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What to Expect from the Simons-FTC

Summary

More change is coming to the FTC than most appreciate.

That’s because the FTC is in the process of an unprecedented, clean-slate leadership change, at the same time society is undergoing an extraordinary inflection point – the “techlash.”  

In a nutshell, the evidence to date shows the eventual Simons-FTC is on path to be a tough, bipartisan, populist, by-the-book, enforcer of antitrust and consumer protection laws. That would be in stark contrast to, the “laxter” enforcement and apparent Google-capture, of the 2012-2017 Ramirez-FTC, and the current, sidelined, no-quorum, Ohlhausen-FTC. 

Don’t be fooled by the quiet glacial pace of the Federal personnel process here so far. Major directional change is coming, away from apparent inappropriate FTC leadership protection of Internet platform interests, to traditional and appropriate FTC leadership protection of consumer welfare interests.

Why? This analysis spotlights how the “techlash” – the new, bipartisan, accountability-ethos -- combines with an unprecedented clean-slate FTC opportunity, to build bipartisan consensus around the need for fair, fact-driven, enforcement vigilance of the companies with the most market power.

Thus, the most important commitment FTC Chair nominee Joseph Simons made under oath may be: “The FTC needs to devote substantial resources to determine whether its merger enforcement has been too lax, and if that is the case, the agency needs to determine the reason for such failure and to fix it. … It would also be good practice to extend the retrospectives to non-merger matters as well.”

If a new Simons-FTC “retrospective” affirms that: the FTC got it right in 2013 and all the FTC-Google antitrust probes were closed legitimately; and Google has not abused or extended its market power in the ensuing five years; then Alphabet-Google would face minimal antitrust risk from a Simons FTC. However, if the retrospective found evidence of antitrust problems, the risk would rise commensurate with the facts.  

Another FTC enforcement matter that appears ripe for a Simons’ “retrospective” would be whether from 2013-2017 the FTC fully-enforced the FTC-Google and FTC-Facebook 20-year privacy consent decrees that require the companies to keep their privacy promises to consumers.

The Simons-FTC decision process of considering the ABA Antitrust Bar’s recommendation to sunset FTC consent decrees after five years, offers official impetus to fully investigate the potential consumer welfare harms of ending the FTC’s 2011, 20-year privacy consent decrees with Google, and Facebook fourteen years early. To make that assessment most accurate, another useful retrospective would be to review how the FTC resolved, or did not resolve, the formal complaints that Google, and Facebook violated the terms of their FTC 20-year privacy framework consent decrees, from 2012-2017.   

 

The Evidence that Major FTC Directional Change Is Coming

Bipartisan “Techlash:”

Never have we seen such a swift and profound, bipartisan, corporate reckoning as the recent “Techlash” against Alphabet-Google, Facebook, Amazon, etc., for a litany of competition and consumer abuses smack in the middle of the FTC’s antitrust and consumer protection wheelhouse.

Since the election, internet platforms have flipped from being perceived as the trustworthy answer to most of the world’s problems to the deceptive cause of many of the world’s problems and dysfunctions. Their well-orchestrated narrative that Internet platforms were munificent, democratizing, pro-competitive bastions of freedom only interested in the common good of their users and the world -- has collapsed under an avalanche of evidence to the contrary (here, here, here, here, here, here, here, here, here, here, here, here, here, here, here, etc.).   

Tellingly, the “techlash” has been bipartisan.

Last summer, Democrats elevated antitrust enforcement in their “A Better Deal” platform vowing to “crack down on corporate monopolies.” Prominent left-of-center, billionaire philanthropist George Soros castigated Google and Facebook as a “menace to society and “obstacles to innovation” in his annual Davos State of the World Address. On the right, Tucker Carlson regularly spotlights the scary unaccountable concentration of market power of Google, Facebook and Amazon. And Senator Ted Cruz warned at the FTC nominees’ Senate hearing, that concerning Google and Facebook: “the scope of market power, and size, and control of public discourse is unprecedented.”        

An Unprecedented New Clean-Slate of FTC Commissioners

This may be the most abnormal time in modern FTC history. Never before has the normally five-commissioner FTC operated for any length of time without a necessary three-commissioner quorum. For the last twelve months, the FTC had only two commissioners with no quorum for a vote. For two years it has only had three commissioners.

Since each commissioner is nominated for seven-year, staggered terms, it is unprecedented, and counter to the staggered-terms-design of the process, for four new FTC commissioners to be nominated and have a Senate confirmation hearing at the same time like this week. But that is only 80% of it. The fifth new FTC nominee is expected to be nominated soon and possibly could ultimately get a Senate confirmation vote with the other four, or shortly thereafter.

Thus, in a matter of months, if confirmed by the Senate, America will have a clean slate of new FTC leadership, three Republicans: Joe Simons (Chairman), Noah Phillips, Christine Wilson; and two Democrats: Rohit Chopra, and Rebecca Slaughter (still pending nomination).   

Why does this matter?

The big takeaway here is unlike the norm or one or two new commissioners joining the FTC every two years, then learning about and largely going along with the current agenda, priorities, and workflow, this is an unprecedented total replacement of FTC leadership at one time and occurring during an extraordinary time of profound bipartisan concern and big-change-in-thinking about the importance of antitrust and consumer protection -- especially vis-a-vis Google and Facebook.

With such a completely different FTC leadership dynamic, it is unlikely that the FTC’s future is going to be a facsimile of the past. All commissioners are coming in new with fresh eyes, and there also will be many new key FTC staff hires, who may be able to be more objective about what worked and didn’t work over the last five years, that may, or may not, have contributed to the exceptional antitrust and privacy dysfunctions the Nation is now enduring.

“Team FTC”  

A Washington adage is “personnel is policy.” Thus, it is instructive to see what FTC Chair nominee Joseph Simons testified to under oath in his confirmation paperwork and at his hearing.

Mr. Simons is making it clear, if confirmed, he plans to be a tough, prolific, and bipartisan, FTC enforcer.

In his confirmation documents he stated that: “as Director of the Bureau of Competition, with responsibilities for roughly half of the agency … my tenure was both active and highly successful. The Commission during that time brought more non-merger enforcement actions than in any comparable period two decades before and since, while remaining very active in merger enforcement as well. As a matter of personal pride, those efforts were characterized by a high degree of bipartisanship.”

In answering a hearing question that asked about his commitment to bipartisan FTC enforcement, he responded his perspective is that of “Team FTC.” 

At Mr. Simons’ and the other FTC nominees’ hearing, Senator Cruz discussed a news report about the extraordinary reach of Google and Facebook’s businesses, and stated that their “scope of market power, and size, and control of public discourse is unprecedented.” Senator Cruz then asked Mr. Simons: “How should the commission approach this development?

Mr. Simons answer was telling: “with respect to antitrust… the place most likely to have antitrust problems – is places that have market power. Those are the places you want to be monitoring carefully and paying attention to. And if anticompetitive conduct is occurring there, that’s where you get a bang for the taxpayer buck, by enforcing in those areas.”   

The Need for FTC “Retrospective Studies” -- The Apparent Google-Capture of the FTC

Big Picture? An apparent important “retrospective” task for the new FTC to investigate and resolve, is if there were any improper, unfair, or deceptive practices by Google, the FTC, or others, that led to the strange near-complete and continuous cessation of meaningful FTC antitrust interest, scrutiny, or accountability concerning Google for over five years from January 4, 2013 to present.

That is despite very vigilant DOJ/FTC antitrust/privacy enforcement focus on Google in 2008, 2009, 2010, 2011, 2011, 2011, 2011, 2012, and three EU antitrust cases against Google, Search-Shopping 2015, Android 2016, and Search Adtech Advertising 2016, including a Google conviction and $2.7b fine in 2017 for abusing its dominance in search by demoting leading comparison shopping competitors so consumers would not discover them.

The exceptional incongruity between the FTC’s antitrust interest in Google in 2009-2012 versus 2013-2017 warrants careful study and potentially corrective action. (See Telling Timeline.)

Google-DoubleClick Merger? In retrospect, did the FTC’s approval of Google-DoubleClick in 2007 “substantially lessen competition?

That question is warranted for these reasons. First, Google now commands a very dominant ~90% of U.S. search advertising and search syndication markets. Second, the FTC apparently did not keep its public promise in 2007: “We want to be clear, however, that we will closely watch these markets and, should Google engage in unlawful tying or other anticompetitive conduct, the Commission intends to act quickly.  That’s because third, the FTC was aware of Google’s extensive contractual tying of Google Search as default in Android OS OEM/carrier contracts (a la the U.S. v. Microsoft tying precedent), but apparently did not do anything to stop it.

That’s a particularly huge antitrust miss given that the facts showed EU antitrust authorities that Google extended its ~70% PC search dominance to ~90% dominance in the markets of mobile search advertising, mobile licensed operating system, and Android App store; and that Google exponentially grew Android users from 200m in 2012 to over 2b users today.   

Google-AdMob Merger? In retrospect, did the FTC’s approval of the merger of #1 and #2 mobile advertisers in the 2010 Google-Admob acquisition “substantially lessen competition?”

That question is warranted because: 1) Google evidently extended its ~70% share of PC search advertising and search syndication to ~90% of the new mobile search advertising and search syndication markets; 2) the FTC’s concern that the transaction “raised serious antitrust issues;” 3) the Commission promised to “continue to monitor the mobile marketplace to ensure a competitive environment and to protect the interests of consumers;”  and 4) it became clear soon that the FTC’s assumption that Apple iAd would become a major ad competitor did not materialize and would not materialize because Apple effectively determined it was foreclosed from effectively entering the ad business for the first time by #2 Google being allowed to buy the #1 mobile advertising provider AdMob.  

Consent Decree Precedent? In retrospect, were the consent decrees and procedures used in the January 3, 2013 closure of the five FTC Google antitrust probes in keeping with normal FTC precedent and procedures, and proper and worth repeating in the future? That question is warranted because FTC Chair Ramirez stated to Congressional overseers that at least one FTC-Google consent decrees was improper and should not be seen as an FTC precedent?

Fair Administration of Justice? In retrospect, was the FTC and its administration of justice function executed impartially, fairly, justly, and ethically, free of actual outside influence, or the perception of improper outside influence during the 2013-2017 period?

Android Probe Closure Without a Vote? In retrospect was it proper and ultimately the right FTC decision to shut down the FTC’s Android probe without a public Commission vote or any public acknowledgement that it was no longer going to investigate Android, given the public disclosure that the FTC ended the other four Google antitrust probes with formal votes?

Fairly-Represented FTC Conferences? In retrospect, was it fair, impartial, and fair representation, for the FTC to organize three major FTC antitrust and privacy conferences  ostensibly to “bring together a diverse group of stakeholders,” when the evidence chronicled by the Google Transparency Project documented that a majority of the FTC-hosted speakers, panelists and research papers actually were Google-funded, but that only two of the Google-funded people disclosed their financial ties to Google?

Fairly-Disclosed Academic Research? In retrospect was the January 2013 FTC decision to close all the FTC-Google antitrust probes unfairly influenced at all by the hundreds of largely undisclosed academic research papers supporting Google’s theory of the case without fair disclosure they were funded by Google, in a hidden influence effort which was exposed via a front-page WSJ investigation and expose entitled: Hidden Influence -- Paying Professors: Inside Google’s Academic Influence Campaign?

Forthright Impartial Press Releases? In retrospect, was it fair, forthright, impartial, and fair representation for the FTC to issue a Google-benefitting FTC press release defending Google’s characterization of the FTC process of closing all the FTC-Google antitrust probes – when the press release was actually urgently requested by a Google lobbyist via email? The email was discovered subsequently via a FOIA request.  

 

 

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Scott Cleland served as Deputy U.S. Coordinator for International Communications & Information Policy in the George H. W. Bush Administration. He is President of Precursor LLC, an internetization consultancy for Fortune 500 companies, some of which are Google competitors, and Chairman of NetCompetition, a pro-competition e-forum supported by broadband interests. He is also author of “Search & Destroy: Why You Can’t Trust Google Inc.” Cleland has testified before both the Senate and House antitrust subcommittees on Google.

 

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