Having recovered from the exceedingly lackluster seventh Federal Trade Commission (FTC) meeting, the two-hour eighth meeting had actual votes and a bit of drama. But be careful what you ask for. We highlighted the lack of consumer turnout at the last meeting, and that was certainly not the case this month – even members of Congress attended. So how did things roll out at the meeting? On a scale of 1-10, with 1 being hyperpartisan and hostile and 10 being calm and copacetic, this one gets a solid 4.
On the consumer protection side, the topic was initiating a Mag-Moss rulemaking concerning earnings claims – the statements that businesses may make when trying to encourage consumers to work for them or sell their product or service. This is noteworthy for two reasons. First, you may recall that back in October 2021, the FTC sent out Notice of Penalty Offense letters to 1,100 companies involved in multilevel marketing and coaching services, franchises, and large and small gig-app companies. These letters raised many identical issues, thus demonstrating further the Lina Khan FTC’s continued focus on issues involving “workers.” Second, this is significant because it is the second new Mag-Moss rulemaking initiated by the FTC in just a few months – just two months ago, a rulemaking on impersonation fraud was voted out unanimously. Folks who predicted an explosion of rulemaking at the FTC were indeed correct. Though remember that Mag-Moss rulemaking is a complicated and time-consuming process, even with the new “streamlined” approach. We are years away from any final rule on impostors or on earnings claims.
The FTC staffer did a great presentation that described the substantial work the FTC has done on earnings claims, and she discussed cases involving multilevel marketing companies and cases involving for-profit educational institutions that made earnings claims for graduates. Since 2000, the agency has brought more than 129 cases in this area and has returned more than $530 million to consumers who were harmed in such cases. She also explained that the AMG decision has hampered the agency’s ability to get money in a good deal of these cases going forward when existing rules don’t apply.
Commissioner discussion about the proposed rulemaking was pretty telling. Commissioner Wilson made it very clear that she still has great concerns about a “tsunami of rulemaking.” She supports initiating this rulemaking, however, in part because of the impact of the AMG decision, and added that if there were an AMG legislative fix put in place by Congress, she would likely ask to terminate the rulemaking. Commissioner Slaughter focused a good deal on the gig economy and on the importance of protecting “workers” as consumers, and noted that she wanted to level the playing field between “workers” and those that employ them. Commissioner Phillips supported a tailored rule that would address the specific conduct at issue. And Chair Khan noted the history of FTC case law in this area and her concern that power asymmetries can create an environment that is ripe for abuse.
This ANPR is a big deal, and it will go on for years. And, yes, it was voted out unanimously. More information about the rulemaking is available here, and the first round of comment seeking has begun. There will be many more opportunities to comment as the rulemaking proceeds. One thing to watch for as this evolves is the breadth of the proposed rule. Commissioner Phillips’ concern about a tailored rule appeared quite pointed and may reflect a not-so-subtle concern about other commissioners wanting to vastly expand the scope of such a rule. And indeed, the discussion was broad – investment opportunities, gig economies, multilevel marketing companies, for-profit educational institutions. Using the FTC’s complex Mag-Moss rulemaking authority to create a rule that is specific enough to cover all of these different areas will be a challenging undertaking.
And on the competition side – well, this is a consumer protection blog, so we won’t go into much detail. The bottom line, Chair Khan really wanted to kick off a study on pharmacy benefits managers. Health care and drug issues have been an important focus at the FTC for ages, and this study was supposed to “study the competitive impact of contractual provisions, reimbursement adjustments, and other practices affecting drug prices, including those practices that may disadvantage independent or specialty pharmacies.” But it wasn’t meant to be – at least not yet. Commissioners Phillips and Wilson made it very clear that there are issues in this area that warrant studying, and they could support an appropriate study in this area. However, given that they had received a substantially revised document “late last night” and had not had an opportunity to meet with staff to discuss the substantial changes, they both voted no. Chair Khan expressed her “disappointment.” This issue of late notice was a big concern early in her tenure, and it appears to have resurfaced. And for now, with a divided 2-2 commission, these process fouls have consequences, and that was on display today.
Finally, the consumer portion of the show was indeed one for the record book, with an extensive focus on pharmacy-related issues, including consumers with problems getting their medications and the challenges faced by small pharmacy owners. There also were a few other small business owners (including franchise owners) discussing the challenges that they face. The FTC’s head of public affairs ran a tight ship, and microphones were unceremoniously cut off at the two-minute mark. Even with her solid oversight, the consumer comments went on for well over an hour.