Antitrust in an Election Year – 10 Minutes With Noah Phillips

Below, we have provided the full transcript of an interview with FTC Commissioner Noah Phillips from the first episode of our series, Antitrust In an Election Year: Challenges Ahead.

Leah NYLEN:

Thanks to CPI. I’m Leah Nylen, Politico’s antitrust reporter, and I have here with me today FTC Commissioner, Noah Phillips. Hey, Noah.

Noah PHILLIPS:

Hi, Leah. Great to be here with you.

NYLEN:

Great. As I’m sure you know, the House Judiciary committee, last week, put out its report on antitrust in the tech sector, and the staff recommended a number of changes to antitrust law and the FTC. What do you think about some of their recommendations?

PHILLIPS:

Thanks for the question, Leah. I think the big takeaway that I had… You mentioned at the beginning, they put out a report on antitrust in the tech sector, but a lot of the recommendations go much more broad than the tech sector. So, the report is a study, people have issues in how it was done, but it was a study on four companies and some of their business practices, and a lot of the prescriptions are broad fixes for the economy. I think, when I think about legislation, you want to figure out what is the problem you’re addressing? And you want to tailor a solution to that problem and think about unintended consequences and this sort of thing. And by design, this report focuses on four very big and very interesting companies without a doubt. But it then prescribes rules for the whole economy. And I think my big takeaway is the rules don’t track, or at least, some of the rules don’t track just what is in the report. And the question to ask is what would the rule do in general? And is that justified?

NYLEN:

Mm-hmm (affirmative). Are there any in particular that you think are bad ideas or particularly good ideas?

PHILLIPS:

Look, the report calls for additional funding for the agencies. I think where we are today is very busy, and we could certainly use additional funding. So, that’s a good example of something I like. And to be clear, there are a lot of recommendations in the report. We can talk about particular ones, but there are other rules, broad ideas of Glass–Steagall type structural separation that I don’t know are warranted. I don’t know at all that those would be good for consumers. There are even other rules that some people view as modest, like shifting the burden of proof in cases to the defendant, which is certainly not the tradition of American law or law enforcement that I think are anything but modest, and in fact, would have a very dramatic, and in many cases, very negative effect.

NYLEN:

There was an entire section on potential recommendations related to the FTC. As you mentioned, one of them was funding, which I think everyone broadly supports. There were a couple of others in there I wanted to get your take on, though. One of them proposed allowing civil penalties for violations of the Unfair Methods of Competition statute. What do you think of that?

PHILLIPS:

Well, I might be misremembering. I think the idea was to have in place rules, the violation of which would trigger civil penalties because under our organic statute, we don’t get penalties. But where there are violations of particular rules, we can. And the basic idea is the following. And this is part of the original conception of the agency, which I think remains wise today. We’ve got this broad juristic, whether it’s something that’s on antitrust or the consumer protection side, and we’re allowed to root out conduct that people maybe didn’t think of as bad or the law didn’t recognize as bad before, and say, “Hey, stop that.” But because we’re allowed to do that and a company might not have had the ability ex ante to figure out that it was problematic, you don’t also penalize them for it. But where you have rules and you say, “Here are the rules of the road. Don’t drive more than 65 miles an hour,” then it’s okay to punish people for violating. And that’s the basic compromise embedded in the statute. And I think it makes a lot of sense.

NYLEN:

Yeah. One thing I did want to, since you brought up rules, talk about, was it wasn’t actually included in the report, clarifying language that the FTC has authority to create rules governing what counts as an unfair method of competition. I asked Chairman David Cicilline about that, and he said they didn’t include that in there because they think it already exists. What are your thoughts on that kind of a rule-making?

PHILLIPS:

I think it’s actually a more complicated question and one that raises some serious issues, both in terms of policy, and really, in terms of the structure of our government, constitutionally speaking. The idea that we have this rule-making authority was something that the agency, for the most part, didn’t believe in for the first, I don’t know, 50 years of its existence. And it discovered authority, which was blessed by the DC circuit in an opinion in the early 1970s. Read that opinion today in light of how judges read law. I don’t know that it holds up so well. The other issue that this, of course, creates, if you listen to a lot of the folks talking about antitrust today, they really view competition as applying to everything in the economy.

And where you believe that competition law is about everything in the economy, and you’ve got a word that says nothing more than unfair, and you want to make rules, prescriptive rules about the entire economy. What you’re really talking about there is legislate. And I think that raises a real non-delegation concern. One thing that’s really interesting, if you look back at the original progenitor case of the non-delegation doctrine, where the Supreme Court invalidated the National Industrial Recovery Act that was the new deal, that allowed the president of the United States, in that case, Franklin Delano Roosevelt, to promulgate codes of fair competition. And here, we’ve got a statute that says “unfair methods of competition,” and that, at the time, was understood to deal with case-by-case enforcement. But now, you’re talking about making rules with very little limit. And I think that raises a real concern. It’s one thing if, consistent with the house report, Congress wants to legislate. They can do what they want. But it’s another thing to say to an agency, “We think competition applies to everything: labor, privacy, the environment, racial justice, you name it. Oh, and you can go make rules.”

NYLEN:

Since we only have a couple of minutes, I want to get in a couple other topics. As I’m sure you know, President Donald Trump signed an executive order in May focused on social media. That order suggests that the FTC consider action against social media companies that quote, “Restricts speech in ways that do not align with those entities’ public representations.” What do you think of the executive order, and what steps, if any, do you think the FTC should take in response?

PHILLIPS:

The executive order requires us to consider complaints that come in. I’m actually not aware that any complaints have come in to us. But leaving that aside, I think part of the issue here is that we have traditionally stayed away from activity that is protected by the First Amendment in doing our consumer protection enforcement. And so, making content moderation decisions, however bad those decisions may be, is the kind of area that the agency has, I think, soundly stayed away from in the past.

NYLEN:

Does that mean you don’t think the FTC should take any particular steps in response to the executive order?

PHILLIPS:

Look, I think consistent with the order, we should evaluate what comes in. Likely, evaluate any complaint that comes in. But if the complaint is something that is governed by the First Amendment, as a general matter, what you do with content on your site, is protected by the First Amendment. That’s an area where we shouldn’t go.

NYLEN:

Okay. Three of your colleagues, Commissioners Chopra, Slaughter, and Wilson have now said that they think the FTC should use its unique powers under the FTC Act, Section 6B to conduct a study on how targeted advertising impacts the content decisions that platforms make. And Commissioner Wilson has suggested that that would work as a response to Trump’s executive order. What do you think about a study like that?

PHILLIPS:

I guess what I’d say is that’s not a study, the way you articulate it. How does targeted advertising affect content moderation? It doesn’t really speak to the issues that the executive order raises, which, to be clear, are legitimate questions. The scope of Section 230 and how companies do content moderation are really important policy questions. And like many Americans, I’m troubled by a lot of decisions that get… But targeted advertising is an interesting issue. There are policy questions that it raises. What is the value of targeted advertising? Content moderation raises a lot of interesting policy questions, and we’re talking a lot about those. But how those two relate and what such a study, how it would relate to the executive order, I think we’re talking about two different things.

NYLEN:

Okay. Then just take the study then. Do you think that would be a worthwhile study for the FTC to take on?

PHILLIPS:

Look, I think there are a lot of interesting questions at which we should look. My view on 6B studies is I want us to have a targeted thing that we’re doing because these studies are costly, and we want to know that we’re going to have usable work product at the end. Let me say the following. On targeted advertising, I have some questions. On other issues, content curation, I have some questions. I think there’s a lot of interesting things to study.

NYLEN:

Okay. As you know, the FTC has been teleworking since March when the pandemic hit, and you all have had a really busy year. I think the Chairman mentioned at Fordham that you all have challenged more mergers this year than any year since 2000. How has the pandemic changed work at the FTC? And do you find that certain things are taking longer or shorter?

PHILLIPS:

Look, like the chairman said, we’ve been very, very busy. We just won a really difficult case in Missouri about a coal joint venture, effectively, a merger to monopoly. We’ve been really active on the antitrust side, on the consumer protection side. And so, I don’t think there’s any visible way in which we’ve been limited in our work, but it’s hard. And I don’t think it’s as pleasurable as it normally would be. Like most workplaces, I think a lot of us get a lot of value out of being with our colleagues in person. And certainly, there are little ways in which, logistically, life is tougher. The viewer may not know this, but getting onto this Zoom call was not the easiest thing for me. And so, yeah. I think a lot of different ways in which it affects our work, but I don’t think it shows in the results. I think we remain busy. We’re a very active commission. This began, of course, before the pandemic. We’ve been bringing a bunch of monopolization cases over the last couple of years, a bunch of merger cases. So, there’s no discernible decrease in activity.

NYLEN:

Since I think I have one more minute, I will ask you about one of those monopolization cases. A couple of weeks ago, the FTC voted to seek en banc review of its case against Qualcomm. You voted against that decision. Can you talk about what motivated that?

PHILLIPS:

Look, the case is sub judice in front of the ninth circuit, so I don’t want to dwell too much on it. I think it’s a case that raises a lot of difficult issues. I think it’s a case that has led courts to say things, in certain cases, they probably shouldn’t have said. My view was, at the end of the day, there wasn’t a good reason to seek en banc review.

NYLEN:

Okay. Well, thank you so much for taking the time today. This is FTC Commissioner, Noah Phillips. And back to you guys over at CPI.

PHILLIPS:

Thanks, Leah.