U.S. Federal Trade Commissioner: Consumer protection and fair competition are keys to a developing economy

Noah Joshua Phillips serves as one of five Commissioners on the U.S. Federal Trade Commission, following his appointment to the position by President Trump and unanimous confirmation by the U.S. Senate last year. He came to the post after a meteoric rise in the legal profession: He served as a litigator in leading New York and Washington law firms, then as Chief Counsel to U.S. Senator John Cornyn, a member of the Senate Judiciary Committee.
 
Phillips spoke with Majallaabout his work on the FTC, the organization’s global footprint, and lessons the United States has learned about the value of fair competition and consumer protection.
 
Q: What are the functions of the Federal Trade Commission, and how did it achieve its mandate?
 
A: The FTC is an independent agency within the U.S. government, which was founded in 1915 to address antitrust law. The agency was founded about 25 years after the passage of the first antitrust law in U.S., the Sherman Act. It was the view of President Wilson and others at the time that we needed an expert body to help decide what was and wasn’t legal and to bring enforcement actions. Decades later, in the 1930s, Congress gave us the authority to engage in consumer protection, enabling us to bring enforcement action against unfair or deceptive practices. 
 
Since then, in a variety of areas related to consumer protection and, to a lesser extent, competition, Congress have granted us additional authority. On the competition side, that means reviewing certain mergers before they happen to see whether or not the government ought to stop those mergers. On consumer protection, and a wide variety of other issues, including in the last 50 years the issue of privacy, which has increasingly become a dominant issue in US. We have a broad mandate. Right now, this broad mandate puts us in the midst of an international discussion about competition enforcement and issues surrounding privacy. 
 
Q: Such as the recent revelations about Facebook’s unauthorized sharing of user data with private companies?
 
A: We have publicly confirmed that we’re conducting an investigation of Facebook, so I can’t say much beyond that fact. Facebook, as a matter of public record, is known to be under order with us. We settled a case and they’re required to abide by certain rules. As a general matter, on privacy, we look at a set of two broad areas. One is specific privacy statutes. Two, we also have that general consumer protection authority to police unfair and deceptive acts and practices.
 
Q: How do you determine which companies to focus on?
 
A: When we see things that happen in the news, or consumers complain to us, we look into those questions and we try to determine whether there were violations of the law and what to do about them. 
 
Q: How does the FTC’s footprint exceed the borders of the United States?
 
A: Jointly with the Department of Justice on antitrust questions, and on our own in terms of consumer protection, the FTC has long played an important role internationally in helping countries develop their law consistent with principles that we think are good not only for US consumers but also for consumers across the globe. We have Office of International Affairs — both to facilitate enforcement in cross-border cases; and they also have an important teaching role. They help explain to other countries what we’re doing and why we’re doing it the way we are. We welcome representatives from sister agencies across the globe here at the FTC, and we send our people abroad. We also participate very actively in a number of international bodies dealing both with competition and consumer protection.
 
Q: Are the governments which the FTC engages abroad primarily democratic ones?
 
A: Democratic nations play a prominent role in these organizations, but other countries are involved as well. 
 
Q: What is the FTC’s message overseas inasmuch as it serves as a force for development — and how do responses to it vary?
 
A: To my mind, we’re part of a much broader scheme of the rule of law. The specific constitution of our agency as an independent one means that we’re not subject to political control and part of the idea is that we should be able to do good policy without political direction. And that market participants can rely on what we do not to be political. And I would argue that that’s important for any country, no matter how it’s constituted. This isn't my area of expertise, but, certainly, I think it might create more discomfort in a society where the expectation was that the ruler could intervene. On the other hand, when trying to attract FDI [Foreign Direct Investment], one good indicator is that where economic policy rules are followed consistently and without prejudice, I would assume that could be a force to attract FDI. 
 
Q: When FTC communicates or acts internationally, how are the efforts informed by America’s own historical experience with trusts and anti-trust law?
 
A: One project over a very long term of the US government, for many decades, has been bringing to the world important lessons that we learned decades ago with respect to how competition law ought to work. For decades in the US, the law was incoherent, the courts reached decisions that weren’t consistent, and market participants didn’t know how to conduct themselves. Both the political Right and Left agreed it was a mess, and, really beginning in the 1970s, we brought more rigorous economic thinking to antitrust law. Out of that emerged a more consistent set of principles, better understanding of what kinds of conduct should be viewed with skepticism by the law and which should not be. We as a nation — DOJ and FTC leading — took those principles out into the world and dealt with a lot of different countries around the globe, to help make the law more coherent across the board. One particularly important implication on the global level is that, as firms become increasingly multinational and need or want to merge, they need to get approval in multiple jurisdictions. If you have to think about how your transaction will be treated across multiple jurisdictions, it’s better to have a reasonable assuranceof equal treatment across the board. 
 
Q: What is an example of an American anti-trust case that proved defining or instructive?
 
A: One very famous case — Von’s Grocery — occurred where the federal government blocked a merger involving grocery companies with incredibly small market shares. We’re talking single percentile points. We now know that a merger of competitors with that small a market share will be unable to raise prices in a way that is sustainable. And so we’re not as concerned with mergers at that level of market share. We look for higher levels of concentration. The courts had been very skeptical of horizontal mergers — among competitors — and vertical mergers, up and down supply chain of a particular industry. As a result, in fact, companies engaged in conglomerate mergers — companies having nothing to do with each other merging. In the 1970s you saw political scandal concerning ITT, which owned lots of different businesses. Companies were prevented from doing mergers that could be beneficial, and getting into more inefficient mergers instead — merging badly. 
 
Q: In some countries, economic elites may feel personally vested in perpetuating unfair competitive practices, or reluctant to introduce consumer protection laws. How would you attempt to persuade them to reconsider?
 
A: Both competition and consumer protection law are important to the inculcation and the maintenance of markets, which help encourage development. So competition law is all about the rules of the road that firms need to follow in how they interact. So, rules, for instance, regarding price fixing, or rigging bids, help keeping costs low for consumers. They also  help give confidence in markets. By the same token, consumer protection and the knowledge of consumers that they will be protected by the government, encourage them to enter into the market, to buy products, which itself inculcates investment. So think about it this way: where you have only the market to police, consumers may have to invest a lot of energy to learn about which sellers of products are honest or not, and they may be more leery of sellers of products that are further away from them and which they can’t reach. The government plays an important role by determining what the rules of road are. And consumers know what those rules are. For instance, if you know that a company can get in trouble for deceiving you, that makes you more confident about spending money. It reduces the due diligence costs of consumers to know that there are rules and the rules are enforced. So both competition law and consumer protection law are reasons for firms and consumers to have confidence that honest market play is going on. That’s a reason for both to make investments, to make purchases, and that helps everyone grow.
 
Q: Where a country’s political leadership is itself vested in corporate trusts, advocates for the kind of legal reforms you champion face an uphill climb. Why is it in the interest of a corrupt political leadership to upend a system from which it is profiting?
 
A: Two reasons that relate [to one another] are the confidence of firms and the confidence of consumers. With respect to firms, where you know that the rules are the rules, and they determine what market participants can do, you’ll attract competition. That will both enhance the welfare of consumers— by expanding options, bringing down prices — and also make your firms more efficient by forcing them to compete on the merits. The other reason is that consumers not only like lower prices, more output, innovation, quality — they also don’t like corruption. And better competition can be a bulwark against corruption. 
 
History has also shown that where people feel that rules of the road aren’t applied consistently, where they fear that there’s too much cronyism or corruption, there can be social unrest. And I would think if you’re a member of an elite that should give you a great deal of concern.
 
Q: Can you offer a cautionary tale from the American experience to that effect?
 
A: In the 1970s, during the Nixon Administration, there was a concern that the government was exerting too much political or politically driven influence over antitrust law. And even in the US, that was really a scandal. This had to do with the government and ITT, a major conglomerate, and my recollection is that the Nixon White House was accused of directing the justice department’s antitrust enforcement efforts as an exercise in political favoritism. The press was angry and people were very angry. This sort of got subsumed in some of the other scandals, but it was a big deal at the time.
 


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