Why the new FTC chair is causing such a stir
It's time to start paying attention to Lina Khan and the US's key consumer protection agency.
On Tuesday, an attorney named Lina Khan became the chair of the Federal Trade Commission. Her appointment to lead the FTC marks a potential new direction for a small but important government agency—one you might not know much about.
Here’s a brief look at what the FTC is, and how Khan’s leadership there could change its course—which could in turn affect the life of anyone who buys products like smartphones, uses social media platforms like Facebook, or orders items from Amazon, to name just a few examples.
What is the Federal Trade Commission, or FTC?
The FTC has a pretty straightforward mission. “The Federal Trade Commission is our primary consumer protection agency,” says Chris Hoofnagle, a professor at the School of Law at the University of California, Berkeley. “It can bring cases against companies; it can make rules concerning certain practices; and it is looked to by Congress to solve many different types of consumer problems.” In other words, FTC could just as easily stand for “fair trade commission.”
It’s a relatively small agency, but it’s comparable to what the FDA does for food and drugs, the FAA does for aviation, or the SEC for securities. (Don’t confuse it with the FCC, which is all about communications.)
But compared to those organizations, it’s seen as less muscular. “The Federal Trade Commission has a reputation for being weaker than sister agencies like the FDA and the FCC,” Hoofnagle says.
Remember, this is a body that protects consumers from bad things like fraud, harm, and anti-competitive markets, so it’s an entity that ideally should function well. And it is known for some accomplishments. “Through the history of the Federal Trade Commission, it has sometimes intervened in aggressive ways to protect consumers from injury,” Hoofnagle explains. “The high-water mark was requiring cigarette [warning] labels.”
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Another more recent greatest hit was the establishment of the national do-not-call list to try to tackle predatory and annoying telemarketing calls. Yes, you probably still get spam calls anyway, but experts cite this registry’s creation as an important initiative in curbing them.
Its mission also includes oversight over large mergers, so if two companies want to combine in a way that could be anti-competitive, and thus drive up prices for consumers or give them fewer options, then the FTC can take action.
At the top of the agency are five commissioners. A single political party can hold no more than three of those spots, and one of the commissioners is the chair. Right now, there are three Democrats (including Khan, the leader) and two Republicans as commissioners. The agency’s chair can decide who to hire for the senior staff; the commissioners’ power comes from being able to veto the choices that the attorneys at the FTC make when deciding what cases to pursue.
“Whether it does a good job or a bad job makes a big difference in the lives of ordinary people,” says Stephen Calkins, who was general counsel of the FTC between 1995 and 1997 and is now a professor of law at Wayne State University in Michigan. He cites energy efficiency labels on appliances like water heaters, and clear price lists for services at funeral homes, as other areas in which the FTC has effected change.
How might the FTC shift gears now?
Khan, who was not available for an interview, is a 32-year-old with a reputation for standing up to corporations. “She is the personification of the attack on big tech,” says Calkins. “Her reputation is as being somebody who would be very aggressive and very critical and very imaginative.” She’s well known for a paper about Amazon relating to questions of antitrust and the tech giant. According to Hoofnagle, her appointment marks a major shift for the FTC, which has been plagued by “mediocre commissioners” and tight budgets.
“In 1979, this agency had over 1,700 employees, and now it has about 1,100,” he explains. “So it was a terrible victim of the Regan revolution, and we’re at a moment where we might be fundamentally realigning our society—fundamentally making different choices about how we want business to work.”
“Lina Khan’s appointment is a signal of a fundamental realignment,” he adds. That new direction, he observes, is “towards a more interventionist federal government.”
Fiona Scott Morton, a professor of economics at the Yale University School of Management who is also a former deputy assistant attorney general for economics in the Department of Justice’s antitrust division, says Khan’s appointment is an “exciting” development. “I think that it’ll be great to see how quickly she can make things happen,” she says, citing issues in the pharmaceutical industry and even mergers relating to dialysis clinics.
“The FTC has a number of tech investigations going, we know, so the faster those cases get brought, and won, the better—so that’s I think what consumers should be hoping for,” she says. (You can see a list of the agency’s current cases here.)
“Consumers really are harmed when there aren’t the choices that the marketplace would normally deliver to us,” she adds. Facebook owns Instagram, for example, not to mention the WhatsApp messaging service.
And when it comes to the tech landscape, having options isn’t just about potentially taking advantage of lower prices. “If there’s a social network that has less hate speech, it might attract users because they like that choice,” she says. “There’s lots of benefits to consumers from markets that work properly.”