Photo of William C. MacLeod

Email
(202) 342-8811
Bio

After months of speculation among the consumer protection and antitrust bars, Trump announced today his intention to nominate former Director of the Bureau of Competition and current Paul Weiss partner Joseph Simons as Chairman of the Federal Trade Commission.  Trump also announced his plan to nominate Rohit Chopra, currently a senior fellow at the Consumer Federation of America and previously Assistant Director at the Consumer Financial Protection Bureau (CFPB), to one of two vacant commissioner seats.  News outlets also are reporting that Trump will soon nominate Noah Phillips, chief counsel for Senator John Cornyn (R.-Tex.), to an additional commissioner seat.

Assuming Simons is confirmed and appointed as Chair, Acting Chairman Maureen Ohlhausen would return to her position as Commissioner.  Her term is set to expire in September 2018.  Commissioner Terrell McSweeny also continues to serve on the Commission, although her term expired in September, and as reported by MLex.com, Simons’ confirmation would place him in the slot she currently occupies.  More information on each of the three nominations follows.

Joseph Simons.  Currently a partner and co-chair of the Antitrust Group at Paul, Weiss, Rifkind, Wharton & Garrison LLP, Simons has worked in private practice for the majority of his career and is likely to be welcomed by industry as a reasoned and qualified choice.  He also has experience in public service, having served at the FTC as Director of the Bureau of Competition from June 2001 to August 2003.  He also served as the Associate Director for Mergers and the Assistant Director for Evaluation at the FTC in the late 1980s.  Simons has worked on a number of high profile antitrust cases, including representing MasterCard Inc. in antitrust class actions over merchant fees, and representing a consortium including Microsoft, Ericsson, RIM and Sony in its $4.5 billion acquisition of the patent portfolio of Nortel Networks.

As a long-time antitrust practitioner with experience in private and public practice, Simons is likely to bring a thorough and deliberative approach to the Commission.  While Simons is unlikely to support enforcement that is not justified by a rigorous economic analysis of costs and benefits, he’s also unlikely to shy away from challenging deals and conduct that fail the economic test.  In short, economic effects and rule of reason will guide policy.  Simons notably has significant high tech and intellectual property experience, as well as merger experience, where economics predominates decision making.

On the consumer protection side, Simons’ experience will likely reinforce the policies announced by Acting Chairman Ohlhausen to put economic injury at the center of case selection.  The emphasis on fraud will likely continue, while actions and remedies that would regulate ordinary business practices will face the test of economic analysis.  If he’s confirmed as expected, Simons would serve a seven-year term that began on September 26, 2017.

Rohit Chopra.  While Simons’ experience comes primarily from the competition side, Chopra has concentrated on consumer protection issues.  Chopra is currently a senior fellow at the Consumer Federation of America where he focuses on consumer finance issues, particularly with regard to their impact on younger Americans.  Chopra was previously the Assistant Director of the CFPB where he led enforcement actions against student loan borrowers and helped establish a new student loan complaint system at the agency.  Chopra’s background and experience with consumer finance give him an expertise rare among commissioners and could translate into significant influence on hot topics such as credit reporting, debt collection, and big data.  He also may engage in advertising and privacy initiatives affecting children and younger Americans, given his prior interest in this area.

Chopra’s approach to competition could be influenced by longtime ally, Senator Elizabeth Warren (D.-Mass.), who has distinguished herself as a proponent of aggressive enforcement and new legislation.  Unlike most prior FTC commissioners, Chopra is not an attorney.  His background is in business and includes an MBA from the Wharton School at the University of Pennsylvania.  Trump indicated that Chopra would be appointed to the remainder of a seven-year term that would expire on September 25, 2019.

Noah Phillips.  While yet to be announced by the Trump Administration, media outlets are reporting that Phillips will be named to fill another vacancy at the Commission.  Phillips is presently Chief Counsel to Senator Cornyn.  Phillips previously worked as an associate at Cravath, Swaine & Moore LLP and Steptoe & Johnson LLP, before leaving the private sector to serve as counsel to Cornyn.

Phillips would come to the Commission with significant law firm experience, as well as an understanding of the Hill.   Among others, Cornyn serves on the Senate Committee on Finance, which includes subcommittees on international trade and energy.  We would expect, therefore, to see Phillips take an active interest in international issues, as well as competition in the energy sector.

***

We will continue to monitor the appointment and confirmation process and post updates here.

On September 20, the Ninth Circuit blocked the City and County of San Francisco from implementing an ordinance that would have required health warnings on advertisements for beverages that contain one or more added sweeteners and more than 24 calories per 12 fluid ounces of beverage. The Ninth Circuit’s panel opinion, in reversing a district court order, held the ordinance likely chilled protected commercial speech under the First Amendment.

The 2015 ordinance would have required that advertisements (not labels) for sweetened beverages contain an explicit health warning that “occup[ied] 20 percent of the advertisement [] set off by a rectangular border”, like so:

The American Beverage Association, the California Retailers Association, and the California State Outdoor Advertising Association (“Associations”) sued to enjoin the implementation of the ordinance on constitutional grounds.  The district court denied a preliminary injunction and the Ninth Circuit granted interlocutory appeal.

Under established precedent, regulations that compel speech by imposing a disclosure are governed by the framework set forth in the SCOTUS case of Zauderer v. Office of Disciplinary Counsel of Supreme Court of Ohio (1985) (upholding a state bar disciplinary rule requiring that attorney advertisements regarding contingent-fee rates inform clients they would be liable for costs (as opposed to legal fees), even if their claims were unsuccessful). The Zauderer framework historically had been applied to government-mandated disclosures needed to prevent consumer deception.

The Ninth Circuit panel opinion applied the Zauderer framework beyond the context of preventing consumer deception.  Under the framework, the Ninth Circuit held that compelled disclosures could be related to other substantial government interests, such as promoting public health, but had to be “factual and non-controversial” and not “unjustified or unduly burdensome.”

The San Francisco ordinance satisfied neither of these factors.  The Ninth Circuit panel observed the warning falsely conveyed the message that sweetened beverages contribute to obesity, diabetes, and tooth decay, regardless of the quantity consumed or other lifestyle choices.  This message was contrary to statements by the FDA that added sugars are “generally recognized as safe,”  and “can be a part of a healthy dietary pattern when not consumed in excess amounts.”

The Ninth Circuit also held the warning was misleading.  “By focusing on a single product, the warning conveyed the message that sugar-sweetened beverages were less healthy than other sources of added sugars and calories and were more likely to contribute to obesity, diabetes, and tooth decay than other foods.”  This message was found to be deceptive in light of the current state of research on the issue.

Finally, the court held the warning requirement unduly burdened and chilled protected commercial speech.  The panel observed the black box warning “overwhelms other visual elements” in the advertisement.  This, according to the panel, would defeat the purpose of the advertisement, “turning it into a vehicle for a debate about the health effects of sugar-sweetened beverages.”

Thus, Ninth Circuit panel concluded that the Associations had shown a likelihood of success on the merits of their First Amendment claim.

 

Acting Chairman of the Federal Trade Commission Maureen Ohlhausen announced today that Thomas Pahl – a current partner at Arnall Golden Gregory with significant experience at both the FTC and the Consumer Financial Protection Bureau – will take over as Acting Director on February 17.  Jessica Rich will depart as Director of the Bureau of Consumer Protection, a position she has held since 2013.

While currently in private practice, Pahl previously spent more than twenty years at the FTC, including stints as Assistant Director of the Division of Financial Practices and Assistant Director in the Division of Advertising Practices.  After his time at the FTC, Pahl served as a Managing Counsel in the Office of Regulations at the CFPB, where he oversaw rulemaking, guidance, and policy development activities relating to debt collection, credit reporting, and financial privacy.  Pahl also advised Reagan appointee and FTC Commissioner Mary Azcuenaga, and served as an attorney advisor to Republican FTC Commissioner Orson Swindle.

Pahl recently praised the appointment of then-Commissioner Ohlhausen as Acting Chairwoman as a “wise choice” that will “place[] the agency in very capable hands” and suggested that President Trump “should give serious consideration to making Ohlhausen the permanent chairman of the FTC.”   In announcing his appointment, Acting Chairman Ohlhausen commented that “Tom’s career demonstrates his continuing commitment to protecting consumers through active enforcement and advocacy that promotes a free and honest marketplace.”

Outgoing Bureau Director Jessica Rich served in various capacities at the FTC for 26 years and has presided over the Bureau of Consumer Protection since 2013, when she was appointed by former Chairwoman Edith Ramirez.  During her tenure, Rich advocated for rigorous enforcement of consumer protection laws and oversaw a number of high profile enforcement actions against major corporations such as Volkswagen, Apple, Google, and Amazon.  She also championed efforts to expand the Commission’s efforts to regulate privacy and data security practices under the FTC Act, as well as to develop the technological expertise necessary to protect consumers in a constantly-evolving marketplace.

Further shake-ups at the Commission are inevitable.  With former Chairwoman and current Commissioner Ramirez’s departure effective this coming Friday, there will be three vacancies on the five-person Commission.  However, the interim appointments of Commissioner Ohlhausen as Chairwoman and Pahl as Acting Bureau Director suggest that top positions at the Commission may continue to be filled by individuals with significant consumer protection experience.  Stay tuned.

Just over one week after being named acting chair of the Federal Trade Commission (FTC), Maureen Ohlhausen delivered the keynote address at the American Bar Association’s biennial Consumer Protection Conference in Atlanta on February 2.

During her remarks, acting chair Ohlhausen offered insight into consumer protection priorities during her tenure as acting chair.

First, acting chair Ohlhausen signaled the importance of the Agency focusing on stopping fraudulent schemes, especially those targeting vulnerable populations such as the elderly or military members.

Second, the acting chair noted that remedies sought in FTC cases should be more closely linked to actual, rather than speculative, consumer injury or harm, echoing her recent dissent in Qualcomm, and further posited that the FTC’s efforts in recent cases to collect disgorgement in non-fraud cases is inconsistent with prior FTC practice.  Specifically, the acting chair called into question the Agency’s practice of seeking disgorgement that is disproportionate to actual consumer injury.  As an example, she referred to her dissent in Uber, where she wrote that “I dissent from the complaint against Uber and the settlement resolving that complaint because the monetary settlement of $20 million is not tied to an estimate of consumer harm.”  And for privacy enforcement actions, she emphasized the need for “concrete injury” to justify agency action.

Third, acting chair Ohlhausen indicated a desire for the FTC to be more transparent about its investigation and enforcement matters.  She noted that there may be value in disclosing (without disclosing confidential information) details of investigations where the FTC closes an investigation without nay enforcement action.  According to acting chair Ohlhausen, such transparency would help provide guidance to businesses about practices and policies that the Commission deems permissible, in addition to those that are not.  It is unclear how much additional information acting chair Ohlhausen envisions disclosing beyond information contained in Commission closing letters at present.

Also with respect to investigations, the acting chair signaled the need for the Agency to narrowly tailor investigative requests to only obtain information that is necessary and relevant to its investigations.  Recognizing the burden of overly broad information requests, she stated that “the FTC must remain able to collect the information we need to enforce the law, but I am certain that we can do this while reducing the burden on businesses, particularly third parties who are not under investigation.”

Although her remarks were brief, the acting chair’s address suggests a more restrained approach by the FTC than it has pursued in recent years.  Given the three open seats on the Commission yet to be filled, two by Republicans, and the future appointment of a permanent chairperson, more changes are a certainty.

Federal Trade Commission Chairwoman Edith Ramirez announced today that she will resign her position effective February 10, leaving the Commission with three vacancies and just two remaining commissioners.  Chairwoman Ramirez has been a commissioner since April 5, 2010 and became Chairwoman on March 4, 2013.

In announcing her resignation, she remarked: “It has been the honor of a lifetime to lead the Federal Trade Commission and to have played a role in advancing American consumers’ ability to navigate fast-paced digital markets and promoting business competition across the economy. I thank my fellow Commissioners and all of the talented FTC staff for their support and dedicated public service during my tenure.”  As noted in the FTC’s press release, Chairwoman Ramirez’s tenure was notable for aggressive enforcement of consumer protection and antitrust laws, resulting in “nearly 400 law enforcement actions covering a range of consumer protection issues and approximately 100 enforcement actions challenging anticompetitive mergers and business conduct in major sectors of the economy.”

Assuming no new appointments between President-Elect Trump’s inauguration and February 10, the Commission will be in the rare situation of having only two commissioners on the five-person body.  The Commission could continue to bring enforcement actions under FTC rules, assuming Commissioners Ohlhausen and McSweeny both agreed.  With just two confirmed commissioners, any Commission enforcement decision and most official actions would require both to agree.  Commissioner Ohlhausen, a Republican, has been a commissioner since April 2012 and could take the chair under the new administration.  Commissioner McSweeny, a Democrat, was appointed in April 2014 to a term that expires in September 2017.