "breathtaking power grab" and will provoke a serious legal challenge. Another case against Wal-Mart prompted the giant retailer to question the vitality of Humphrey's Executor and challenge the FTC's constitutionality.

Khan's agenda has also prompted discomfort within the FTC, and is apparently prompting one commissioner--Christine Wilson--to tender her resignation. Wilson writes in the Wall Street Journal:

Much ink has been spilled about Lina Khan's attempts to remake federal antitrust law as chairman of the Federal Trade Commission. Less has been said about her disregard for the rule of law and due process and the way senior FTC officials enable her. I have failed repeatedly to persuade Ms. Khan and her enablers to do the right thing, and I refuse to give their endeavor any further hint of legitimacy by remaining. Accordingly, I will soon resign as an FTC commissioner.

Since Ms. Khan's confirmation in 2021, my staff and I have spent countless hours seeking to uncover her abuses of government power. That task has become increasingly difficult as she has consolidated power within the Office of the Chairman, breaking decades of bipartisan precedent and undermining the commission structure that Congress wrote into law. I have sought to provide transparency and facilitate accountability through speeches and statements, but I face constraints on the information I can disclose—many legitimate, but some manufactured by Ms. Khan and the Democratic majority to avoid embarrassment.

That a Republican FTC Commissioner objects to Khan's agenda might not surprise. That Khan's leadership approach has also prompted dissension within the FTC's career ranks, on the other hand, may be more surprising.

From Wilson's WSJ op-ed:

I am not alone in harboring concerns about the honesty and integrity of Ms. Khan and her senior FTC leadership. Hundreds of FTC employees respond annually to the Federal Employee Viewpoint Survey. In 2020, the last year under Trump appointees, 87% of surveyed FTC employees agreed that senior agency officials maintain high standards of honesty and integrity. Today that share stands at 49%.

Many FTC staffers agree with Ms. Khan on antitrust policy, so these survey results don't necessarily reflect disagreement with her ends. Instead, the data convey the staffers' discomfort with her means, which involve dishonesty and subterfuge to pursue her agenda. I disagree with Ms. Khan's policy goals but understand that elections have consequences. My fundamental concern with her leadership of the commission pertains to her willful disregard of congressionally imposed limits on agency jurisdiction, her defiance of legal precedent, and her abuse of power to achieve desired outcomes.

That Khan's leadership style ruffles feathers or departs from precedent does not mean (necessarily) mean that she's doing anything wrong, nor does it mean that her policy initiatives won't survive legal challenge. On the other hand, the sorts of objections being made could be the sorts that could prompt judicial concern or suggest the sort of failure to engage in reasoned decisionmaking that often leads agencies to defeat in court.

UPDATE: Former FTC Commissioner Joshua Wright has an insightful Twitter thread on what Wilson's resignation could mean for the FTC going forward.

A lot of talk today about Commissioner Wilson's impending resignation from the FTC. There will be plenty to say about that I am sure. But I wanted to do a short thread on and what, if any, practical implications for the agency in the near term. Here goes: (1/x)

— Joshua Wright (@JoshWright1977) February 14, 2023

Comments

[Ed Grinberg]

abuse of power to achieve desired outcomes

Dictionary definition of authoritarianism. But then, what “progressive” isn’t?

[Rev. Arthur L. Kirkland]

You might have asked Artie Ray Lee Wayne Jim-Bob Kirkland to describe the dangers of authoritarianism . . . but he was censored with prejudice by the hypocrites who operate this faux libertarian, right-wing blog.

[Ed Grinberg]

Anyone remember Barack Obama, the former boss of Ms. Khan's boss?
Just a coincidence, I'm sure...

[Rev. Arthur L. Kirkland]

Disaffected clingers seem to focus myopically on that guy.

For some reason.

[Frank Drackman]

I'll leave aside the fact that myopes don't focus, because you're a disgraced Linebackers Coach and mental midget, but I missed where Barry Hussein was impeached after he left Orifice, gets hassled by DemoKKKrat S-hole tin-horn District Attorneys, and yes, had his tax returns released (amazing! Trump used legal means to lower his taxes!), and did I tell you he's 1/2 Black??

[Rev. Arthur L. Kirkland]

And you, Frank Drackman, are precisely the audience this right-wing blog desires and the defender the Volokh Conspirators deserve.

[LawTalkingGuy]

The FTC has had the power to regulate unfair trade practices for 80 years. There is a ton of evidence that non-competes are abusive and unfair practices. State courts have always disfavored them and the largest economy in the country already bans them. But most people don't know that their noncompete is likely unenforceable. The employers who use them rely on the threat of a suit and court enforcement to pressure people into making employment decisions that they might not otherwise make in a freer market. That's far more of an abuse of power than the FTC stopping it.

[Rossami]

The FTC has the power to police unfair trade practices but not the power to unilaterally define what trade practices count as "unfair" unless Congress has explicitly delegated that authority to the agency. Given the long history of non-competes and the notable lack of congressional action against them, there is strong evidence that Congress has not mysteriously and suddenly delegated this authority to the FTC.

I actually agree that non-competes are a bad idea. But a) that's not enough reason to block people from voluntarily entering into them when they want to and b) even if it were, there is no evidence at all that states are unable to make these decisions for themselves. This is not a proper function for the federal government to be involved with.

[LawTalkingGuy]

They're also deceptive in that the employers (well the one's with lawyers anyway) know they likely can't be enforced but use them to pressure employees anyway.

Also the long history of non-competes is state courts not liking them. The problem is they achieve their function without court intervention because many people don't know how disfavored they are.

This is absolutely proper for the federal government to get involved with because non-compete clauses aren't necessarily bound by state lines. How does a person know if they are running afoul of the clause if they move states and whether the employer might be able to enforce it across state lines? It is a widespread unfair and deceptive practice that isn't easily brought to state attention. The FTC is perfectly within its authority to do something about it.

[SKofNJ]

Rossami, what is your response to Martinned’s comment? He says that per 15 USC 45 (n):

The Commission shall have no authority under this section or section 57a of this title to declare unlawful an act or practice on the grounds that such act or practice is unfair unless the act or practice causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition. In determining whether an act or practice is unfair, the Commission may consider established public policies as evidence to be considered with all other evidence. Such public policy considerations may not serve as a primary basis for such determination.

Doesn’t that mean that the Commission does indeed have the power to define what trade practices are unfair? I ask knowing nothing about this area of the law.

[Martinned]

The FTC has the power to police unfair trade practices but not the power to unilaterally define what trade practices count as “unfair” unless Congress has explicitly delegated that authority to the agency.

You mean more explicitly than this?

The [FTC] is hereby empowered and directed to prevent persons, partnerships, or corporations, (…) from using unfair methods of competition in or affecting commerce and unfair or deceptive acts or practices in or affecting commerce.

https://www.law.cornell.edu/uscode/text/15/45

[David Nieporent]

Let's assume you are correct about non-competes: by what standard can we evaluate whether something is actually an "unfair trade practice"? How can an outsider determine whether the FTC has overstepped its bounds?

[Martinned]

Well, they could start by reading 15 USC 45 (n)

The Commission shall have no authority under this section or section 57a of this title to declare unlawful an act or practice on the grounds that such act or practice is unfair unless the act or practice causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition. In determining whether an act or practice is unfair, the Commission may consider established public policies as evidence to be considered with all other evidence. Such public policy considerations may not serve as a primary basis for such determination.

[David Nieporent]

Yes, I know what the statute says. It does't really provide a whole lot of guidance. Set aside that the provision you quote is actually a limitation on an undefined power rather than a definition of what the power is; it's still incredibly vague.

1) The FTC can declare a practice to be unfair.
2) It can't declare a practice unfair unless the practice
(a) causes substantial injury to consumers;
(b) which can't be reasonably avoided by consumers;
(c) and which doesn't have countervailing benefits to consumers.
3) Oh, the FTC can consider public policy in some unspecified way, except it can't rely on public policy.

So… what counts as an injury? What counts as a benefit? As literally written, that means that the FTC has a roving commission to strike down any policy of any business anywhere in the country that increases a business's profits.

After all, every such policy hurts consumers — they have to pay more — can't be avoided (except by not doing business with the business at all, but that's always a way to avoid such injury, so it can't be sufficient), and doesn't benefit consumers.

For example, look at the instant topic: does an employee non-compete agreement cause substantial harm to consumers? How? And yet the FTC thinks it can outlaw them.

[Martinned]

The FTC has explained how non-competes cause substantial harm to consumers, because that's what it has to do: show its workings.

Non-competes reduce competition between companies, which leads to higher prices and less innovation (etc) for consumers. This is a factual statement that can be challenged in court, and that presumably many well-paid experts will earn a good living arguing over for the next few years.

[Martinned]

Also, I'm not sure if the Sherman Act is all that clearer. What's a "contract in restraint of trade"? Like the Supreme Court said in Standard Oil, when taken literally that could be read as basically outlawing all contracts. Instead, the Court read that provision in light of the common law and the debates in Congress. You can do the same with the FTC Act.

[Nige]

You could read the above and fail to come away with any clear idea of what the supposed abuse of power actually is, but that's beside the point isn't it?

[Rev. Arthur L. Kirkland]

Christine Wilson is a quitter and sounds like (as one might expect of a Trump pick) a jerk and a paid right-wing mouthpiece.

(That doesn't add much to a discussion of Chair Khan's merits or conduct. That Wilson is bad doesn't mean Khan is good.)

[BravoCharlieDelta]

It harms our Sacred Democracy to not allow these unelected bureaucrats unfettered power over our lives and economy.

[LawTalkingGuy]

“Our lives" is doing A LOT of heavy lifting here considering the context.

[Nige]

Wait'll you hear about the influence of billionaires and corporations.

[BravoCharlieDelta]

You mean those entities that work hand in hand with the State to secure their influence?

[LawTalkingGuy]

And in the case of noncompetes the FTC is trying to stop that.

[Nige]

Do I mean that?

[LawTalkingGuy]

"Has been labeled a "breathtaking power grab" and will provoke a serious legal challenge."

Why are you using the passive voice here? Eugene Scalia, a current Gibson Dunn attorney whose client base would like to maintain unfair trade practices like non-competes, is the one who "labelled" it a power grab. He also published this in the WSJ op-ed pages...a paper whose audience is business interests who would also like to maintain a practice to restrain trade! Perhaps he is not the best example of a good-faith critic of the proposed rule and you should indicate that.

[bevis the lumberjack]

Non-competes are not “unfair trade practices”. It’s part of a voluntary agreement between two parties, which typically also include things like extraordinary benefits and change-of-control payouts (aka golden parachutes). Are they unfair too?

Who are non competes unfair to, the employees who want to profit off of proprietary information or the competitors who can only compete by using information that they don’t have the right to have? Don’t want to live with the provisions of a contract, then don’t sign it.

[LawTalkingGuy]

I thought we talked about this already? You’re confusing noncompetes with trade secrets again.

[bevis the lumberjack]

When someone is in a key role in a company and leaves to work at a competitor, they take their knowledge with them. Included in their knowledge is what you call trade secrets. I’m not confusing anything - they’re inseparable.

Now answer my question. Who are they unfair to?

[LawTalkingGuy]

They're unfair to the many employees who have them in their contracts even though they have no proprietary knowledge and don't have a lot of bargaining power. (Hairdressers and restaurant workers have them...they have no proprietary knowledge)

They're also unfair to market participants by depriving them of the services of otherwise qualified people. Think about doctors. Sometimes practices make their doctors sign non-competes. If they leave the practice they are restrained from providing medical services for a certain time in a certain area...that is harmful public.

Lawyers of course have recognized that non-competes harm the public by stating it is unethical for them to enter into them because it might deprive clients of their choice of counsel. They've exempted themselves from the requirement because they know they are unfair to the lawyers and to the public!

[dwb68]

When there is a bona fide exposure to intellectual property, plus a monetary severance payment, I could see the non-compete as defensible.

However, many companies require non-competes for low level employees that are not exposure to proprietary information. OTOH, non-competes can be very hard to erforce.

I dont really have an opinion on whether the FTC has the authority to prohibit non-competes. It seems like this is a labor law issue not an FTC issue, but i am not an expert. Even if they do have such authority, companies will relabel them NDAs and pay severance, so I am not sure it will have much effect.

[Martinned]

The FTC's proposed rule also captures NDAs that have the same effect as a non-compete.

https://www.ftc.gov/legal-library/browse/federal-register-notices/non-compete-clause-rulemaking

[LawTalkingGuy]

Now generally not every “voluntarily bargained for exchange” is fair, and courts have long recognized that. Parties often have unequal bargaining power and levels of sophistication. And judicial enforcement (ie government intervention) in every bargained for exchange also isn’t always good so courts don’t enforce certain agreements or limit others.

[TK-421]

Of the two actual object-level issues mentioned here, eliminating non-compete agreements is Good Actually, and the Walmart thing seems like a normal regulatory dispute (regardless of who wins). Is there any specific evidence of abuse of power beyond "the FTC is invoking its powers more than it used to"?

[LawTalkingGuy]

Nope. I mean not letting employers engage in a widespread unfair and deceptive trade practice that is hard to clamp down on judicially seems to be exactly within the text and spirit of the FTC Act. This is a textbook use of its authority.

[Rev. Arthur L. Kirkland]

When a low-grade sandwich chain collects thousands of non-competition agreements from entry-level, low-wage workers, evaluation of the laws governing those agreements seems reasonable.

The Jimmy Johns folk seem to be selfish and unreasonable jerks, but it still would be difficult to challenge Subway or Chick-fil-A among biggest assholes in the fast-food business.

[Rossami]

Per my comment above, even though I agree that eliminating non-competes is a Good, that does not mean that it is good or proper for the FTC to be doing it. Due process and separation of powers matter even when we agree with the outcomes.

For other examples of the FTC's "abuse of power", I recommend that you catch up on any of the multiple articles here discussing their recent string of failed anti-trust actions. Notably, they are failing because the FTC is asserting what are politely called "novel" (and less politely called "absurd") interpretations of their authority and purpose.

[Ben_]

They keep losing in court. That’s one indication that their attempts to exercise their power are at least bordering on abuse.

[Krayt]

The purpose of government is to get in the way, to get paid to get back out of the way.

Corruption enjoys unchaining wildcatting useful idiots asserting massive powers, as they can sit back and take donations, legal and otherwise, as it slashes randomly and viciously, all the while saying they had nothing to do with it.

Congress releases The Gimp, who sets about his business, and lo! Their coffers increase.

[LawTalkingGuy]

This is a pretty overwrought reaction to non-competes. Like non-competes are just powerful people using the threat of government enforcement to scare people into making different decisions about their own employment. Judicial enforcement of a non-compete is government intervention.

[Ben_]

Just the most recent example of Democrat lawlessness. More and more examples all the time.

[LawTalkingGuy]

Pretty sure employers using non-competes they know won’t hold up to judicial scrutiny to pressure unsophisticated employees is much more lawless than the FTC exercising its statutory authority to correct that.

[CommentMonkey]

No doubt all the problems you mention with non-competes are real. But the power grab is nonetheless a concern. The trend in the states is toward stricter limits or outright bans, both by courts and legislatures. Does it make sense for an administrative agency to usurp state authority just to speed the process up?

The absolutist approach is also a problem. There are narrow circumstances (particular jobs in particular industries) in which non-competes make sense and are a fair method of protecting the employer (a small fraction of what's out there now, to be sure). It seems to me it makes more sense to keep the line-drawing in the hands of elected representatives, even though they are moving in the right direction more slowly than many of us would like.

[Martinned]

Take it up with Congress, because they enacted this:

The [FTC] is hereby empowered and directed to prevent persons, partnerships, or corporations, (...) from using unfair methods of competition in or affecting commerce and unfair or deceptive acts or practices in or affecting commerce.

https://www.law.cornell.edu/uscode/text/15/45

[Martinned]

For the record, even in these dark times of Democrats actually enforcing antitrust laws there are still plenty of boundary-pushing things happening that Republicans vote for as well. That's true in Congress but also in the FTC. Stronger antitrust enforcement is a bipartisan issue.

Wilson herself voted in favour of the FTC's complaint against the Illumina/Grail merger, which was based on some pretty heroic (and non-horizontal) theories of harm, and which the FTC ultimately lost before the ALJ.

https://www.ftc.gov/legal-library/browse/cases-proceedings/201-0144-illumina-inc-grail-inc-matter

[dwb68]

Pushing the boundary is what every agency tries to do. Except when there is a buzzsaw right over the border.

What Khan does not realize (or care about) - judicial curtailment of FTC authority will permanently de-claw the agency.

[Martinned]

What would a further de-clawing of the FTC even look like? Before Khan they were already a complete waste of space, utterly unable to actually regulate anything.

[Stephen Lathrop]

When the employer says to its employee, "That was a great idea you presented in your memo. Now sign this non-compete so we can be sure you don't take it somewhere else," what ought to happen next?

[Martinned]

Why wouldn't they use an NDA instead? That's what that situation seems to call for.

[Brett Bellmore]

I don't think a non-compete would even help for that purpose.

[Brett Bellmore]

The law creating the FTC says of the 5 member commission that "no more than 3 members may be of the same party". It does NOT say that they have to be major party members, or that they can't be of parties that caucus together.

Prediction: Biden will nominate a Democrat and two Socialists or Green party members to fill the empty slots, to maintain a Republican free commission. He will do the same as the terms of the Republican members of the FEC expire. (One expires in a couple months.)

[Martinned]

I'd take that bet. Biden will nominate two (moderate) Republicans, with or without some kind of deal with McConnell.

[Brett Bellmore]

I'm expecting this because not gaming the system by appointing an allied third party member rather than a member of the opposition party has been a long standing norm, but a lot of norms have been falling lately, some of them a lot better established than this one.

[Martinned]

I think we can all agree that Congress wouldn't be allowed to write into the law that the Commissioners have to be Republicans or Democrats, so unwritten norms is all you have. Best not to overturn them too quickly.

[Brett Bellmore]

I'm not advocating that this norm be overturned, just predicting that it will be.

It wasn't smart of the Democrats to trash the norm that the minority party got to pick their own committee members, but they trashed it anyway. They just don't seem to factor in the likelihood of their norm violations coming back to bite them.

So it's dangerous assuming that they'll uphold a norm just because it would suck when they're on the receiving end of the violation.

[Martinned]

No, but you're advocating for plenty of other norms to be trashed, so I thought I'd propose a general rule of thumb.