Ohlhausen's FTC Process Changes Praised, But Some Future Alterations Tougher, Say Experts

An Ohlhausen aide told us the Republican chairman will continue to prioritize ways to use the agency's limited resources as efficiently as possible while protecting consumers and without imposing unnecessary burdens on legitimate companies: “This is part of her governing philosophy and so I think you’ll continue to see us exploring lots of options to get there.” She supported looking at potential changes to the 20-year long consent decrees as long as they remain effective without being overly burdensome, said the aide, but it's not something being pursued now. The agency, said the aide, is listening to concerns from Capitol Hill and the White House, and "internal thoughts" on what can be done better. Some projects will be quicker while others will be longer term, said the aide, who didn't provide any specifics.

A spokeswoman for the House Commerce Committee emailed that it's "very pleased with ... Ohlhausen’s work with regard to reforming the FTC. She has worked quickly to implement several important changes that the committee has long favored and shown that she’s no stranger to improving existing processes and policies. Committee leaders look forward to continuing their work with her into the future." In a news release last week praising the changes, House Digital Commerce and Consumer Protection Subcommittee Chairman Bob Latta, R-Ohio, said Ohlhausen's changes reflected several bills seeking to "reform" agency processes.

Morrison Foerster privacy and consumer protection lawyer Julie O'Neill emailed that the changes implemented are "consistent" with expectations about Ohlhausen’s approach. "She has spoken before about the need to avoid the imposition of unnecessary regulation and associated costs on business, so it would not surprise me to see additional measures to minimize the scope of the agency’s civil investigative demands," said O'Neill, a former FTC attorney. "We may, for example, see more precisely targeted inquiries."

Perkins Coie attorney Janis Kestenbaum, a former senior aide to former FTC Chairwoman Edith Ramirez, told us businesses would like to see more clarity and transparency in the investigative process. But Kestenbaum said they would "extremely welcome" reconsideration of 20-year consent decrees, which often shock companies. A House Republican proposal last year sought to cut down consent orders to eight years in many cases, but Ramirez at a hearing resisted that idea (see 1605240042).

Kestenbaum said the current two commissioners, including Terrell McSweeny, a Democrat, could agree on a case-by-case basis to impose shorter time frames on orders or they can change the 20-year default rule, which was adopted about three decades ago. Kestenbaum said this revision may get support once the three empty commission seats are filled, giving Republicans a majority. She also approved Ohlhausen's other changes, such as streamlining demands for information from companies during investigations, an "expensive and extensive" proposition. The message is that FTC staff has to be "cognizant" of such burdens, she said.

John Breyault, National Consumers League vice president-public policy, telecom and fraud, described Ohlhausen's changes as a "normal review" when an agency changes leadership. "I don't really notice they're doing anything substantive," he told us. However, he rejected as inaccurate Latta's comments that the changes reflect four bills that were part of a larger Republican legislative FTC "process reform" package that advanced through a House Commerce subcommittee last year (see 1607140051), but wasn't considered on the House floor.

Breyault, who testified at the House hearing last year on that legislative package, said the four bills cited by Latta were "fairly seriously criticized" by public interest advocates during the hearing on the legislation (see 1606230054 and 1605240042). "The four bills that [Latta] referred to were all ones, I think, intended to really weaken if not neuter the commission," he said. For instance, HR-5109 would have required the FTC to provide more information and transparency into investigations, which Breyault said would raise serious privacy concerns with companies. HR-5136 would have required a cost-benefit analysis by the Bureau of Economics for almost any action by the FTC, he said, calling it a "faulty" presumption since the commission regularly consults with the bureau.

But Breyault said he didn't expect any "radical" changes from Ohlhausen because she shares the "sentiment" that the FTC is a nonpartisan agency. "I think if they tried to enact sort of radical reforms to the FTC that would go against that historic bipartisanship the FTC has had."

Ohlhausen's changes outlined in the FTC news release appeared "more incremental and more modest" than House legislative proposals floated last year, said an industry source. But the source said it may be a "heavier lift" for Ohlhausen to reduce the typical 20-year consent decrees imposed on companies and another proposal to essentially increase the burden on FTC staff to provide more evidence of consumer harm in unfairness cases to the commission.

Ohlhausen also could direct acting Bureau of Consumer Protection Director Thomas Pahl (see 1702080016) and acting Bureau of Competition Director Tad Lipsky (see 1702160071) to filter cases sent to the commission, the source said. Those two directors, who report to the chairman, are "very, very powerful" and much more powerful than Commissioner Terrell McSweeny, a Democrat, because they control the information flow to her, said the source. The directors can decide not only which cases can go to the commission but also recommend whether they should be pursued as complaints or be closed, for example. The directors will be "more hands off," more inclined to close an investigation and ask more questions before taking an enforcement action, the source said.

George Mason University associate law professor James Cooper, a former staffer who advised then-Chairman William Kovacic, said Ohlhausen is "hitting all the right notes" with the modifications, especially more collaboration between the Bureau of Economics and Bureau of Consumer Protection. But he said one House bill last year that sought to have the economics bureau weigh in on every consumer protection matter and then make that analysis public isn't a good idea. "Transparency in the abstract is great but there's a reason we have privilege laws so people will free to talk to their lawyer," he said. If the bureau's staffers know their recommendations will be made public, they may "think twice about a course of action" and may not give their best advice, he said.