By statute, the U.S. Federal Trade Commission comprises five commissioners appointed by the president and confirmed by the Senate to serve staggered seven-year terms with no more than three serving from one political party. But for some time, the agency was operating at a deficit — with only Republican Acting Chairwoman Maureen Ohlhausen and Democrat Terrell McSweeny at the helm. With President Donald Trump successfully writing a new slate for the FTC and the Senate recently confirming all five nominations, the agency is now operating at full capacity for the first time since August 2015.
Republican Joseph Simons, who was sworn in as FTC chairman May 1, will be working with new appointees Noah Phillips, Republican, Rohit Chopra, Democrat, and Becca Kelly Slaughter, Democrat. Former FTC Chair Maureen Ohlhausen, Republican, who was tapped by Trump for a federal judgeship, will stay on as commissioner until either her own nomination is confirmed or until her term ends in September 2018, at which point Christine Wilson, Republican, will join as commissioner.
As to what the new commission means for U.S. enforcement, Reed Freeman, CIPP/US, co-chair of WilmerHale’s cybersecurity and privacy practice group, said, "The president has nominated a capable set of commissioners," adding the board historically has operated with "terrific continuity" and he expects the same in this case. Freeman described both Simon and Ohlhausen as "supremely qualified" and said "Phillips, who served on the Senate Judiciary Committee and has dealt with both sides of the FTC antitrust and privacy fraud, has a particularly impressive CV."
Freeman identified Chopra as someone he imagines to be an outspoken voice on the Democrat’s side. “To the extent that there is any disagreement, I think he will be the one who writes the dissenting statement — he will be the one to push the commission to be more aggressive on the margins that it may otherwise feel uncomfortable doing.” Of Slaughter, Reed said, “She knows the FTC cold, has a J.D. from Yale, and again is very smart. She knows the issues. This is an impressive set of people and I expect the commission will operate largely unchanged.”
Freeman continued that the "FTC works very hard to operate by consensus. It is not a highly politicized agency, and so the difference between Democrats and Republicans, on enforcement matters, tends to be on the margins. It’s a generalization, but generally true, that a Republican-led FTC will try to focus the commissions limited resources on saving the most consumers from the most harm — meaning they tend to bring the most fraud cases."
Katherine Armstrong, who worked with the FTC for more than 30 years and is now counsel at Drinker Biddle & Reath, explained that although working as a two-member commission might have been less than ideal, it wasn’t prohibitive. “For the majority of the work the FTC does, there is consensus, but the challenge of a two-person commission is that unless there is agreement, nothing gets out.”
Armstrong added that “one of the beautiful things about a five-member commission is that there is room for disagreement. At the end of the day the majority rules, but the minority can voice their opinion and disagree without being disagreeable.”
Although the final member of the FTC will not join until Ohlhausen exits, this may be considered business as usual. Pointing to Robert Pitosky, whose nomination as chairman of the FTC under then-President Bill Clinton was delayed for many months, Armstrong said, “It’s not unprecedented to have interesting transitions.”
Robert Belair, partner and leader of the Privacy Practice with Arnall Golden Gregory, said of the full slate transition, “This is certainly unprecedented. There’s never been a transition like this before. We really do have five new commissioners coming in at the same time. Having said that, I guess the expectation would be ‘Wow, this is going to be pretty remarkable,’ but in my own view, I think not. The staff, of course, carries most of the water.”
That said, a fully staffed FTC will undoubtedly help the agency as it pursues enforcement matters. And a strengthened commission can only help as the U.S. looks for leadership, while the EU becomes a leader on data protection and privacy with the implementation of the General Data Protection Regulation this week. And while the FTC may find itself at the forefront of privacy matters, it currently lacks any rulemaking ability and is is tasked with enforcing an array of federal consumer protection laws.
Belair said, “The bureau is, for better or worse, the nation’s primary privacy regulator and that’s increasingly a big deal. I think the FTC, the new commissioners, and certainly the staff would be loath to do anything that would suggest that that would not be the case. Of course, these days it’s easier to wear that crown because the rivals to the throne are less interested. It falls to the FTC almost by default, and the FTC has really earned that position.”
He added, “I think in many ways, we’re seeing global privacy leadership slip from the U.S. to the EU. For those of us who have been at this a while, it’s disappointing and a real change that’s taken place over the last 20-25 years.” Despite the shift, Belair said, “I’m expecting the FTC and the Bureau of Consumer Protection will continue to make privacy a priority and will continue to be America’s de facto privacy regulator.”
Although the general consensus on the incoming commissioners is positive, no seems sure of who will champion privacy rights for U.S. consumers.
“Typically, one and sometimes two of the FTC commissioners get to identify an issue or a set of issues and run with that,” Belair said. “I think we will see that here. I don’t expect Joe Simons, who has, by necessity, a broader perspective, to take up the privacy baton. None of these five people have any particular experience or expertise when it comes to privacy. They aren’t anti-privacy either. During the confirmation hearings held by the Senate Commerce Committee, when asked directly, they all said they would be very focused on privacy, cybersecurity and data breaches. They said all the right things.”
Armstrong echoed Belair on that. "During the nomination process, each of the current commissioners noted the challenges associated with technology, which I read as code for privacy and data security, so I expect these issues will continue to be a high priority for this commission," she said.
Belair tapped Phillips and Slaughter as the two who will embrace privacy leadership within the commission. Phillips, he said, has a strong legal background and some experience concerning privacy issues when he advised Sen. John Cornyn, R-Texas, on legal and policy matters including antitrust, constitutional law, consumer privacy, fraud, and intellectual property. Slaughter, who advised Sen. Charles Schumer, D-N.Y., on legal, competition, telecom, privacy, consumer protection, and intellectual property matters, could be Phillips' democratic counterpart.
It's already been a busy month for the FTC. Under Simons, four new members to the agency’s senior leadership team have been appointed. The director of the FTC’s Bureau of Consumer Protection has been given to Andrew Smith, D. Bruce Hoffman will serve as the director of the Bureau of Competition, Bruce Kobayash will be director of the agency’s Bureau of Economics, and Alden Abbott will serve as general counsel. Hoffman, Kobayashi and Abbott were approved unanimously, while Smith was confirmed with a 3-2 vote.
Regarding the appointment of Smith, Slaughter wrote in her dissenting statement that she strongly believes “in the critical and rapidly evolving areas of data privacy and security, the Commission’s consumer protection mission demands strong leadership and vigorous enforcement.” As such, Slaughter concluded, “My vote against Mr. Smith’s appointment is instead a reflection of my conviction in the particular importance of the consumer protection mission at this moment in time. I am concerned that selecting a director for the Bureau of Consumer Protection who is barred from leading on data privacy and security matters that affect so many consumers, command so much public attention, and implicate such key areas of the law potentially undermines the public’s confidence in the Commission’s ability to fulfill its mission.”
As the government's new watchdog in enforcing consumer protections, some concerns have been raised over his ability to enforce given that Smith has agreed to recuse himself from dozens of cases he worked on as a private attorney. Now approved, Smith will be recused any potential investigations or enforcement involving companies he represented over the past two years while he was partner with Covington & Burling— meaning he could be sidelined on matters concerning Facebook, Uber and Equifax, among others.
Despite this initial controversy, Freeman, who worked alongside Smith when they were both partners at Morrison Foerster, said of Smith, "Andrew Smith has unimpeachable integrity. I believe that his commission chops can be validated by his previous commission position, where he served with great distinction. I have every confidence that he will be a terrific advocate for the people of the United States. He knows how the place works, has a lot of FTC experience, and I expect him to be first class."
To Freeman, Slaughter's statement was more of a signal rather than an ad hominem attack on Smith. He said, "I think it was the way the democrats articulated that they want to ensure that the office is headed by someone who will effectively protect consumers."
And so now, fully staffed and ready to tackle the issues of the day, the FTC embarks on what is commonly accepted as an unprecedented transition. Given all that, it's clearly believed by most that business as usual will endure. “Having been an observer of the FTC from within and now on the outside, I believe that commissioners take their role very seriously and care deeply about doing the right thing,” Armstrong said.
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