Did The Supreme Court Just Put Crosshairs On Every Independent Commissioner's Back?

Newsletter 42: A quick take on a historic ruling, plus updates on our investigations into the world of elite antitrust lawyers

The world of executive branch appointments is often scant on direct news, but this week had a doozy of a story. Monday’s Supreme Court ruling in Seila Law LLC v. Consumer Financial Protection Bureau could have far-reaching implications for independent agencies and executive governance. The most obvious, of course, is that Joe Biden can replace Kathy Kraninger on day one of his potential presidency (something she doesn’t seem particularly upset about), but the knock-on consequences could extend much deeper. We have fuller analysis later on in this edition of the newsletter.

But we want to balance that short-term response to a sudden development with deeper analysis of a longer-term trend: the rebirth of the anti-monopoly movement. This past week all but confirmed that the DOJ is ready to bring an antitrust suit against Google, and even Apple is finally starting to irk the Feds.

Anti-monopolism as a concept has also enjoyed a moment within DC wonk circles for the last few years, as a bevy of think tanks release their personal takes on what to do about the octopi across our economy. Unsurprisingly, our attention has been less on the policy (which has been ably analyzed by others) and more on the people. A very small circle practices, follows, or consults on federal antitrust enforcement -- and when everybody knows everybody, and there’s a lot of money to be made in letting a government function deteriorate, bad things tend to follow. Here, we provide some thoughts and updates on our research into the people and networks which have enabled our world of monopoly.

Congressional Oversight:

As we wrote in the American Prospect back in April, in 2012, the FTC approved medtech giant Covidien’s acquisition of Newport Medical Instruments, the small firm public health officials had contracted to develop a fleet of low-cost, portable ventilators. In a recent piece in Washington Monthly, our Andrea Beaty investigated the merger from the other side of the aisle: we took a look at the Ropes & Gray lawyer who boasted about getting the Covidien-Newport deal through the FTC without any meaningful investigation. 

Michael McFalls, a former protege of the late Democratic FTC commissioner Robert Pitofsky, uses his insider knowledge of the FTC to push mergers for his corporate clients. His resume includes countless medtech mergers he advocated for on behalf of private equity clients, as well as Google’s acquisition of DoubleClick and the union of tobacco giants RJR Tobacco and Brown & Williamson. Private sector lawyers like McFalls lean on the allure of potential private sector work and their connections to antitrust enforcers in order to ease through mergers for their clients. From inside the agencies, ostensibly career officials revolve between approving those harmful mergers that endanger the country’s emergency preparedness, consumer privacy rights, and so on, to helping them pass from their partnerships at elite law firms. 

Given the pandemic, it’s more than a little surprising that Congress isn’t systematically investigating the causes of the US’ lack of preparedness, including the ventilator shortage. But meaningful oversight could accomplish much more than simply re-discovering what we’ve already investigated. If, through hearings and fact-findings, Congress showed an actual investment in scrutinizing the revolving door and the effect it has on policy outcomes, it could do far more than a handful of advocacy groups to scare civil servants back into, y’know, doing their jobs. We also doubt that the Covidien merger is the only time a killer acquisition has blocked what could have been life-saving public health innovations so that a dominant firm could retain market power. Finding out more about this facet of the medtech and pharmaceutical market could be a guide to future policy.

Congress is also failing to wield their subpoena power to hold Big Tech and other proto-monopolistic companies accountable. We’ve documented the House Judiciary Committee’s ongoing struggle to get Amazon CEO Jeff Bezos to testify on his company’s potentially perjurious statements and anti-competitive practices.

But of course, Congress’ true power is in policymaking. Our solution to prevent something like the Covidien merger from happening again is simple: make “career” positions in government mean “career” again. Congress can help mitigate the influence of revolving door figures in antitrust enforcement by upping the pay grades of officials, particularly those at the FTC, who might otherwise seek out higher-paying private sector jobs. As we’ve written, directorships and other top posts more often go to lawyers with extensive private law firm experience; Congress and a future Biden administration can direct the agencies to promote from within and stop the outflow of staff who see private sector work as a natural step in a career in antitrust law. On the flipside, Congress should place more stringent restrictions on former government employees engaging with their old employers in order to make sure officials are incentivized to benefit the public interest instead of potential future private employers. Such restrictions would be an effective measure across the executive branch: we recently wrote about two Deputy Assistant U.S. Trade Representatives who tried to net lucrative consulting gigs in the auto industry after helping write the USMCA, while they were still working for the government. 

If a future Biden administration hopes to effectively address corporate concentration, they should start with banning revolving door actors from the administration and elevating career antitrust officials with demonstrated loyalty to the public interest (but we’ll get more into that later). 

Independent Agencies:

As we have long argued, independent agencies—those led by directors or commissioners that cannot be fired at will by the president—serve a critical function in our democracy. The FTC, FCC, FERC, and other agencies that enforce antitrust laws wield enormous, often overlooked power over our political economy. Ideally, these agencies would help advance a strong anti-monopoly agenda that holds large corporations accountable and not simply obey the wishes of partisan elected officials. (Of course, for that to be true, the antitrust establishment would need to embrace a more muscular vision of itself, independent of partisan politics. But that’s a whole other issue, which we have plenty of thoughts on.)

Unfortunately, on Monday the Supreme Court leveled an attack against independent agencies like the FTC, FCC, and FERC. The Court’s opinion in Seila Law LLC. v. Consumer Financial Protection Bureau, authored by Chief Justice Roberts, held that the president has the power to fire the director of the Consumer Financial Protection Bureau (CFPB). While it stopped short of abolishing the agency in its entirety—which plaintiffs advocated for—the decision re-elevates a weird and dangerous doctrine that puts the independence of other agencies at risk.

Optimists might read the Seila decision as narrowly targeting the single-director structure of the CFPB, sparing other agencies led by multimember commissions like the FTC, Federal Reserve, and FCC. But even if Seila is read narrowly, the CFPB is not the only agency in trouble. The decision will likely also affect the Federal Housing Finance Agency (FHFA), which is also led by an individual director. 

In reality, the opinion represents a solid victory in a long battle championed by conservative legal scholars and Trump officials seeking to undermine all independent agencies. This cache of corporate funded right wing ideologues, which includes in its ranks current Supreme Court Justices Gorsuch and Kavanaugh, argue that the President should have the broad authority to remove any executive branch official at will. This constitutional theory, called the “unitary executive” theory, asserts that all independent agencies—those with heads that can only be removed for cause—are unconstitutional by design.

Although Roberts distinguishes between single-director and multimember commission-led agencies in Seila, proponents of the unitary executive theory will likely use the opinion to launch attacks against commission-led independent agencies, including the FTC. That’s surely within the majority’s intent -- just as the Roberts Court hinted at what became Janus v. AFSCME (undermining public employee unions) in unnecessarily provocative dicta in earlier cases, herein SCOTUS’ right wing majority is knowingly encouraging additional assaults on the administrative state in Seila.

These lines of attack are not only further articulated by Justices Thomas and Gorsuch, who argued in their concurrence that the president should have the power to fire any independent agency head at will, but are also foreshadowed in Justice Kagan’s dissent. 

Kagan argues that presidents actually have more control over single director-led independent agencies than those with multimember commissions. Conservative lawyers might adopt this very argument, asserting that, because the Seila decision held that directors of independent agencies can be fired at will, by Kagan’s logic multimember commissions must also be subject to at will termination by the president.

The Court’s opinion in Seila represents just the latest in a series of attacks against independent agencies. While it is unclear how the decision will be interpreted, it is clear the FTC, and agencies like it, are in danger. Progressives need to begin to pay attention and develop a plan. Unpacking the Supreme Court is one of many ideas that need to be on the table.

2020 (And Potentially 2021):

Before he lapped up the Democratic primary, Biden was perceived as one of the most moderate contenders on the question of anti-monopoly policy. But it’s a credit to the hard work of advocates in this space that even he felt like he needed (a) any anti-monopoly policy, and( b) one that’s still tougher than what we’ve seen in decades. Biden’s “Plan for Rural America” calls for strengthened antitrust enforcement to protect farmers and ranchers from Big Ag. He has also said he is at least open to breaking up Big Tech firms like Facebook. If elected, his FTC and DOJ would inherit the now all-but-certain cases against Facebook, Google, Apple, and potentially Amazon. All that’s left for him to do is to pick highly motivated individuals who will see these high-profile cases across the finish line.

It may not be until 2023 that Biden gets an opportunity to appoint a Democratic majority on the FTC when Republican Noah Phillips’ term expires. (That’s only if current chairman Joseph Simons does the dishonorable thing and stays on as Chair rather than resign with a change in presidency, as Edith Ramirez did in 2017). Of course, Biden can nominate an Assistant Attorney General for Antitrust on day one. Same thing for Department of Agriculture appointees, which should be particularly relevant to Biden given his stated interest in targeting Big Ag. As Sandeep Vaheesan explains, there’s considerable anti-price discrimination power vested in the Grain Inspection, Packards, and Stockyard Administration should Biden pick strong appointees to fill it. The Federal Communications Commission and Federal Energy and Regulatory Commission both wield antitrust powers over the telecoms and energy industries, respectively. And as Matt Stoller points out, the Securities and Exchange Commission’s power over accounting standards lets it investigate when one line of business is being cross-subsidized by others for purposes of acquiring market power. That’s key data when assessing any kind of monopoly case.

But a great number of the personnel involved in the federal antitrust apparatus aren’t chosen directly by the President; they are picked by the President’s own picks. In other words, one reason it’ll be so important for Biden to choose a strong Assistant Attorney General for Antitrust and capable Federal Trade Commissioners is that they, in turn, will choose the people who handle the day-to-day decisions that enable something like a Big Tech breakup to even happen. The FTC’s Bureau of Competition Director, for instance, is both nominated and confirmed by the Commissioners. There’s likewise no Congressional input on the Bureau of Economics and Office of Policy Planning Directors, both of whom are critical to advancing an antitrust case -- if your chief economist presents you with an analysis based on the hyper-passive consumer welfare standard, for example, that can kill a case before it even takes off. 

As we’ve documented, it’s these sub-appointee positions where the revolving door really comes into play in a way with systemic implications. Sure, any BigLaw firm would love a former Commissioner to run their antitrust practices, but attracting a no-name government competition lawyer is both far easier and may yield even better results for corporate America. It’s these little known lawyers who really know how the merger review system works from first-hand experience, after all. These would-be civil servants are underpaid, often feel underappreciated (especially at the FTC), and are actively incentivized to revolve out, due to the FTC traditionally considering private sector experience a boon for top jobs, rather than promoting from within. 

To build an effective and public-oriented government, these agencies will need more than just a budget increase (though that’s essential): they’ll also need leaders ideologically committed to a mission of public service, and with the personal leadership skills to instill that sense of a grander mission in their team. Lawyers and economists with that combination of talent, drive, and charisma are out there. But they aren’t on K Street, where too many presidents have gone looking for their top legal appointees.

A REMINDER: PLEASE FOLLOW US ON Twitter at @revolvingdoorDC, where we react to news of the day as well as sustain sadly never-ending threads on Steven Mnuchin’s gifter nature (north of 190 tweets in all!) & House Democrats’ aversion to congressional oversight (over 240 tweets and counting.)