[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]
OVERSIGHT OF THE FEDERAL
TRADE COMMISSION
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HEARING
BEFORE THE
COMMITTEE ON THE JUDICIARY
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTEENTH CONGRESS
FIRST SESSION
__________
THURSDAY, JULY 13, 2023
__________
Serial No. 118-33
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Printed for the use of the Committee on the Judiciary
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via: http://judiciary.house.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
52-955 WASHINGTON : 2023
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COMMITTEE ON THE JUDICIARY
JIM JORDAN, Ohio, Chair
DARRELL ISSA, California JERROLD NADLER, New York, Ranking
KEN BUCK, Colorado Member
MATT GAETZ, Florida ZOE LOFGREN, California
MIKE JOHNSON, Louisiana SHEILA JACKSON LEE, Texas
ANDY BIGGS, Arizona STEVE COHEN, Tennessee
TOM McCLINTOCK, California HENRY C. ``HANK'' JOHNSON, Jr.,
TOM TIFFANY, Wisconsin Georgia
THOMAS MASSIE, Kentucky ADAM SCHIFF, California
CHIP ROY, Texas ERIC SWALWELL, California
DAN BISHOP, North Carolina TED LIEU, California
VICTORIA SPARTZ, Indiana PRAMILA JAYAPAL, Washington
SCOTT FITZGERALD, Wisconsin J. LUIS CORREA, California
CLIFF BENTZ, Oregon MARY GAY SCANLON, Pennsylvania
BEN CLINE, Virginia JOE NEGUSE, Colorado
LANCE GOODEN, Texas LUCY McBATH, Georgia
JEFF VAN DREW, New Jersey MADELEINE DEAN, Pennsylvania
TROY NEHLS, Texas VERONICA ESCOBAR, Texas
BARRY MOORE, Alabama DEBORAH ROSS, North Carolina
KEVIN KILEY, California CORI BUSH, Missouri
HARRIET HAGEMAN, Wyoming GLENN IVEY, Maryland
NATHANIEL MORAN, Texas BECCA BALINT, Vermont
LAUREL LEE, Florida
WESLEY HUNT, Texas
RUSSELL FRY, South Carolina
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C O N T E N T S
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Thursday, July 13, 2023
Page
OPENING STATEMENTS
The Honorable Jim Jordan, Chair of the Committee on the Judiciary
from the State of Ohio......................................... 1
The Honorable Jerrold Nadler, Ranking Member of the Committee on
the Judiciary from the State of New York....................... 3
WITNESS
The Hon. Lina Khan, Chair, Federal Trade Commission
Oral Testimony................................................. 5
Prepared Testimony............................................. 7
LETTERS, STATEMENTS, ETC. SUBMITTED FOR THE HEARING
All materials submitted for the record by the Committee on the
Judiciary are listed below..................................... 112
An Attorney Detail Report of Lina Khan, New York State Unified
Court System, Jul. 13, 2023, submitted by the Honorable Harriet
Hageman a Member of the Committee on the Judiciary from the
State of Wyoming, for the record
A letter from Lina Khan to the Honorable Cathy McMorris Rodgers,
Chair of the House Energy and Commerce Committee from the State
of Washington and the Honorable Jim Jordan, Chair of the
Committee on the Judiciary from the State of Ohio, submitted by
the Honorable Jerrold Nadler, Ranking Member of the Committee
on the Judiciary from the State of New York, for the record
A letter from Small Business Rising, Jul. 11, 2023, to the
Honorable Chair Jordan, Chair of the Committee on the
Judiciary, from the State of Ohio, and the Honorable Nadler,
Ranking Member of the Committee on the Judiciary from the State
of New York, submitted by the the Honorable Henry C. ``Hank''
Johnson, Jr., a Member of the Committee on the Judiciary from
the State of Georgia, for the record
Materials submitted by the Honorable Adam Schiff, a Member of the
Committee on the Judiciary from the State of California, for
the record
An article entitled, ``Elon Musk, King of Censorship: 10
Times the `Free Speech Absolutist' Silenced Twitter
Users,'' Jun. 25, 2023, Yahoo News
An article entitled, ``Twitter is complying with more
government demands under Elon Musk,'' Apr. 27, 2023, Rest
of the World
An article entitled, ``Ethics Official Owned Meta Stock While
Recommending FTC Chair Recuse Herself From Meta Case,'' Jun.
30, 2023, The Wall Street Journal, submitted by the Honorable
Madeleine Dean, a Member of the Committee on the Judiciary from
the State of Pennsylvania, for the record
Materials submitted by the Honorable Glenn Ivey, a Member of the
Committee on the Judiciary from the State of Maryland, for the
record
An article entitled, ``Does Justice Alito Hear Himself?''
Jun. 22, 2023, The New York Times
An article entitled, ``Samuel Alito's Wife Leased Land to an
Oil and Gas Firm While the Justice Fought the EPA,'' Jun.
26 2023, The Intercept
A collaborative letter to the Honorable Kevin McCarthy and
the Honorable Jim Jordan, Apr. 17, 2023
A report entitled, ``Assessment of Costs Associated with the
Implementation of the Federal Trade Commission Notice of
Proposed Rulemaking (RIN 2022-14214), CFR Part 463,'' May 2023,
Center for Automotive Research, submitted by the Honorable
Wesley Hunt, a Member of the Committee on the Judiciary from
the State of Texas, for the record
Materials submitted by the Honorable Jeff Van Drew, a Member of
the Committee on the Judiciary from the State of New Jersey,
for the record
An article entitled, ``Linda Khan Has Some Explaining to
do,'' Jul. 12, 2023, Americans for Tax Reform
An article entitled, ``Khan Reveals That She `Handpicked'
Controversial Unpaid Consultants,'' Apr. 18, 2023,
Americans for Tax Reform
QUESTIONS AND RESPONSES FOR THE RECORD
Questions for the Hon. Lina Khan, Chair, Federal Trade
Commission, from the Honorables Darrell Issa from the State of
California, Scott Fitzgerald from the State of Wisconsin, Lance
Gooden from the State of Texas, Nathaniel Moran from the State
of Texas, Laurel Lee from the State of Florida, Harriet Hageman
from the State of Wyoming, Wesley Hunt from the State of Texas,
Ted Lieu from the State of California, Zoe Lofgren from the
State of California, and Mary Gay Scanlon from the State of
Pennsylvania, for the record
A response from the Hon. Lina Khan, Chair, Federal Trade
Commission
OVERSIGHT OF THE FEDERAL
TRADE COMMISSION
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Thursday, July 13, 2023
House of Representatives
Committee on the Judiciary
Washington, DC
The Committee met, pursuant to notice, at 10:08 a.m., in
Room 2141, Rayburn House Office Building, Hon. Jim Jordan
[Chair of the Committee] presiding.
Members present: Representatives Jordan, Issa, Buck, Gaetz,
Johnson of Louisiana, Biggs, McClintock, Tiffany, Massie, Roy,
Bishop, Spartz, Fitzgerald, Bentz, Cline, Gooden, Van Drew,
Nehls, Moore, Kiley, Hageman, Moran, Lee, Hunt, Fry, Nadler,
Lofgren, Cohen, Johnson of Georgia, Schiff, Jayapal, Correa,
Scanlon, Neguse, McBath, Dean, Ross, Bush, Ivey, and Balint.
Chair Jordan. The Committee will come to order. Without
objection, the Chair is authorized to declare a recess at any
time. We welcome everyone to today's hearing on Oversight of
the Federal Trade Commission. The Chair now recognizes the
gentleman from Wisconsin, Mr. Fitzgerald, to lead us in the
Pledge of Allegiance.
[Pledge of Allegiance.]
Chair Jordan. I thank the gentleman. We begin today's
hearing with what we normally do, with opening statements, and
then we will get right to our witness. I appreciate Ms. Khan
being with us--Chair Khan being with us today.
At a speech in Berlin in 2022, Chair Khan told an audience
that the challenges facing antitrust today were ``the result of
a choice made 40 years ago to follow the misguided philosophy
of people like Robert Bork.'' In other words, according to
Chair Khan, the prevailing view over the last 40 years, a
bipartisan view, shared over more than 20 Congresses, six
Presidential Administrations, and adopted and developed by all
50 States in their enforcement is now somehow wrong.
Consider that over those 40 years, the U.S. economy grew
from about a $3 trillion annual economy to $25 trillion and was
the single greatest period of wealth creation in human history.
Everyone who oversaw economic policy for those four decades,
according to the Chair, was wrong. She knows better. She is
trying to usher in a radical departure from the norms that made
the American economy great to a system where her and her
cronies have unchecked power over business practices in our
country, untethered from any reasonable reading of precedent or
statutory law.
So, we should ask now, over the two-years into her tenure,
how has her approach to antitrust in playing out as she heads
one of those critical agencies in our government? The short
answer is that it has been a disaster. She has pushed
investigations to burden parties with vague and costly demands
without any substantive follow-through or, frankly, logic for
the request themselves. She centralizes the decisionmaking at
the Commission within her office, eliminating any pretext of
due process or transparency in that decisionmaking. Her
approach is best characterized as one of intimidation, followed
by inaction.
The best example of this, which was only brought to light
because of our work on the Weaponization Select Committee, was
her targeted harassment of Twitter. After Mr. Musk bought the
company, and following pressure from Democrat Senators, left-
wing activist groups, the FTC issued over 350 requests for
information from Twitter. These requests included asking for
every communication about Mr. Musk inside the company, and most
troubling, for information about Twitter's work with
journalists, working to shed light on the government-driven
censorship practices that existed and I think in some cases
still exist in big tech. In fact, we got a great court decision
last week that talked about this, how pervasive this effort
was, in a preliminary injunction from that Federal court in the
Western District of Louisiana.
Just this morning, though, in a filing in Federal court, we
have learned that the situation is actually even worse than we
could have imagined. This wasn't harassment. It was a
shakedown. The FTC, as is common practice pursuant to the
consent order, required Twitter to hire an independent
assessor, an independent assessor whose legal obligation is to
be truly independent and objective, not for one party or
another. Well, it turns out objectivity was not what the
Federal Trade Commission was interested in hearing.
Here is what the filing said about Ernst & Young, the
independent assessor hired in this matter.
The FTC was so adamant with Ernst & Young conveying that this
is absolutely what you will do and this is going to occur and
you will produce a report at the end of the day that would be
negative about Twitter, that senior Ernst & Young leaders
feared that if Ernst & Young resigned as the independent
assessor, the FTC would take exception to their withdrawal and
create other challenges for Ernst & Young over time.
This is not conjecture from Twitter. This is from sworn
testimony of the independent assessor in the deposition itself
taken just last month. This is outrageous. This is unacceptable
and it is the kind of behavior that occurs in banana republics,
not in the United States of America.
So, it is no wonder Chair Khan has no interest in providing
information to the people's representatives in the Congress,
the people on this Committee when we ask for it.
Today, the FTC has not fully complied with a single request
for documents from this Committee. Because of her
mismanagement, not even her own staff is impressed with Chair
Khan's leadership.
In 2020, the last year under Trump, the Trump
Administration, 87 percent of FTC employees agreed that senior
leaders maintain high standards. Under Chair Khan, that figure
fell to 53 percent in 2021. It declined even further to 49
percent in 2022. In 2020, 82 percent of surveyed FTC employees
agreed that they have a high-level respect for the FTC senior
leaders, again, under the Chairman, that figure plummeted to 49
percent. These numbers were before it was revealed recently
that the Chair was advised by FTC's Ethics Council to recuse
herself from a major case. She did not recuse herself, and then
appears to have misled Congress about taking that advice.
We have a lot of questions today to get through. We look
forward to the response from the Chair of the FTC. With that, I
would yield to the gentleman from New York, the Ranking Member,
for an opening statement.
Mr. Nadler. Thank you, Mr. Chair. Mr. Chair, since you
brought up Robert Bork, I must say that I have thought for the
last 40 years that the court's unfortunate following of Robert
Bork's doctrines, upending all prior understandings of
antitrust law, has resulted in a terrible misinterpretation of
antitrust law and is directly responsible for the over-
concentration of industry and the power of big business in
today's economy.
Mr. Chair, yesterday, the Director of the FBI sat at the
witness table for nearly six hours, enduring a steady stream of
baseless attacks and conspiracy theories meant to fit a far-
right narrative that may resonate on Fox News, but that lacks
any basis in fact. Today, it is the Chair of the Federal Trade
Commission's turn to step into the alternate universe that is
the House Judiciary Committee under MAGA Republican leadership.
Chair Khan, the last time you were here, you sat on this
side of this table, helping to reinvigorate this Committee's
work on antitrust matters, and I thank you for your service to
the Committee. Unfortunately, I expect that today you will be
the target of a barrage of personal attacks and wild
accusations about the work of the FTC under your leadership.
Republicans will tell us that the Commission is wasting
resources, but the FTC has returned over $430 million to
consumers under your watch and is vigorously enforcing the laws
that Congress has entrusted to it. Meanwhile, it is the House
Republicans who have wasted untold Congressional and agency
staff resources, and millions of dollars, in pursuing a
fruitless search for evidence of misconduct at the FTC.
The majority will also argue that the FTC's investigation
into Twitter was politically motivated and conducted at the
behest of Congressional Democrats. This argument also has no
basis in fact. Twitter has been in trouble for failing to
adequately protect the privacy of its users for more than a
decade. It has been subject to a consent decree on this topic
since as far back as 2011. It came under a second consent
decree last year. Given the haphazard conduct of its new owner,
it may very well be subject to new scrutiny today.
It is the FTC's duty to review compliance with these
consent decrees, particularly when, as occurred last year,
there are credible concerns that user data may have been
compromised when the majority of its legal and engineering
staff was fired. This work has nothing to do with the new owner
of the company and his political views.
Protecting user privacy is not political. Rushing to defend
a company at all costs and investigating the agency that
attempts to hold that company accountable, merely because the
new owner shares your political views, is another matter.
Ultimately, Chair Khan, you will face attacks today because
you are doing your job and that is what threatens Republicans
the most. The Federal Trade Commission was created and charged
with enforcing antitrust and competition laws to respond to a
rise in consolidation across the market in the early 1900s. It
helped bring down the trust and lessen monopoly power, it
strengthened the economy, and helped support the formation of a
strong middle class.
Unfortunately, in recent decades, the Executive Branch took
a radical turn away from enforcement of the antitrust laws that
kept us safe and prosperous for nearly a century. That failure
led to massive consolidation across the market that gave rise
to a handful of dominating companies with the power to squash
competition.
The rise of monopolies and monopsonies in several fields
was a boom to the corporate class, but it has been devastating
to consumers, workers, and small businesses. This began to
change when the Biden Administration announced several steps to
reinvigorate the enforcement of Federal antitrust laws. By
faithfully interpreting the original intent of the antitrust
laws and the FTC Act to ensure fair competition and prices, the
administration has announced that the party is over for large
and unfettered corporations. Although most Americans welcome
this change, and indeed our economy is booming and unemployment
is at a historic low, the commitment to enforcing these laws
has raised alarm among our Republican colleagues so they have
taken aim at your agency and the important work the FTC does to
protect consumers and promote competition.
I hope that my Republican colleagues will find it within
themselves to put their baseless and often personal attacks on
pause long enough to listen to the importance of your mission.
In any event, I appreciate your appearing here today and I
appreciate the valuable work of the FTC. I look forward to your
testimony and I yield back the balance of my time.
Chair Jordan. The gentleman yields back. Without objection,
all opening statements will be included in the record.
We will now introduce today's witness, Hon. Lina Kahn. Ms.
Kahn is the Chair of the Federal Trade Commission. She was
sworn in on June 15, 2021. We welcome our witness and thank her
for appearing here today.
We will begin by swearing you in. Will you please rise and
raise your right hand? Do you swear or affirm under penalty of
perjury that the testimony you are about to give is true and
correct to the best of your knowledge, information, and belief,
so help you God?
Let the record reflect the witness has answered in the
affirmative. Thank you. Please know that your written
testimony--you have seen this before. You sat behind the
Chair--the former Chair before, so your written testimony will
be entered into the record in its entirety. Accordingly, we ask
that you summarize your testimony in five minutes, and we will
be a little lax with that if you need a few extra.
Chair Khan, you may begin, and then there will be
questions.
STATEMENT OF CHAIR LINA KAHN
Ms. Khan. Chair Jordan, Ranking Member Nadler, and Members
of the Committee, thank you for inviting me to testify today. I
am glad to join you to discuss the FTC's work to promote fair
competition and protect Americans from unfair and deceptive
practices.
It is a particular honor to appear before this Committee
where I had the great privilege of serving during its historic
bipartisan investigation into digital markets and the power of
large technology platforms.
As this Committee knows well, there has long been a battle
in this country between monopoly power and America's democratic
institutions. Congress created the FTC in 1914 against the
backdrop of an Industrial Revolution that had delivered
significant technological advances, but also enabled intense
consolidation. Given deep national unease about the unchecked
powers that these monopolists could wield, lawmakers tasked the
FTC with preventing unfair methods of competition and
scrutinizing business practices through regular data collection
and continuously building expertise.
In the subsequent years, Congress has expanded our
legislative mandates to include laws in protecting consumers.
With each of these efforts, Congress has redoubled its
commitment to fair competition and to rooting out unfair or
deceptive business practices.
At the FTC, our north star is fulfilling the important
mandate that Congress has given us and doing all that we can to
faithfully enforce the laws and safeguard America's citizens
and businesses from harmful and even dangerous concentrations
of private power that characterize significant swaths of our
economy today.
I am endlessly impressed by the talent and tenacity of the
FTC teams especially in the face of ongoing resource
constraints and legal challenges to our authority. Over the
past 24 months, the FTC has moved to challenge major
transactions that would have eroded competition in critical
sectors of the economy including defense, semiconductors,
energy, digital markets, and pharmaceuticals.
We are tackling anticompetitive practices including those
that harm American farmers, small businesses, and workers. Last
year, the FTC in a bipartisan coalition of ten State Attorneys
General, charged the two largest pesticide manufacturers with
unlawful schemes that prevented farmers from having access to
cheaper products, costing them billions of dollars.
In January, the FTC proposed a rule that would ban
employers from imposing noncompete restrictions that lock in
workers and collectively depress their wages by up to $300
billion, while also depriving startups and businesses of the
employees they need to expand and compete. In the months since
proposing this rule, we have received over 21,000 public
comments including from nurses and doctors, fast food workers,
and hairdressers who all told us about how noncompetes had hurt
their livelihoods and undermined their economic liberty.
Already several enforcement actions by the FTC have led firms
to drop noncompete restrictions imposed on thousands of
workers.
The FTC also continues to use its tools to conduct market-
wide inquiries. Last June, the Commission launched an inquiry
into the practices of pharmacy benefits managers to shed light
on the opaque operations of these large, middlemen who can
dictate pricing and access to life-saving drugs for millions of
Americans. This inquiry follows thousands of public comments
the FTC received explaining the real-life costs that can follow
from PBM's current practices. One doctor, for example,
recounted how delays in PMB approvals caused her patient to
develop resistance when otherwise effective treatment
ultimately leading to the needless loss of her patient's eye.
In addition to these critical areas of work, we are
redoubling our efforts to protect Americans' privacy and combat
fraud, while also activating additional authorities that
Congress has given us. We have brought actions to protect
consumers from Made in USA fraud, protect military families
from predatory financing, and protect addiction recovery
patients from deception.
We are fighting to protect the security of people's
sensitive personal data and have obtained record monetary
judgments including the largest ever judgment to protect
children's privacy.
The Commission has also proposed rules to address some of
the most widespread scams like government impersonation fraud,
Made in USA fraud, and fake online reviews. The Agency is
tackling junk fees plaguing American consumers and scrutinizing
dark patterns that trick people into incurring unwanted charges
or surrendering sensitive data. Our Click to Cancel proposal
would require companies to make it as easy to cancel a
subscription as it is to sign up for one.
The FTC is also committed to fighting for people's right to
repair their own products. The FTC has brought several major
actions against companies for imposing unlawful repair
restrictions, hurting customers, and independent shops alike.
In other words, the FTC is firing on all cylinders, fighting
every day to protect the American people from unlawful business
practices. These efforts reflect the extraordinary work of our
agency staff whose talent and dedication are second to none.
It is a deep honor to serve in this role and I am
enormously proud to see how our enforcement actions and policy
work are materially helping Americans in their day-to-day
lives. In the aggregate, our work helps promote the open,
competitive, resilient markets that have been the bedrock of
America's economic success and dynamism throughout our Nation's
history.
Thank you for the opportunity to appear before you today
and I am happy to answer your questions.
[The prepared statement of the Chair Khan follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chair Jordan. Thank you, Madam Chair. We will now move to
five-minute questioning. The Chair recognizes the gentlelady
from Wyoming.
Ms. Hageman. Like other Federal agencies, the FTC has a
Designated Agency Ethics Official, known as DAEO. On April 18,
2023, you testified before a Subcommittee of the House Energy
and Commerce Committee. At the hearing, Chair Rodgers asked
you, ``Are there any instances where you have not followed the
DAEO's advice?'' You responded, ``no'' and you followed up by
saying that you, ``Have consulted with the DAEO and taken
actions that are consistent with the legal statements that DAEO
has made.''
On June 16, 2023, a Bloomberg journalist published a leaked
memoranda written by the FTC's DAEO analyzing Chair Khan's
ability to sit as a judge in the FTC's review of a meta
acquisition of a company called Within. According to the ethics
memoranda, the DAEO ``recommended you recuse to avoid an
appearance of partiality concern pursuant to Federal ethics
regulations.''
Do you believe that you were completely honest and
forthcoming with Congress when you asked if there were ``Any
instances where you would not follow the DAEO's advice?'' You
answered ``no.'' Yes or no?
Ms. Khan. Yes, Congresswoman.
Ms. Hageman. OK. In the letter that you sent to this
Committee yesterday evening, you claimed that you received only
oral advice from the DAEO, but never saw the leaked memo until
after you decided not to recuse yourself.
First, it is unbelievable to me that you would not ask for
written ethics advice on this particular topic. You admit that
you have written ethics advice on other topics, but on this
topic, you claim you did not see the written memo. Instead, you
want us to believe that you only received oral advice and not
specific oral advice, but only general advice on
``understanding the legal framework.''
Did DAEO give you advice that is different than what was
written in the memoranda?
Ms. Khan. Thanks for the question, Congresswoman. So, my
work before I joined the Commission was focused on assessing
the power of large technology--
Ms. Hageman. I need you to answer the question that I
asked. The question that I asked was did you receive different
oral advice than what was written in the memoranda from DAEO, a
very simple question.
Ms. Khan. So, I consulted with the ethics official. The
ethics official, as was noted in the memo that you cited,
although I did not receive that memo, noted that the ultimate
framework for instances in which somebody has no financial
conflicts of interest--
Ms. Hageman. Did she give you different oral advice than
what was in the written memoranda, yes or no?
Ms. Khan. --the legal framework is for the employee to
themselves determine whether they should or should not recuse.
That was--
Ms. Hageman. Did she give you different advice than what
was--orally than was in the written memoranda, yes or no?
Ms. Khan. Congressman, as was noted in the written
memoranda, there was no ethics violation created by my
participating in the matter--
Ms. Hageman. You didn't follow the DAEO's advice, did you?
You could have recused at any time, couldn't you?
Ms. Khan. I followed the determination that there was no
ethics violation--
Ms. Hageman. You could have recused at any time, couldn't
you?
Ms. Khan. There was no violation under the ethics laws
because I have not a penny in financial stock, not a penny in
financial interests relating to--
Ms. Hageman. The DAEO gave you the advice to recuse, and
you did not do so, correct?
Ms. Khan. Congresswoman, as was noted in the memo, as I
noted--
Ms. Hageman. I am going to move on since you are not
willing to answer my question. I read your four-page letter
which was nothing more than a front to your obligation of
honesty, integrity, and candor before this tribunal, but is
owed by every public servant. I would reference Part 2635 of
the Code of Federal Regulations which describes your ethics
standards. I want to note that the ethics standards are
actually higher than one owed by lawyers which brings me to my
next point.
Do you expect lawyers at the FTC to follow Federal ethics
rules?
Ms. Khan. Of course, everybody at the Federal Trade
Commission--
Ms. Hageman. Do you expect lawyers at the FTC to be an
active member, in good standing of a bar of the United States?
Ms. Khan. If they are practicing as a lawyer, they need to
be in good standing and follow the bar rules.
Ms. Hageman. I understand that you were admitted to the New
York bar on July 16, 2020, but in 2019 and 2020, according to
your Senate questionnaire, you held yourself out as Counsel for
the Democrats on this very Committee. You used this title, but
you were not licensed to practice law. Counsel is a term
reserved for lawyers, licensed lawyers. In Wyoming, a person
who in any manner holds themselves as competent to practice law
without a license to do so is guilty of unauthorized practice
of law.
I believe the law in the District of Columbia where you
held yourself out is similar. Do you believe it is appropriate
for non-lawyers to claim the title of counsel?
Ms. Khan. Congressman, when I had the honor to work for
this Committee, I complied with all the document requests that
the H.R. folks requested, including documentation about the
fact that I--
Ms. Hageman. When I checked your registration status this
morning, I learned that you were not in good standing with the
New York bar. Your license is listed as delinquent, which means
you have failed to file your biennial registration and it means
that you have not been paying your bar dues, completing your
continuing legal education, and maintaining your law license. I
believe it is shown on the screen. It also means you are
subject to referral for disciplinary action. I find this
situation to be stunning and a reflection on your ethics. With
that, I yield back.
Chair Jordan. The gentlelady yields back. The Chair now
recognizes the Ranking Member from New York for five minutes of
questions.
Mr. Nadler. I find the statement of the gentlelady from
Wyoming incredible. Will the Republican staff all commit to
recusing themselves from any matters that relate to their work
on the Committee? Because that is the standard they are holding
Chair Kahn to?
Chair Khan, thank you for coming before our Committee
today. Under your tenure, the Commission has returned over $430
million to consumers and proposed a ban on noncompete
agreements that would increase workers' earnings by nearly $300
billion a year, would save consumers up to $148 billion in
healthcare costs, and would close racial and gender wage gaps
by between 3.6 and 9.1 percent.
What are some other ways that the Commission supports a
strong economy?
Ms. Khan. Thanks for the question, Congressman. So, our
work on the antitrust side is focused on ensuring robust
competition. This has involved blocking mergers that we believe
would have eroded competition including in the defense
industry, including in healthcare. We have brought a set of
lawsuits alleging that certain types of hospital mergers would
have deprived Americans of access to quality affordable
healthcare. We have a whole set of work underway focused on the
fact that all too often drug prices are way too expensive for
American people and we are scrutinizing the ways in which
potentially unlawful practices may be contributing to those
high prices.
We are also hearing directly, day in and day out, from
small businesses, from independent grocers, independent
pharmacists, franchisees, about the ways in which the FTC's
work can help ensure that they have a robust open opportunity
to compete in the marketplace and make sure that Americans are
benefiting from robust competition.
Mr. Nadler. Thank you, and you have made it clear that
antitrust enforcers like your own agency must be more active in
enforcing the law and bringing high-impact cases, even if those
cases ultimately are unsuccessful.
Can you expand on this for us and share what you think
having a strong cop on the beat is essential to a fair
marketplace?
Ms. Khan. Thanks, Congressman. I have been very clear that
my worry has been about under enforcement. Unfortunately, I
think there were missed opportunities in the last few decades
where all too often entire sectors were allowed to consolidate.
That has now created markets that are closed off to
competition.
Recently, the Defense Department has been noting how this
consolidation is also now directly undermining national
security with significant consolidation in the defense
industrial base is harming our military and making it more
difficult for us to compete globally. These are just some of
the harms that we have seen from consolidation. Because of
that, we think it is incredibly important to be vigorously
enforcing the laws that Congress has charged us with enforcing.
This includes the FTC's act prohibition on unfair methods of
competition. It includes the Clayton Act. It includes the
Sherman Act. There have been provisions of these statutes that
unfortunately have been left dormant and we are fully committed
to reinvigorating the law and make sure that we are fully
enforcing all the provisions that Congress has charged us with
enforcing.
Mr. Nadler. I assume you also enforce the Celler-Kefauver
Act. I know that you also support bringing court actions
instead of reaching a settlement under consent decree with a
company that has broken the law. Why is this?
Ms. Khan. So, Congressman, we assess every matter on a
case-by-case basis. On the antitrust side, we have seen,
unfortunately, instances in which certain remedies that were
achieved in merger settlements unfortunately fail to fully
protect competition in the way that the agencies are required
to do under the law, so certain behavioral commitments that
firms made, or certain divestitures really fail to preserve the
competition that we are charged with safeguarding.
As a result, we are learning from that experience and
adjusting and modifying where needed. In some cases, that means
bringing a lawsuit if a remedy that is being offered and we
don't believe will fully resolve the underlying competitive
harm. In other instances, it means really improving and
strengthening and tightening up the remedies that we are
achieving. So, it really depends on a case-by-case basis.
Mr. Nadler. Thank you. Despite claims from the Majority
that you did not follow ethics guidance, we know for a fact
that under the law you have no conflicts of interest that would
require you to recuse yourself, correct?
Ms. Khan. Correct.
Mr. Nadler. Indeed, the designated ethics official
instructed you correctly that the decision to recuse yourself
was a personal one that you are charged to make, correct?
Ms. Khan. That is right.
Mr. Nadler. You also spoke of the General Counsel's Office
who also stated that you do not have a conflict of interest
that would require your recusal, correct?
Ms. Khan. That is right, correct.
Mr. Nadler. You do not own any stock in any corporation or
have any personal ties that would require you to recuse
yourself, correct?
Ms. Khan. I have not a penny in any individual firm's
stock, correct.
Mr. Nadler. The Federal Trade Commission plays a critical
role in protecting consumers, ensuring competition, and
enforcing the laws we have entrusted to it. The agency has done
this work for over a hundred years, and I appreciate that it
will continue to do so under your leadership.
Finally, Mr. Chair, before I yield back, I ask unanimous
consent to enter into the record a copy of a letter from Lina
Khan to Hon. Cathy McMorris Rodgers and yourself.
Chair Jordan. Wow. I appreciate it. That is fine. Without
objection, so ordered.
Mr. Nadler. Thank you, I yield back.
Chair Jordan. The gentleman from California, Mr. Kiley, is
recognized for five minutes.
Mr. Kiley. Good morning, Ms. Khan. A few days ago, you lost
another case. This was your challenge to the Activision
acquisition. The Northern District of California, in the
opinion by a Biden appointee, denied your request for a
preliminary injunction. After what the court called voluminous
pre- and post-hearing written submissions, the court found you
are not likely to succeed on the merits.
You seem to be losing quite a bit, and I don't say that to
be disrespectful, but these are, after all, taxpayer funds. You
are now zero for four in merger trials. The average win rate
for the FTC in the modern antitrust era is around 75 percent.
So, I have to ask, why are you losing so much?
Ms. Khan. Thanks for the question, Congressman.
I should note, first, that the FTC has some of the best
litigators around. In the very trial that you mentioned, it was
just phenomenal to see, and the judge herself, personally,
commented on how the fact that the FTC, despite being totally
out-resourced by some of these companies, was really able to go
toe-to-toe in terms of legal talent and skill. I'm enormously
proud of our litigators.
Mr. Kiley. Well, I'm not sure the taxpayers are going to
take much delight in the legal talent and skill of enforcement
actions that cost great taxpayer dollars and end in defeat. So,
the question is, why is your track record so poor when it comes
to actually winning cases?
Ms. Khan. Congressman, we've had significant success in the
courts. There are a whole set of matters, including our case
against Martin Shkreli, where the court found resoundingly in
the FTC's favor; also, banned Martin Shkreli for life from the
pharmaceutical industry. We also had a recent--
Mr. Kiley. OK. You're zero for four in merger trials. So,
when I was trying to figure out what is going on here, I found
maybe a clue in an article from The New York Times, December 7,
2022, which reported comments you made at a conference where
you said this. You said,
If there's a law violation and agencies think that current law
might make it difficult to reach, there's a huge benefit to
still trying.
She added that any courtroom losses would signal to Congress
that lawmakers need to update antitrust laws to better suit the
modern economy.
I'm, certainly, not somebody who thinks that success is marked
by a 100 percent court record.
So, this raises the question, Chair Khan, are you losing on
purpose?
Ms. Khan. Congressman, the key clause in the quote you
mentioned was ``if there is a law violation.'' We only bring
cases when the facts before us lead us to believe that there is
a law violation under the existing laws.
On the merger front, there are a whole set of cases where
we've won, including in instances where the parties abandoned
and walked away after they filed the complaint.
Mr. Kiley. OK. You are zero for four in merger trials. So,
what did you mean when you said that any courtroom losses would
signal to Congress that lawmakers need to update the antitrust
laws? What does that mean?
Ms. Khan. So, there is an institutional dialog, right,
between enforcers, between Congress, between the courts.
There's a century worth of antitrust back-and-forth between the
agencies, between Congress. This very Committee, in the 1950s,
determined that the agencies were not bringing the types of
cases that Congress was worried about in terms of monopoly
power.
Mr. Kiley. OK, but you're actually bringing the cases.
You're losing because you don't have the authority that you
want from Congress. So, this is how you think you're going to
persuade Congress to give you more authority, is by exceeding
the authority that you now have?
Ms. Khan. Congressman, again, we only bring lawsuits where
we believe there is a law violation, given the facts and the
law at hand. We fight hard when we believe that there is a law
violation, and unfortunately, things don't always go our way.
We make determinations about--
Mr. Kiley. Are you bringing cases that you expect to lose?
Ms. Khan. Would you repeat that?
Mr. Kiley. Are you bringing cases that you expect to lose?
Ms. Khan. Absolutely not.
Mr. Kiley. OK. Well, your track record seems to suggest
otherwise.
Let's look more closely at the Activision decision, though.
The court first noted that, in an attempt to lower your burden,
you, essentially, made up case law. You couldn't find anything
actually that the courts have provided in terms of precedence.
So, you cited to your own FTC decision as precedent.
Irrespective of the legal standard, the court--you probably
wouldn't have won under any standard because the court said
this:
The FTC has not raised serious questions regarding whether the
proposed merger is likely to substantially lessen competition .
. . . Not raised serious questions.
The court also rejected your assertion--not only rejected
your assertion of a likely anticompetitive effect, but found
just the opposite, that the record evidence points to more
consumer access.
So, why should Americans have faith in your judgment, when
this Biden-appointed judge says you are so far off the mark?
Ms. Khan. Congressman, this matter is still pending before
the FTC in administrative adjudication. So, I'm just going to
be limited in what I can say about the merits.
Our complaint lays out the staff's view of what this merger
would result in and why that would be a law violation. You
may--
Mr. Kiley. The judge roundly rejected it and said there
weren't even serious questions. Now, having lost, you're
spending even more taxpayer money on an appeal that you're even
less likely to win, because the appeals court is going to defer
to the trial court's findings of fact in this very fact-
intensive matter. So, why are you spending even more taxpayer
resources pursuing this appeal?
Ms. Khan. So, I can say, again, this was a staff
recommendation. I can say, in a general matter, staff always
looks closely at an opinion and looks at whether there are
certain errors in law that they believe are worth appealing on.
Those are, in general, the types of determinations that go into
whether the FTC ends up appealing.
Chair Jordan. The gentleman's time has expired.
The Chair now recognizes the gentleman from Tennessee.
Mr. Cohen. Thank you, Mr. Chair.
Chair Khan, thank you for being here and for putting up
with some of the questions you've been asked.
Yesterday, FBI Director Wray sat here for almost five hours
and put up with continual questions attacking his patriotism,
his judgment. It was really amazing the hypocrisy that was
shown.
The issue was weaponization of the FBI. Yet, every Member
of this panel who was here on January 6, 2021, knows that the
government was weaponized on that day--as I said, nuclearized--
to take over the government, to overthrow the government, in
contradiction of the oath of office that each of us had taken.
We have learned that certain Members of this Committee went and
met with Donald Trump and that they were participating in the
overthrow of our government, the nuclearization/weaponization
of our government.
Yet, they had the chutzpah, the audacity, the lack of
integrity to question Wray's judgment, and went on and on. I
was sorry, I came in here today and I'm sorry--
Mr. Issa. Is the gentleman accusing us of a lack of
integrity?
Mr. Cohen. Mr. Chair, if you would ask whoever it is to
shut up?
Mr. Issa. I'm sure the Chair will rule when he comes back.
Mr. Cohen. I was surprised when I came in today and I heard
some questions about your relationship with the Bar
Association. Hey, you don't talk about rope in a house where a
man's been hung. You don't ask about membership in the Bar
Association on a Judiciary Committee, where there are Members
who never passed the bar and aren't members of the Bar, and
they are Members of this Committee in good standing. So, we
need to get beyond the hypocrisy and realize where we are and
don't raise such subjects.
Chair Khan, let me ask you this: The Federal Trade
Commission deals in issues that protect consumers.
Subscriptions to magazines, to services, on subscription
services for media are everywhere and you can subscribe to them
easily. It's hard to unsubscribe. It's difficult to find that
spot. This has been a problem to consumers, and the companies
just make money hand over fist, as people give up on trying to
unsubscribe or cancel their membership.
What steps is the FTC taking to reel in these predatory
practices?
Ms. Khan. So, Congressman, you're absolutely right. We have
a complaint data base where we hear directly from consumers.
Oftentimes, we hear about significant frustrations about these
subscriptions that are very easy to sign up for, but
effectively impossible, in some cases, to fully cancel.
We've brought enforcement actions, including a case we
brought against Vonage last year. We also recently proposed a
rule--it's our click-to-cancel rule--that requires that
companies make it as easy to cancel a subscription as it is to
sign up for one. We've been collecting public comments. We're
going to look closely at the record and determine how to
proceed.
Mr. Cohen. Thank you for that.
I had a bundle with Disney, Hulu, and ESPN 26, or
something. I tried to get out of that bundle and just do Hulu.
Whatever it is, I'm being charged for both of them. I've given
up. I've just tried to cancel and it's just too much. It needs
to be easy.
Ms. Khan. That's right. We've also seen through our work
that companies sometimes use what are known as ``dark
patterns.'' These are these manipulative design techniques that
are designed to trick people into either signing up for
unwanted services or that make it very difficult to cancel or
opt out of something. So, those manipulative design tactics are
very much on our radar.
Mr. Cohen. Another consumer, anticonsumer practice is
robocalls. I've heard about it forever. It bothers me; it
bothers so many people to get these robocalls and asking you to
sign up for this or sign up for that, and to speak, and they
get you.
This is also the FCC, maybe, but what is the FTC doing to
help us with these deceptive calls?
Ms. Khan. So, we work hard on this one. One thing that
we've been thinking about is, how can we be most effective and
efficient with our resources? We've been looking upstream at
the voice over internet protocol providers, who sometimes are
helping facilitate or enable these robocalls. So, we've brought
a whole set of enforcement actions against them to have a more
deterrent impact and really protect consumers from these
unwanted calls.
Mr. Cohen. Have you tried to encourage or help companies--
the public, where antitrust actions could give them more
choices and better prices?
Ms. Khan. Absolutely.
Mr. Cohen. Well, I thank you for what you're doing.
By the way, do you have any books that you checked out from
the library that are overdue? No.
Ms. Khan. Not that I can--
Mr. Cohen. The public really cares about that. That's
important.
[Laughter.]
Mr. Cohen. I yield back the balance of my time.
Chair Jordan. The gentleman yields back.
The gentleman from California is recognized for five
minutes.
Mr. Issa. Thank you, Mr. Chair.
On behalf of the Committee, for the work that your 1,600-
plus full time equivalents do on areas like thwarting robocalls
and your efforts to promote the right to repair, I want to
thank the people at the FTC.
Our beef, though, is not with much of the good work you do,
much of which, as you said to Mr. Kiley, is successful when you
litigate.
Our problem here today, my problem here today is that
you're a bully. You have half a billion dollars to spend, and
you choose to spend it promoting a policy that, when you were a
staffer sitting behind us, you seemed to be very much into. I
believe you've taken the idea that companies should have to be
less competitive to merger; that every merger has to be somehow
bad for the company and good for the consumer--a standard that
cannot be met.
I will take, for example, Illumina, a situation in which
they have had the audacity to tell you that a company that they
spun off, but still held major assets in, that has to be
reacquired, so that a breakthrough, noncompetitive drug, a
technology of detection of cancer could be promoted more
quickly--one which has no current competitor; one which is not
on the market.
Yet, you decided that a company with a market cap of about
10 percent that of Pfizer somehow would be anticompetitive if
it assimilated a new--took on something that would be new, that
they had helped internally produce before spinning it off.
You're failing in that; you're going to fail.
You, then, took on Microsoft. Microsoft is a big, big
company. Everybody up here seems to want to beat on anyone that
has over a trillion-dollar market cap. When you served on the
Committee, you were big on, if you were over a trillion
dollars, we need to break you up or stop you.
However, that merger that you lost the other day is one in
which a protected market that's Sony enjoys in Japan, a company
that is already larger, needs competition. The reality is we
are a global market, and you are thinking only of who you want
to go after for some reason.
I cannot find your logic, and I believe that it begins at
the top. When you blamed your staff and said staff decisions,
shame on you. The fact is you run this organization, and its
left turn came when you took over, not with the staff, many
whom would have already been there.
Now, one of the things beyond Illumina that gets me is--and
this is my question to you--if cancer patients die because you
had blocked the merger, which you didn't because they went
forward over your objections, and will continue to fight you,
if cancer patients die because they don't have the money to
bring this technology forward, where has the consumer
benefited?
I know that you are going to say Illumina is currently
pending; we're still working on it; I can't answer. It's
interesting, you can answer yes or no to the Democrats, but you
can never simply to us. I'll get you a chance.
If something is not on the market, and an organization of
two companies say we want to merge to bring something to the
market, where does the FTC see anticompetitiveness? Briefly, if
you can answer.
Ms. Khan. Before I answer, I should just note, if anybody
asks me on either side about an ongoing matter--
Mr. Issa. No, no. Please answer my question.
Ms. Khan. --I will not be able--
Mr. Issa. My time is limited.
Ms. Khan. I will not be able to answer about ongoing
adjudicative proceedings.
Mr. Issa. OK.
Ms. Khan. Relating to the matter that you mentioned, I was
not at the Commission when it was voted out. There was a recent
Commission opinion. In that opinion, we lay out our view--that
was voted out unanimously--we laid out our view about how the
antitrust laws apply in nascent markets. There is significant
case law around how it's incredibly important to be protecting
competition, not just in well-established markets, but
especially in nascent markets.
Mr. Issa. OK. So, let's go back through this. Your opinion,
the opinion, whether you inherited it or not, that you seem to
bear, is that in the future there could be a failure to have
competition in a market that has not yet occurred. If people
have to meet a standard of your hypothetical market will not
develop because we--``we''--have to predict the future, if your
ability to predict the future is so good, how is it you could
not predict that you were going to lose four out of four cases?
How is it you can predict the future of markets, when, in fact,
the stock market can't even do it?
I would contend that you have overstepped your boundaries
and your half-billion dollar budget is being wasted. I, for
one, will not support your $160 million increase as long as you
do not stick to those things, which you do well, for which the
FTC has the responsibility, and for those robocalls that, in
fact, you have never managed to stop.
With that, I yield back.
Chair Jordan. The gentleman yields back.
The gentleman from Georgia is recognized.
Mr. Johnson of Georgia. Thank you, Mr. Chair.
I want to commend my colleagues on the other side of the
aisle in the 118 Congress in diversifying the membership on
their side of the aisle, but, frankly, we haven't done enough.
They have not done enough. They can't do enough at this point.
It reflects in the treatment that a witness such as
yourself, Chair Khan, receives from this Committee. When a
witness comes in, sitting so low at that table in front of all
these interrogators, it's a daunting look. The American people
can see it.
When we treat a witness who looks like you with the
politics of personal destruction, and when we only attack
witnesses who look like you with allegations of incompetence
and a lack of ability to lead their agency, it's indicative of
the need for this Committee to reflect what the American people
look like.
I want to appreciate you today for withstanding what you
have had to endure thus far, and we've only begun.
I will say this, Chair Khan, Americans rely on regulations
to protect consumers and workers in this country. The Federal
Trade Commission should be as aggressive in its enforcement as
the circumstances dictate.
Today, in America, there are only four large corporate
conglomerates that control the market for beef, pork, and
poultry. Consolidation in the meat packing industry shows up at
the grocery store, resulting in inflation for consumers and at
the same time, coincidentally, record high profits for the
corporate conglomerates who are soaking those profits from the
American people.
A single company controls most of the web searching and a
single company controls nearly half of all e-commerce. That's
too much power in the hands of too few corporations, and they
can hike prices with little recourse. They control vast amounts
of personal data. Consumers are being squeezed by consolidation
in almost every aspect of the marketplace--from food production
to hospitals.
So, I'm glad to see that you are using your position to
strongly enforce antitrust laws to ensure fair competition and
prices. Moreover, we are lucky to have an FTC Chair who does
not have personal or monetary conflicts of interest that would
require her to recuse herself from cases involving big tech
companies. That is good thing. Because of that, Chair Khan is
able to lead an agency that is properly investigating companies
like Amazon, Meta/Facebook, and Twitter. I'm glad that we do
not have the fox guarding the henhouse and that we, instead,
have an FTC that is actively working to protecting American
consumers.
Now, I want to ask you, Chair Khan, pharmacy benefit
managers manage prescription drug benefits on behalf of large
insurers, large employers, and other payers. However, this
middleman role allows PBMs to artificially inflate the prices
of drugs that individuals must pay for critical medications,
resulting in consumers having to pay almost 20 percent more for
generic drugs. The market for PBMs is an area of the market
that is highly consolidated with just three PBMs controlling 79
percent of the market.
What can the Commission do to ensure the market for
pharmacy benefit managers is competitive and fair, so that
Americans can afford their prescription drugs?
Ms. Khan. This is an area where we're looking very closely.
We issued a policy statement last year, unanimously, noting
some of our concerns in the pharmacy benefit management space.
In addition to the consolidation that you mentioned, we've
also seen vertical integration. So, these PBMs have also now
expanded into insurance. Sometimes they're competing with the
very pharmacies that are dependent on them. We've heard that
this can create conflicts of interest. We've also heard that
these PBMs demand rebates in ways that may be denying patients
access to more affordable drugs.
So, we have put the market on notice that we are looking at
these practices closely. If we find law violations, we won't
hesitate to act.
Mr. Johnson of Georgia. Thank you.
Mr. Chair, I have a unanimous--
Mr. Issa. Mr. Chair, I have a point of order.
Mr. Johnson of Georgia. I have a unanimous consent request.
Chair Jordan. We will do the point of order, and then, I
will come to your unanimous consent.
Mr. Issa. Mr. Chair, I waited for the gentleman to complete
his time, but I must raise a point of order that I, personally,
felt that he was referring to all Republicans, but particularly
to me, for his comments about diversity and his comments about
our treating the witness, apparently, because of the color of
skin, which happens to be similar to my Brown skin. I would ask
that this portion of his testimony be taken down as
inappropriate and argumentative to, and making a racial slur
against, myself and other Members of the Congress, who, by the
way, yesterday treated what I would call a very White man of a
greater age very similarly.
Ms. Jayapal. Is this a point of order, Mr. Chair, or is
this a speech?
Chair Jordan. I don't think the gentleman's point of order
has been stated in a timely fashion. It's supposed to happen
right after the statement--
Mr. Issa. Then, I withdraw my point of order, but not my
objection.
Chair Jordan. Well, I would just point out we should all
engage in proper decorum, not disparage colleagues, not
disparage people in the government, not disparage anyone. So,
let's just keep that in mind.
With that, I know we have got a unanimous consent request.
Mr. Johnson of Georgia. Thank you, Mr. Chair.
I would move for the entry of a letter from Small Business
Rising to yourself, as well as to the Ranking Member, Jerrold
Nadler, into the record, without objection.
Chair Jordan. Without objection.
Mr. Johnson of Georgia. I would also like to take, if the
Chair will allow me to, the opportunity to simply clarify to my
friend--
Chair Jordan. Briefly.
Mr. Johnson of Georgia. --Chair Issa that no personal
affront was intended. This was directed at the entire panel.
Chair Jordan. We got that. We got that.
The Chair recognizes the gentleman from Wisconsin.
Mr. Issa. It wasn't me; it was everyone.
[Laughter.]
Mr. Fitzgerald. That makes me feel good, Mr. Johnson. Thank
you.
Chair Khan, thanks for being here today.
Last December, I sent you a letter, along with several of
my colleagues, asking about the FTC's consideration of
environmental, social, and corporate governance factors, or
ESG, as it is known, in merger enforcement. I appreciate that
you had a prompt response in answering that FTC would not
support conditioning the approval of the unlawful merger on the
adoption of a particular set of ESG policies or commitments.
While pleased with the first part of the response, you did
not answer whether you would block a merger if it met
traditional competition criteria, but falls short of some
standard on ESG goals. Can you commit that ESG criteria will
not play a role in a decision by the FTC to block a merger?
Ms. Khan. We look at the text of the statutes, which tells
us to block mergers if they substantially lessen competition or
tend to create a monopoly. That's what we look at. Again, if
companies make certain commitments to us about social justice
commitments or ESG commitments, those are irrelevant to us.
Mr. Fitzgerald. OK. Thank you.
Since becoming Chair, have you ever communicated using
Signal, WhatsApp, or through a different encrypted messaging
app, on matters principally related to antitrust or consumer
protection policy, FTC enforcement actions, press, political
strategy, or any official communication? In particular, I'm
interested to see if you've had any communication with Senator
Warren, States Attorneys General, or outside groups.
Ms. Khan. Congressman, the FTC has a very clear policy
requiring that any FTC business relating to substantial matters
be conducted only on authorized FTC devices, and I fully comply
with that policy.
Mr. Fitzgerald. Did you have any communication with your
now-Senior Advisor, Ms. Sarah Miller? Sarah Miller works for
you, is that right?
Ms. Khan. Ms. Miller joined my staff earlier this year,
correct.
Mr. Fitzgerald. While she was in her role at the Economic
Liberties Project, regarding the decision to air attack ads on
Members of this Committee, including myself, for our opposition
to the FTC's proposed noncompete rule?
Ms. Khan. Congressman, I talk to a lot of people, but I'm
never involved in those types of discussions.
Mr. Fitzgerald. So, you weren't involved in the idea to, in
fact, go after Members of this Committee in their districts?
Ms. Khan. Congressman, we're really excited about this
proposal. We're accepting a lot of public comments. We're eager
to hear from Members of Congress. I've talked to many of you
about the proposal. We're eager to hear you, your feedback and
input.
Mr. Fitzgerald. It was announced last night that you
intended to break 30 years of precedent by challenging the
court's ruling in the merger of Microsoft and Activision. Can
you explain why, despite 39 countries and the European Union
already clearing this merger, that you intend to move forward
with, on administrative proceedings?
Ms. Khan. So, Congressman, again, this matter is pending
before the Commission in our administrative adjudication. So, I
can't comment on the merits. When we get an adverse ruling, our
teams look closely at the text of the opinion; determine
whether there are errors of law that they believe warrant an
appeal. Those are the types of considerations that they take
into account.
Mr. Fitzgerald. In April of this year, the FTC's Associate
Director for Litigation for the Bureau of Competition stated at
a conference that, quote, ``Merger policy is industrial
policy,'' and
There is a role for merger policy in directing the way capital
flows into projects. That means at the next venture capital
meeting, they're not going to say, what's the exit via
acquisition? It will be, how do we get to an IPO.
Do you endorse this statement?
Ms. Khan. Congressman, I'm not familiar with the details of
it. Happy to look at it in a question for the record.
I'll say, generally, it is true that antitrust and
competition policy is about ensuring robust competition.
Entrepreneurs benefit from that. Startups benefit from that. I
just met with some venture capitalists the other week that were
expressing concern about a lack of exit options that don't
involve being bought up by one of the large technology
companies. These are certainly issues that we hear about.
Mr. Fitzgerald. I think the issue for myself and many of my
colleagues has been that the way you're running the FTC, that
you're not simply trying to kill deals in the board room,
you're also killing small businesses still in the crib. You
want startups to seek an IPO rather than acquisition, but the
cost of entering the public markets has doubled since the
nineties, and your colleague, Mr. Gensler, at the SEC has been
piling on with the rulemaking.
So, I don't know if this is what the administration means
by Biden economics, but I have to ask, why would anyone start a
small business under this administration right now?
Ms. Khan. So, Congressman, we hear regularly from small
businesses. One of the things that we started since I joined
the Commission is open Commission meetings, where anybody in
the country can sign up and come talk to us. We hear from a lot
of small businesses.
More often than not, what we hear is about the challenges
that they face in being able to compete in an open, competitive
marketplace. We hear about how the existing giants and existing
incumbents are squeezing them and making it difficult, be it
for an independent grocer, an independent pharmacist. So, we
are very eager to hear from small businesses and make sure
we're enforcing the laws in the ways that are enabling
everybody to compete in the marketplace.
Mr. Fitzgerald. Mr. Chair, I yield back.
Chair Jordan. The time of the gentleman has expired. The
gentleman yields back.
The gentlelady from California is recognized.
Ms. Lofgren. Thank you, Mr. Chair.
Thanks to our witness for being here.
I have an interest in several areas where it seems to me
the FTC has been less than robust, and which maybe you can
disabuse me of that notion.
First, in the area of swipe fees, Visa and Mastercard have
more than 83 percent of market share. Congressman Gooden and I
introduced the Credit Card Competition Act of 2023 to introduce
competition. Our small businesses pay a higher swipe fee than
people do in other developed nations. I'm wondering whether the
FTC will be having an active engagement in this area.
I'm also concerned about the issue of consolidation in the
grocery sector. These large companies have the power to secure
preferential pricing and treatment from suppliers, to the
detriment of independent grocers.
Now, recently, Mr. Tiffany and I led appropriations request
for $10 million specifically for FTC enforcement of the
Robinson-Patman Act. I'm interested in what you can tell us
about FTC and Robinson-Patman.
I also have long been a champion of right to repair.
Congressman Issa and I recently introduced legislation to limit
the enforcement period of design patents, so that monopolies
cannot prevent individuals from repairing what they own.
The Nixing the Fix Report was before your tenure, but I'm
interested in what FTC is interested in doing in this area
going forward.
Finally, Congresswoman Eshoo and I introduced what I think
is the toughest online privacy act that's ever been introduced
in Congress. It simply prevents companies from collecting data,
so they cannot, then, use it to manipulate Americans. I'm
interested in what actions the FTC is going to take to minimize
data minimization, which I think is a key to data security,
privacy, and also, helpful in competition.
Ms. Khan. So, on your first point, just a few months ago,
the FTC announced an enforcement action against Mastercard. We
alleged that there was a violation of the Durbin Amendment, and
that Mastercard had engaged in unlawful tactics to block
competing networks and really stifle the competition that
Congress has sought to encourage in this market back in 2010,
because I think you're absolutely right, we still see fees that
are much higher than what we see in sectors where you have more
competition.
Robinson-Patman, and reinvigorating enforcement of it, is a
top priority. We've certainly heard from independent grocers
about the ways in which differential treatment and
discriminatory prices may be squeezing them and disfavoring
them, making it difficult to compete, especially in parts of
rural America. That's something that we're looking at closely.
We also, several months ago, launched a market inquiry
looking at supply chain disruptions, and the degree to which
that type of differential treatment may have contributed.
On right to repair, this has been a big area of focus for
us. In addition to the great staff report you mentioned, we
also issued a policy statement. We followed up with several
enforcement actions, including one against Harley-Davidson, one
against Weber.
Since then, we've also been working with State
legislatures, several of whom are also considering right to
repair legislation. Just the other month, one of our staffers
went to California to testify before the State Senate there to
give input and feedback on their legislative efforts in this
area. So, we're bringing our own lawsuits, but also looking to
serve as force multipliers where other legislators are looking
to be active.
Ensuring robust privacy protections for Americans is a top
priority. We've been extraordinarily active in this area,
especially when it involves children's privacy. We brought an
enforcement action against Epic Games because we found that
certain lax privacy policies that they had in place were
endangering children.
We've also been looking at people's sensitive health
information and instances in which companies are collecting
health data for the purpose, ostensibly, of providing health
services, but then, are turning it around and making it
available for advertising.
We're also looking at geolocation data. We have a lawsuit
pending in Idaho against a data broker called Kochava, where we
allege in our complaint that its practices allowed people to--
allowed companies to track and get very sensitive geolocation
information on consumers in ways that revealed whether they
were going to church, whether they were seeking certain types
of health services, whether they were seeking addiction
recovery facilities--very sensitive data. So, that lawsuit is
still pending.
Ms. Lofgren. Thank you, Mr. Chair. I see my time has
expired and I yield back.
Chair Jordan. The gentlelady yields back.
The Chair recognizes himself.
Madam Chair, why are you harassing Twitter?
Ms. Khan. Congressman, thanks for the question.
As you might know, the FTC's work on Twitter goes back a
decade. Back in 2000 and--
Chair Jordan. I'm not talking about a decade; I'm talking
about now.
Ms. Khan. Back in--
Chair Jordan. Twelve demand letters in 10 weeks, 300--over
350 separate requests you have demanded of Twitter. Why are you
harassing them?
Ms. Khan. Twitter has a history of lax security and privacy
policies.
Chair Jordan. You've asked for every single communication
relating to Elon Musk, not communications that he just sent to
someone or communications he received, but anytime he's
mentioned. That actually seems more, actually, more than
harassment. That seems like almost an obsession. Why such an
intense focus?
Ms. Khan. So, Congressman, again, it was found that
Twitter's lax privacy policies allowed unauthorized users to
coopt Twitter accounts, including that of Fox News.
Subsequently, Twitter voluntarily entered into a consent order
with the FTC. Unfortunately, we found--
Chair Jordan. Here's what you wrote in December. Madam
Chair, here's what you wrote in December:
Identify all journalists and other members of the media to whom
Twitter has granted access since Musk bought the company.
You want to know the name of every journalist a private company
has talked to? Do you think that's consistent with the First
Amendment?
Ms. Khan. Congressman, as a former journalist, I take
extremely seriously the valuable work that they do and
understand that there can be instances in which government
action is--
Chair Jordan. Particularly--
Ms. Khan. --unjustifiably chilling that activity--
Chair Jordan. Particularly, Madam Chair, if I could?
Particularly, if I could just interject? Particularly, in the
context here. I mean, it's bad enough if you've got government
asking a private company about who are the journalists you're
talking to. You name four of them and say, ``We want the other
names of any journalists you may, in fact, be communicating
with.'' That's bad enough and I think a threat to the First
Amendment and freedom of the press. In the context of giving us
information about how government had suppressed speech on these
platforms, that's the context you're asking for. I think that's
particularly troubling, don't you?
Ms. Khan. Congressman, the consent decree that we have
prohibits Twitter from sharing personal information with third
parties. When we read in the papers, like everybody else, that
Twitter may have granted access to third parties, that's what
our teams were seeking information about.
Again, this is a company whose history with the FTC goes
back a decade--
Chair Jordan. Madam Chair, we've got limited time. Madam
Chair, who is David Roque?
Ms. Khan. Could you repeat that, Congressman?
Chair Jordan. David Roque, R-o-q-u-e, who is David Roque?
Ms. Khan. I'm not familiar with that--
Chair Jordan. You deposed him last month, June 21, 2023.
David Roque is the independent partner for Ernst & Young's
independent assessment of Twitter's program that's part of this
consent decree. Do you know what Mr. Roque said in that
deposition?
Ms. Khan. I'm not aware.
Chair Jordan. OK. Let me read it for you, then, because I
think it's pretty important.
Mr. Roque testified--again, in front of your lawyers; you
deposed him--testified that FTC's conduct made him feel,
. . . as if the FTC was trying to influence the outcome of the
engagement before it had started . . . . In some of the
discussions that we were having with the Federal Trade
Commission, expectations were being conveyed about what those
results should be before we had even begun any procedures.
So, they're the independent assessor in this consent decree
the FTC has with Twitter, and you're telling the guy who is the
person--he's the guy; he's the ``Joe the accountant'' who's
going to get this information--you're telling him, you're
putting your finger on the scale telling him what you want the
outcome to be, and he's supposed to be the independent fact-
finder. Why are you doing that?
Ms. Khan. Congressman, I'm not familiar with those
specifics--
Chair Jordan. Because it was just filed today, but we are--
this is filed in court today and this is your deposition.
Ms. Khan. I'm happy to take a closer look at it and be back
in touch.
I will say, as a general matter, we want to make sure that
the assessors and auditors that are responsible for overseeing
compliance are doing their job.
Chair Jordan. You're saying Mr. Roque is lying in what he
testified here, what's been filed in court today, that there
were suggestions of what they would expect the outcome to be?
``They'' being the FTC. There were suggestions of what they
wanted him to go find in his independent assessment of the
consent decree agreement the FTC and Twitter.
Ms. Khan. Again, I'm happy to take a close look and we can
be back in touch with you about that allegation, but our staff
are consummate professionals. When they conduct these
investigations, they're focused on determining whether there
was a violation--
Chair Jordan. Did you go after--did you--is your attack on
Twitter, harassment on Twitter, is that based on the fact that
all kinds of Democrats have asked you to do this, and frankly,
some things that you have written about dealing with, quote,
``disinformation''? Does that have anything to do with it, Ms.
Khan?
Ms. Khan. Congressman, we make only independent
determinations about whether there were law violations.
Chair Jordan. The statement from Chair Nadler, the
statements from--the letter, the press release and the letter
from seven Democrat Senators, that had no impact on it? That's
not why you're doing it?
Ms. Khan. Absolutely not. We look very closely at the
specific matter at hand.
Chair Jordan. Twelve demand letters in 10 weeks, telling
the independent assessor, ``Hey, put your finger on the scale.
This is the results we want,'' that's not harassment and it had
nothing to do with the fact that every Democrat in this town
seemed to be telling you to go after Twitter?
Ms. Khan. Our focus is on protecting people's privacy and
security. Twitter has sensitive data on 150 million Americans,
including private messages. We need to make sure, especially
given its history going all the way back to 2010, that we're
doing everything to make sure Twitter is complying with the
order.
Chair Jordan. That's fine. Don't put your finger on the
scale and don't attack the First Amendment and the rights of
journalists.
Mr. Ivey. Mr. Chair, point of order.
Chair Jordan. With that, I yield. I yield back and
recognize the gentleman from California for five minutes.
Mr. Schiff. Thank you.
Madam Chair, thank you for your testimony today and thank
you for the refreshing and aggressive approach you're taking to
ensure competition.
In my view, we have reached a dangerous point in this
country where there has been a tremendous concentration of
corporate power--at the expense of working families. The
challenge we face today is not that people aren't working;
people are working. The problem is they're not making enough to
get by. Part of that is the result of this concentration of
power in corporate hands--the likes of which I don't think we
have seen in our history. So, I appreciate the work that you're
doing.
I want to ask you, in particular, about an issue I've
written to you about that concerns me, and that is
consolidation among the large grocery stores, the large grocery
chains. This has the potential of not only having an adverse
impact on price, but also having an adverse impact in the form
of job losses, in the form of creation of food deserts,
impacting communities.
If you are able to share your thoughts in terms of that
particular merger, great. If you're not, I would ask, more
generally, what you're looking at in terms of impacts and,
also, vis-a-vis the narrowness of the doctrine that focuses
only on consumer prices? Would that prevent you from looking at
other criteria, such as the impact on communities and the
impact workers?
Ms. Khan. So, we seek to take a 360 view to make sure we're
fully understanding how a particular merger may be lessening
competition in ways that are informing consumers, but that may
be hurting suppliers. In the context of grocery mergers, we
really take care to make sure we're looking at all sides.
As you noted, there is a pending investigation that Kroger-
Albertsons has disclosed. The FTC is looking at their proposal.
I think you're absolutely right, though. We have seen the
consolidation in the grocery sector could have devastating
effects for communities, contributing to food deserts. One
practice that is also on our radar is the way in which grocery
chains can be using what are known as restrictive covenants to
try to lock out competition geographically, which may also be
contributing to these food deserts.
So, we're looking at that closely. We want to make sure
that we're enforcing the antitrust laws in ways that are
serving all communities.
Mr. Schiff. Well, I appreciate that. I have grave concerns
about the Kroger-Albertsons merger and the impact on the
communities that I represent, and many others throughout
California and the country, in terms of impact on workers, on
prices, and on communities.
Let me just turn to the issue that the Chair was just
raising with you. You didn't get much of a chance to elaborate
on the privacy and security problems at Twitter and how they
could impact the privacy of millions and millions of Americans.
I'd like to give you that opportunity, because I'm both
concerned with the enormous proliferation of hate speech on
Twitter, the firing of many of the individuals charged with
security at Twitter, and what impact that on the rise of hate,
but also on the decrease in security and privacy of people's
data at Twitter.
Ms. Khan. So, again, we're squarely focused on the privacy
and security implications of any decisions that may be made. As
I noted, Twitter's history with the FTC goes back over a decade
where serious security and privacy lapses led to personal
information being compromised. As you noted, Twitter today also
has access to deeply personal, sensitive information.
In 2022, we entered into a revised consent order because we
found that Twitter unfortunately had been in violation of the
prior consent order. Whenever we have repeat offenders at the
agency, we're always thinking very hard about what we can be
doing to prevent repeat violations. Our revised order has even
tighter privacy and security provisions. It was voted out
unanimously at the Commission. We'll continue to make sure that
our orders are being followed that companies are protecting
people's privacy and security.
Mr. Schiff. I appreciate that. I'd also like to ask
unanimous consent to enter in the record a couple articles, one
from Gizmodo, ``Elon Musk, King of Censorship: 10 Times the
Free Speech Absolutist Silenced Twitter Users,'' and also an
article from Rest of the World, ``Twitter is complying with
more government demands under Elon Musk,'' which includes:
But Twitter's self-reported data shows that, under Musk, the
company has complied with hundreds more government orders for
censorship or surveillance--especially in countries such as
Turkey and India.
I request consent to enter those into the record.
Chair Jordan. Without objection.
Mr. Schiff. Thank you, Chair. I yield back.
Chair Jordan. The gentleman yields back. The gentleman from
Colorado is recognized.
Mr. Buck. I thank the Chair. Chair Khan, thank you for
being here. Do you own stock in Apple, Amazon, Facebook, or
Google?
Ms. Khan. No.
Mr. Buck. Do you own stock in any of the competitors to
those companies?
Ms. Khan. I do not.
Mr. Buck. Do you know that the ethics official who
requested that you recuse yourself from any activities
involving Facebook, owned stock in Facebook?
Ms. Khan. I learned about that, yes.
Mr. Buck. Do you know how much it costs to buy Congress?
Well, big tech does. They spent $250 million against the bills
that pass out of this Committee last Congress. They spent money
lobbying. They spent money on advertising in Members'
districts. They spent money with third-party think tanks. They
spent money that no other effort in recent memory certainly has
been spent.
It's not just the money that they spent. On lobbying, for
example, Meta spent--and I call it Facebook--$20,070,000;
Amazon, $19,320,000; Alphabet, $11,770,000; and Apple,
$6,500,000. It's not just the money that they spent on lobbying
and those activities.
On June 18, 2021, just five days before the markup hearing
of the big tech bills in this Committee, Paul Pelosi, Nancy
Pelosi's tech investor husband, bought 4,000 shares of Alphabet
via a call option in which he promised stocks at a later date
at a price of $1,200 a share a month later. Now, this is after
we've passed the bills. Nancy Pelosi, the Speaker, sent Steny
Hoyer, the majority leader, to the press to tell the press that
these bills were not ready for the floor.
A month later, the stock price rose to over $2,500, making
Paul Pelosi $5.2 million richer without spending a penny.
Speaker Pelosi's office, it should be noted, issued a statement
denying any involvement or prior knowledge of the transaction.
The fact remains that she refused to bring to a vote on the
House floor those bills, bills that resulted from an 18-month
long investigation.
We had last year as a result of Congresswoman Jayapal's
efforts and my efforts and some other efforts a stock ban in
the House, a ban that would prohibit Members from buying
individual stocks. You probably also don't know that more than
50 Members of Congress bought stocks in pharmaceutical
companies during the COVID crisis when Congress immunized--a
good term, I guess, to use during the COVID crisis--immunized
pharmaceutical companies if there were any problems with the
vaccines that they created. We can't pass a stock ban, but we
can call you into Congress and suggest that somehow you
shouldn't be involved in activities involving some of these
companies because you wrote a law review article.
Do you have a child? I don't want you to answer that
question just yet because that's personal. Do you have a child
who is lobbying for Amazon or Facebook?
Ms. Khan. No, he's turning six--he's turning six months
this week, so, no.
Mr. Buck. OK. They'd probably still hire him. If they could
influence you, they would hire your child at six months old
because, in fact, they've hired Senator Schumer's daughters to
lobby for them. The same bills that pass the House didn't
pass--didn't get a chance--I'm sorry.
The same bills that passed the House Judiciary Committee
and never saw the light of day on the Senate floor, either.
That's just how the game goes. You're well aware of the need to
update the antitrust laws concerning the new economy that we
are facing. I'd just like you, if you could, briefly to explain
what is the need. Why is it so difficult to apply antitrust
laws written at the turn of the last century to the new
economy?
Ms. Khan. Thanks, Congressman. So, there is antitrust
doctrine on the books that has embedded within its certain
economic assumptions about how certain markets work, about what
types of incentives businesses face. That doctrine in some
cases is 30-40 years old, way before we had the advent of
digital markets.
These digital markets function differently, right? You have
the self-reinforcing advantages of data, network externalities.
Companies face different incentives. They're engaged in
different strategies.
Sometimes there can just be a gap between how the doctrine
is saying businesses are acting and what we see in reality. So,
legislative updates can be needed to close that gap between
what the theory says or what the doctrine says, and what we're
all living with in actual markets. So, that's, in particular,
where legislative action can be absolutely critical.
Chair Jordan. The gentleman's time has expired. The
gentleman yields back. The gentleman from California is
recognized.
Mr. Correa. Thank you, Mr. Chair. Chair Khan, welcome
today. What is your job?
Ms. Khan. I have the great honor of serving as Chair of the
Federal Trade Commission.
Mr. Correa. What do you do in that role?
Ms. Khan. Well, help manage the agency oversee both our
Bureau of Consumer Protections--
Mr. Correa. Protect consumers?
Ms. Khan. Protect consumers, protect--
Mr. Correa. Where do you get that authority?
Ms. Khan. Congress charged us with that in the FTC Act and
subsequent Legislative Amendments.
Mr. Correa. Is that new?
Ms. Khan. Excuse me?
Mr. Correa. That authority new?
Ms. Khan. That authority stems back to 1914 and then
subsequent amendments in the following decades.
Mr. Correa. We talked a little bit earlier about litigation
fees, enforcement costs. Let me ask you, are you a profit
center or are you an agency in charge of protecting consumers,
enforcing the law, and going after individuals that may prey on
our consumers, our taxpayers?
Ms. Khan. We're a government agency that using every dollar
we have to protect the American people from illegal business
practices.
Mr. Correa. Thank you. Let's talk about Main Street, people
who send us here to Washington. I get scam calls every day,
robocalls. Seniors get robocalls every day. Veterans get
robocalls every day. How are you working with the FCC to stop
these calls from happening?
Ms. Khan. So, we in the FCC have overlapping jurisdiction
as you noted. One thing that we're doing in addition to going
after some of the robocallers themselves is identifying what
are some of the upstream factors that are allowing these calls
to proliferate? Sometimes these calls are originating from
other countries in ways that can make it difficult for us to go
directly after them. This is why we look at VoIP providers and
other upstream--
Mr. Correa. Madam Chair, a number of years ago, I had a
situation in my district. We had to get Interpol involved.
Calls were originating from Mexico when the local telephone
companies were providing the calling information. It was a
huge, huge mess. International, very much a difficult
challenge. What can we in Congress do to help you rein in these
predatory calls?
Ms. Khan. There are certainly legislative updates that
we're happy to recommend to you and your team. I would say
generally given that the FCC also has authority over the
telecom carriers themselves. Directly taking action at that
layer could also probably have a very big impact.
Mr. Correa. At the end of those scam calls, you have
victims, people that get hurt really bad and struggle to get
that money back. What is your agency doing to help consumers
get their money back?
Ms. Khan. We're bringing lawsuits where we can.
Unfortunately, a couple of years ago, we suffered a big setback
in court where the court said that 13B of the FTC Act which has
been a core provision that we use to go into court and get back
money for people who have been scammed out of money. The court
said, ``we can no longer use that authority.''
That was a big setback. Since then, we've been activating
other legislative authorities to make sure we're trying to get
money back where we can. There's no doubt that billions of
dollars evaporated after that court decision. People are losing
out as a result.
Mr. Correa. So, do you need legislative help from Congress
to do your job, protect consumers in this area of junk fees?
Ms. Khan. Absolutely. Legislation, in particular, enabling
the FTC to go into court under Section 13B and get money back
so that lawbreakers are not profiting from their lawbreaking.
That would be essential.
Mr. Correa. I think that's important. Lawbreakers need to
know there's somebody there, a police officer waiting to make
sure that they follow the law. Too many times my locals get
ripped off. They call the local PD.
They don't know what to do. They call the local State
agency. They don't know what to do. I hope that you and your
agency can continue to be effective in making sure that
consumers on Main Street are protected.
Our seniors essentially that sometimes are embarrassed to
call me and tell me, I just got ripped off. They don't have the
energy or the wherewithal to defend themselves. These are the
people we need to be protecting.
I asked if you were a profit center. I know you're not.
Nonetheless, I encourage you to continue to do a good job
because my constituents, American taxpayers, are relying on
your agency in doing a good job. Thank you very much. Mr.
Chair, I yield.
Chair Jordan. The gentleman yields back. The gentleman from
Virginia is recognized.
Mr. Cline. Thank you, Madam Chair. You implemented the use
of omnibus resolutions in antitrust investigations. These
resolutions in effect give the Chair of the FTC sole control
over FTC investigations. The Chair could direct staff to
investigate a transaction, sign all subpoenas without a
Commission vote, which was previously necessary in
investigations of almost all mergers and business conduct.
Former Commissioners Phillips and Wilson, Wilson resigned
over much of this type of action from you. This paragraph
eliminated the only layer of Commission oversight. Wouldn't you
agree that the use of omnibus resolutions in this matter
undermines the bipartisan nature of this Commission model? Are
you trying to turn the Commission into your own personal
empire?
Ms. Khan. Congressman, omnibus resolutions have long been
used at the FTC before I joined. It's fairly standard for there
to be omnibus resolutions on the consumer protection side,
again, long before I joined. Changes we made brought the
consumer protection side in symmetry with the competition side
to empower our staff to act nimbly.
Mr. Cline. OK. Let's talk about that because the staff has
been leaving in droves. A report by Bloomberg found that 71
senior attorneys left the agency in the two-period between
2021-2022, the highest number of departures in the category for
a comparable two-year period since 2000. Coincidentally, the
Progressive Change Campaign happens to have a list of 400
recommended names for positions in the FTC and the Biden
Administration. Has anyone including Adam Green of the
Progressive Change Campaign communicated with you to hire any
of these individuals?
Ms. Khan. No.
Mr. Cline. OK. Have you hired any of these individuals?
Ms. Khan. No, I don't know what list you're talking about,
to be honest.
Mr. Cline. OK. Let's move on to this Committee and your
responsiveness, or lack thereof, to this Committee following up
on what the Chair asked. In March, your Director of the Office
of Congressional Relations testified before my Subcommittee on
Responsive and Accountability to Oversight regarding your
refusal to produce documents related to this Committee's
oversight of the FTC's harassment of Elon Musk following his
acquisition of Twitter. It's well known that the FTC frequently
seeks extensive information from the parties that it
investigates.
When those parties fail to produce what's required to the
FTC to conduct its investigation, the FTC seeks sanctions. In
the FTC's response to this Committee's inquiry, most of what it
has provided is already publicly available or otherwise
incomplete. I find it inconceivable that the FTC would tolerate
such a production for parties under its investigation. So, what
should this Committee do and take from the FTC's paltry
production to date on this matter?
Ms. Khan. Congressman, our team has been enormously
responsive. We've been working day after day to accommodate
this Committee's request. We've offered and provided numerous
nonpublic briefings including on the matter that you mentioned.
It is true when we have an ongoing law enforcement
investigation, there are additional consideration we have to
take into account to make sure we're not compromising law
enforcement or killing any of the free speech of the third
parties that communicate with us.
Mr. Cline. Does that include communication through
nongovernmental email accounts? Because in the limited
materials that you provided, we can see that your staff
communicated using Gmail accounts. In other instances,
employees from other agencies were using employees email
account attached to that separate agency.
So, you were talking about how you're committed to using
government communications methods. I don't know if you're aware
that your staff is not. What steps have you taken to secure
responsive material from sources outside the FTC?
Ms. Khan. Congressman, whenever anybody onboards onto the
FTC, we provide extensive training to make sure everybody knows
only to use authorized devices. If sometimes inadvertently
there is a message that props up somewhere else, you're
supposed to forward it to your FTC email. I imagine that's why
it was actually captured in those productions.
Mr. Cline. OK. You asked Congress for a historic budget
increase of 160 million, or 37 percent, citing staffing
shortages which you're largely responsible for and insufficient
resources. Did you announce a joint effort within the DOJ
antitrust division with the FTC to send staff to Europe to
assist with implementation of their Digital Markets Act?
Ms. Khan. Congressman, we have a really fantastic Office of
International Affairs that I inherited. It was launched in 2007
during the Bush Administration. As part of our international
efforts, we're routinely sending detailees--
Mr. Cline. Do you know how much that costs?
Ms. Khan. Excuse me?
Mr. Cline. How much does it cost to send staffers to
Europe?
Ms. Khan. I don't know off the top of my head, but we're
happy to provide that information if it would be helpful to
you.
Mr. Cline. OK. Well, due to the rank partisanship that's
coming up in your agency, the fact that you all are ignoring
Congressional requests for information and the wastefulness
that we've seen, I know that the Appropriations Committee is
marking up your budget as we speak. They are seeking a 25
percent reduction in funding for the FTC today. Actually, the
Appropriations Committee is going to be passing that government
funding bill.
So, actions have consequences, Madam Chair. You're about to
see what consequences your actions have had. I yield back.
Chair Jordan. The gentleman yields back. The gentlelady
from Pennsylvania is recognized.
Ms. Scanlon. Thank you, Mr. Chair.
[Simultaneous speaking.]
Chair Jordan. I'm sorry. I'm sorry, sorry. I was just told
that and soon forgot. The gentlelady from the other side of the
country is recognized from the State of Washington.
Ms. Jayapal. Thank you, Mr. Chair. Chair Khan, as head of
the Federal Trade Commission, I would just like to thank you
for the FTC's investigations and enforcement actions that
protects small businesses and hardworking Americans and promote
competition. You have done what few before you have dared to
do.
Few before you have had the courage to take on big
corporations who use their endless lobbying money to hurt
Americans with more fees, less transparency, and higher costs.
You are taking on big tech and the monopoly powers that allow
them to use our data and snuff out small business competitors.
That was something that yesterday I got a lot of bipartisan
praise for in taking on Director Wray at the FBI around
privacy.
You're doing the same thing. There should be more people
like Representative Ken Buck talking about that on this
Committee, talking about the efforts that you are making to
finally put teeth into protecting consumers. I am grateful to
you.
In fact, I think it's precisely because of your success,
your courage, and your integrity that you are receiving all
these baseless attacks on your character. So, just for the
record, here are the facts. It was FTC Ethics Official Lorielle
Pankey who owned stocks in Meta when she recommended that Chair
Khan recuse herself from investigating Meta, Facebook's parent
company.
In contrast, Chair Khan owns no stocks in big tech, not one
penny. A Federal judge ruled that her stances do not constitute
a conflict of interest. So, I want to thank you to your
integrity and your commitment to the mission, which is
precisely why the President appointed you to head the FTC.
Now, I want to spend my time talking about your
accomplishments, the FTC's accomplishments under your
leadership. One in five workers are affected by noncompete
clauses which essentially means that employers restrict or ban
workers and their employment contracts from freely switching
jobs just for the average person who's out there listening. The
FTC is currently working on banning these noncomplete clauses.
Can you explain in plain language why your agency proposed this
rule to ban noncompete clauses?
Ms. Khan. I'm happy to, Congresswoman. I would be remiss if
I didn't mention our ethics officer. From working with her, I
know our ethics officer to be a dedicated career professional
who serves the agency with nothing but its best interest at
heart. I understand in that instance she sought guidance from
the Office of Government Ethics and acted consistently with it.
On noncompete, so these are clauses that lock in workers
and prohibit them from being able to seek an alternative job
with a competitor for a period of time and oftentimes geography
limits. We've seen from our work that these clauses suppress
worker wages to the tune of $300 billion. They also make it
difficult for startups and entrepreneurs and new businesses to
enter and compete. That's why we've proposed this rule.
Ms. Jayapal. What types of workers are going to benefit
from the implementation of that rule?
Ms. Khan. At the proposal stage, it would be everybody.
We've heard from gardeners, journalists, healthcare workers,
fast foot workers, engineers, and scientists. These noncompete
clauses have really proliferated across markets and across our
economy in ways that are now hurting everybody.
Ms. Jayapal. So, let me turn to your work on junk fees.
There are few issues today that unite Members of Congress more
on the Hill. I'm proud to say that junk fees attract the ire of
both Democrats and Republicans because as your agency notes,
they are, quote, ``surprise charges that inflate costs while
adding little to no value.'' So, tell us how widespread these
junk fees are and give us some examples of what you're talking
about and how they harm consumers.
Ms. Khan. Yes, I'm sure everybody can relate to this in
their day-to-day lives. These mystery fees that show up, be it
a resort fee charge on your hotel bill or an unwanted or
unnecessary charge that shows us somewhere else. One of the
areas where we've heard most about these junk fees is in the
auto context.
Buying a car is one of the most significant financial
investments that people make. Unfortunately, we've heard that
all too often consumers are saddled with charges for
unnecessary or unwanted or redundant fees. We're moving forward
there.
We also brought a lawsuit last year against Vonage for also
including some of these junk fees when people tried to cancel
their subscription. So, that's just some of the work. We
currently sought comment on whether we should do more work on
junk fees including potentially proposing a rule. We're
reviewing those comments and determining how to move forward.
Ms. Jayapal. The FTC has got a long history of dealing with
junk fees. Is that correct?
Ms. Khan. That's right.
Ms. Jayapal. Can you talk about that?
Ms. Khan. So again, in the auto context, in particular,
we've gotten hundreds of thousands of complaints about this.
We've brought dozens of lawsuits addressing junk fees that
consumers are saddled with when trying to buy a car. It's
really market-wide that we've seen these charges emerge and
that we're looking to be actively addressing.
Ms. Jayapal. Well, I want to thank you for your work and
hope that we talk more about some of the shared interest that
we have across the aisle. Thank you. I yield back, Mr. Chair.
Chair Jordan. The gentlelady yields back. The gentleman
from Florida is recognized.
Mr. Gaetz. How timely. You are a brilliant woman with a
tremendous ability to impact how consumers are going interface
with the digital world for a long time to come. I want to get
to those areas of agreement, but there is some ugliness we got
to deal with. Now, you guys putting in the names of reporters
in a correspondence to Twitter was solely predicated--based on
anonymous news sources, right?
Ms. Khan. It was based on reporting that--
Mr. Gaetz. Right, and we would agree that anonymous
reporting is not a sufficient predicate for--to target--to send
letters about journalists who are your critics, right?
Ms. Khan. Congressman, yes, the goal was third parties, but
this is good feedback for us. We want to make sure we are not
in any way suggesting that we are interested in affecting
journalists' work. It is really about privacy and security. So,
I really appreciate--
Mr. Gaetz. I appreciate your acknowledgment that this is
not the way we ought to do things. As someone who has seen ugly
government action emerge out of anonymous reporting, perhaps I
am a little sensitive to that, but I am glad that you have made
that acknowledgment.
Let's get onto the important work that you are doing.
Millions of Americans have Ring doorbell cameras, and your
agency recently put out a correspondence saying, quote,
During a three-month period in 2017, a Ring employee viewed
thousands of videos of female users in their bedrooms and
bathrooms including videos of Ring's own employees.
There was also at Ring, according to the FTC, an unauthorized
tunnel that allowed a Ukraine-based contractor to access
consumer videos. An incident where a Ring employee gave
information about a customer's--to their ex-husband was also
something that you uncovered.
You also State that bad actors at Ring took advantage of
the camera's two-way communication functionality to harass and
threaten people who used Ring cameras. There was a case where
an 87-year-old woman in an assisted living facility was
sexually propositioned through Ring's two-way features. Kids
were subject to racial slurs. A hacker got in and threatened a
family with physical harm if they did not pay a Bitcoin ransom
and one hacker even communicated through the two-way feature to
a customer that they had already killed the customer's mother
and, quote, ``tonight you die.''
What is going on at Ring?
Ms. Khan. So, as you know, we recently took enforcement
action precisely because of these very serious lapses in data
privacy, which endangered Americans in their day-to-day lives.
Overall, looking at some of these surveillance devices and how
they can be misused and abused is a top area of focus for us
because people's privacy is paramount.
Mr. Gaetz. Yes, I thought that when people got Ring it was
to enhance their personal security, not to have their 87-year-
old relative in an ALF sexually propositioned, their children
to be slurred at, and then to be told that they were going to
be killed if they didn't pay Bitcoin ransom. So, thank you for
that effort.
Let's go to another evil company, Kochava. Kochava is one
of these data brokers that you are going after, right?
Ms. Khan. That's right.
Mr. Gaetz. The American people should know that Kochava
geolocates where people go to church and then they sell that
data to commercial enterprises, right?
Ms. Khan. That's right.
Mr. Gaetz. That is really creepy, isn't it?
Ms. Khan. I believe most people would have that reaction,
yes.
Mr. Gaetz. I got onto the FBI Director yesterday for their
creepy FISA activity and now we have Kochava literally selling
to people, oh, well, this is a Baptist, this is a Methodist,
this was someone who goes to temple. Are you going to get these
people and stop them?
Ms. Khan. So, we have a pending lawsuit. We filed it last
year. The court dismissed it. They gave us the opportunity to
refile. We just refiled an amended complaint. We think it's
urgent to act here because the types of stigmatization and
harms that can stem from being able to track and sell people's
sensitive geolocation information is just critical for us to be
addressing.
Mr. Gaetz. We didn't like it when the FBI was wanting to
infiltrate the Catholic churches and I don't know that I want
the data brokers to do the same. By the way, we have even seen
how the FBI is using the data brokers to do an end-run around
the Fourth Amendment. So, I really want to encourage your work
in this space, and I hope that your litigation against Kochava
is something that creates precedent.
You know what, there has been criticism of some of your
losses in court, but we as sophisticated lawyers know sometimes
that a motion to dismiss in an initial complaint can create a
pathway to an amended complaint to achieve relief. So, if the
laws are insufficient to stop data brokers from selling
information about where my constituents worship and if the laws
are insufficient to stop Ring from these activities, I really
hope you will work with us to change those laws.
All of Mr. Buck's points are really central to this because
if Congress is bought off, if people are just coming here to
beat you up over what email account you use or what trip you
have been on to Europe, I think it misses these things that are
far more central to the life that our constituents lead. Thank
you for your work.
Chair Jordan. I would just say worse than Kochava selling
it, is the FBI is probably buying it. That is the scariest
part.
Mr. Gaetz. Agree with both.
Chair Jordan. So, I appreciate--
Mr. Gaetz. Let's get a bill, Mr. Chair, to deal with those
data brokers.
Chair Jordan. We are working with the gentlelady who just
went right before you to do just that. That is something that I
this Committee can hopefully agree on.
I neglected to mention this earlier, Madam Chair. We have
been at this 1\1/2\ hours. If you need a break at any time,
just let us know. If not, we can keep going because we can get
up and leave, but you can't. So, you let us know if you need a
break. With that, if you are willing to keep going, we will go
to the gentlelady from Pennsylvania for five minutes.
Ms. Scanlon. Thank you. Chair Khan, I want to start by
thanking you and the FTC for your work to protect American
businesses and workers and consumers on issues ranging from
privacy concerns to deceptive business practices, to unwanted
telemarketing and robocalls, to fraud and financial
exploitation that targets seniors, service members, veterans,
and those in recovery from opioid disorder. Those are all
really important issues, and we hear from our constituents
regularly about all that.
You don't have an easy job. It is not made any easier when
bogus claims are levied against you in Congressional Hearings.
Every day some of our colleagues seem to be trying to prove the
legal maxim that if you don't have the law on your side, argue
the facts. If you don't have the facts either, just argue. So,
we appreciate your patience in responding to a lot of fact-free
questions.
I want to focus my questions on hospital consolidation and
the growing problem of private equity firms buying up hospitals
and healthcare groups. In the Philadelphia region in recent
years, we have had two major hospitals purchased by private
equity firms after which those firms mismanaged the healthcare
functions of the hospitals, stripping them of their assets, and
then either closing the hospitals or putting them up for sale.
This was Hahnemann Hospital in 2020, which was closed in
the middle of the COVID pandemic after a private equity-backed
real eState developer bought it. That left a gaping hole in our
front-line healthcare system in one of the poorest cities in
the country.
Then currently the Crozer Health system is teetering on the
verge of bankruptcy while hemorrhaging talented staff and
medical practices after a private equity owner stripped the
system of assets, undermined its relationships with medical
staff, and has reduced access to medical care, particularly
maternity care, emergency services, and behavioral healthcare.
The impact on our local healthcare system has been so
extreme. We have seen local Republican politicians calling for
government intervention in this private equity firm's hospital
business to prevent from closing or bankrupting the system and
its constituent parts.
We are also seeing this troubling national trend in which
private equity firms have embarked on a buying spree to scoop
up smaller healthcare groups. There was a revealing report from
the Petris Center at UC Berkeley and the Washington Center for
Equitable Growth detailing the trend of private equity firms
buying up multiple doctor groups in a city and then using that
consolidation to raise prices. So, we are really concerned
about this trend that is reducing access to healthcare and then
raising prices.
So, what is the FTC's response to the call for more
regulatory scrutiny over these transactions and how can it
increase oversight and enforcement activities to ensure that we
preserve market competitiveness in our healthcare system?
Ms. Khan. This is such an important issue, Congresswoman,
and we at the FTC, our team has done a fantastic job really
addressing hospital consolidation. In particular, in local
markets we've had a whole set of successes really spanning
hospitals trying to merge in ways that would have hurt
patients. Our staff was able to block that transaction and the
parties walked away.
I think you're absolutely right though that today we're
seeing different types of strategies including the incursion of
private equity. I recently met with some emergency medicine
physicians who had come from across the country who were
sharing how the incursion of private equity is really harming
quality of healthcare for people in very material ways. So,
that's something that's on our radar.
We're trying to figure out how do we update our tools to be
able to address this. We recently issued some proposed updates
to what's known as our Hart-Scott-Rodino Form. Sounds very
technical, but it's basically the information that parties have
to provide us when they're looking to make an acquisition.
Partly those changes would give us more insight into some of
the type of roll-up strategies that you're mentioning so that
we know on day one whether a private equity firm has this
history of roll-ups that should put us on high alert. So,
definitely something that we're looking at closely.
Ms. Scanlon. OK. I have got a couple more questions on that
same topic that I will save for the next round or submit to
you, but I did want to yield 30 seconds to Representative
Jayapal.
Ms. Jayapal. Thank you so much, Representative Scanlon.
I just wanted to say quickly before I ask my question that
I was not trying to attack the ethics of your ethics officer. I
was trying to point out the hypocrisy of those on the other
side who raised that you have conflict of interest and don't
mention the other issues that might exist there.
I just want to go to evil actors because there is one more
I really want to talk about, and that is tax preparation
companies. For years Intuit, the maker of TurboTax, flooded
consumers with ads promising free, free, free tax filing
services only to trick and trap them into paying, which is why
taxpayers pay $250 on average each year just for the privilege
of filing their taxes.
So, State Attorney Generals have won taxpayer's money from
Intuit and the FTC has also taken action. Can you just speak
about that?
Ms. Khan. Yes, absolutely. So, last year the FTC brought a
lawsuit against Intuit for those very types of deceptive
practices that are laid out in our complaint. That is still
pending, but I couldn't agree more that claims of something
being free but then ultimately not being so really hurts
people.
Mr. Gaetz. The gentlelady's time is expired.
The gentleman from Louisiana is recognized for five
minutes.
Mr. Johnson of Louisiana. Thank you, Mr. Chair.
Chair Khan, I'd like to begin with policies related to
diversity, equity, and inclusion, DEI, that you have instituted
at the FTC during your tenure.
Last month you implemented a so-called Equity Action Plan
that calls on the FTC's Bureau of Competition to, quote,
``update its case selection based on those two criteria.''
Allowing the bureau to wade into picking cases based on these
amorphous terms like equity is an idea that we believe is
fraught with problems.
You have also hired staff who have published articles on
the topic of, quote, ``antiracist antitrust.'' Can you explain
to the Committee what that means? What does that term mean?
Ms. Khan. Congressman, it's not a term that I've used. I
can say generally I know that there is a lot of worry that
concentrated economic power hurts everybody, all communities,
and that the FTC needs to be mindful to make sure that our work
is focused on the harm that is affecting everybody.
Mr. Johnson of Louisiana. Everybody, right? So antiracism
should not play a factor in competition and consumer protection
policies at the FTC, right?
Ms. Khan. Congressman, we bring our lawsuits based on the
law at and. We look at closely at where we--
Mr. Johnson of Louisiana. This is not one of the factors?
Antiracism is not going to be used under your watch, right?
Ms. Khan. There are instances in which Congress has asked
the FTC to look at whether particular communities are being
defrauded. In those instances, we follow what Congress has told
us to do, but otherwise we just follow the general laws, that's
correct.
Mr. Johnson of Louisiana. OK. A senior staffer at your FTC
recently attended an event, gave a speech, and discussed,
quote, ``applying a gender lens to antitrust,'' in which the
senior staffer praised a cross-agency equity team. Are you
applying a gender lens in the context of antitrust analysis
now?
Ms. Khan. To be honest, I'm not really sure what that
means.
Mr. Johnson of Louisiana. We aren't, either. I hope you are
not using it. OK. Is there a cross-agency equity team? Was she
accurate about that?
Ms. Khan. We have a lot of cross-agency teams. There are
teams that are focused on how you make the FTC a better place
to work, including by making sure that certain types of--
Mr. Johnson of Louisiana. OK. Equity is not in your
bailiwick now. You don't have a team dedicated to that,
correct?
Ms. Khan. We have a cross-agency team that's thinking about
how to make sure that the FTC is a good place--
Mr. Johnson of Louisiana. OK. She just overspoke. OK. I got
it, for time. Don't you think reorienting the FTC from
protecting consumers to protecting favored groups, that this
idea would run counter to what the FTC's mission is? Right? You
said it is to apply to everyone, right?
Ms. Khan. That's right.
Mr. Johnson of Louisiana. We shouldn't be injecting these--
I guess it is progressive policy initiatives that we are
concerned about. The FTC has a really important mission, and we
don't want you to get off course.
Last year on a party line vote FTC also expanded its
authority under Section 5 of the FTC Act well beyond what any
previous FTC has done over the last 40 years. In a November
2022 policy statement that power was expanded to unfair methods
of competition that is described as, quote, ``conduct that goes
beyond competition on the merits,'' and that, quote--here is
the key--``even when conduct is not facially unfair, it may
violate Section 5.''
Following that decision Former Commissioner Christine
Wilson stated--this is what she said, quote, ``The Commission
has now created the authority to summarily condemn essentially
any business it finds distasteful.''
That is an extraordinary power. It is very concerning
because unfair is an amorphous and very subjective term by
nature. Are you using Section 5 authority to determine what is
unfair even if it is not facially unfair, whatever that means?
Ms. Khan. Congressman, we look very closely at the text of
the statutes that Congress wrote. The text of the FTC Act
instructs us to prohibit unfair methods of competition. We have
to take those words seriously. When putting together that
policy statement our team looked closely at decades of case law
to try to understand how have courts interpreted what this
means, and the policy statement reflects that.
Mr. Johnson of Louisiana. OK. Really quickly, there is an
example recently--I believe you are in the process of ending
noncompete agreements as an unfair method of competition. That
decision could go into effect next year, is that right?
Ms. Khan. We got 24,000 comments on the proposal. We're
reviewing them and determining how to move forward.
Mr. Johnson of Louisiana. Would you favor a blanket ban on
all noncompete agreements? Is that your position?
Ms. Khan. So, the proposal bans the vast majority of
noncompetes with a few exceptions, one of which is noncompetes
that are included as part of the sale of a business.
Mr. Johnson of Louisiana. OK. Let me ask you a question:
Have you ever run or worked in a small business?
Ms. Khan. I personally have not.
Mr. Johnson of Louisiana. Yes. So, do you think it is
reasonable for entrepreneurs and small businesses who have
spent considerable time and money developing practices to
better compete against their rivals to find your ban on
noncompete agreements unfair?
Ms. Khan. We'll be eager to hear from them. I know we've
gotten a lot of input. The other thing I'll say we hear from
small businesses is that noncompetes make it difficult for them
to compete because if they're trying to enter a market and
compete with some of the big guys, but the big guys have locked
up all the workers through noncompetes, that hurts the small
businesses. So, we really have heard multiple views on this
issue.
Mr. Johnson of Louisiana. I am out of time. I yield back.
Chair Jordan. The gentleman yields back.
The gentleman from Colorado is recognized.
Mr. Neguse. Thank you, Mr. Chair.
Beware of that profound enemy of the free enterprise system
who pays lip service to free competition but labels every
antitrust prosecution as a persecution. Those words were
uttered by President Franklin Delano Roosevelt 90 years ago.
I have listened to most of today's hearing, Madam Chair,
and of course we are grateful that you are here today. I have
listened to many of the criticisms that have been made by my
colleagues of your leadership at the FTC on the other side of
the aisle. Not all my colleagues, but most of them. The vast
majority of these criticisms have nothing to do with your
ethics or your integrity or your approach to the job and
everything to do with corporate power. The reality is that you
have pursued your duties as the Chair of the FTC in a way that
puts the best interests of the consumers first. That is a new
approach at the FTC.
I don't want to belabor the point because I have some
substantive questions for you, but I will ask for unanimous
consent later at the conclusion of my remarks and our colloquy
here for an article in The Wall Street Journal from June 30,
2023, the headline of which is ``Ethics Official Owned Meta
Stock While Recommending FTC Chair Recuse Herself From Meta
Case.''
We have spent a great deal of time hearing my colleagues
talk about this particular issue. I will just simply echo the
comments made by my colleague from Colorado and my friend Mr.
Buck who I thought very powerfully on this front.
Only in Washington, DC, can an individual, a regulator who
has no financial interest in the merger before her be accused
of an ethics violation by Members of Congress who own
financial--or have rather financial interests in the company
that has petitioned for that--or has rather proceeded with that
particular merger that is under review by the FTC on the basis
of an opinion that was issued that didn't conclude that there
would be a per se ethics violation for the commissioner in
question to proceed with considering the matter, but
nonetheless opined that there would be an appearance of
impropriety and of course that individual having a financial
interest in the underlying--in the company that was involved in
the merger.
I am not commenting. I agree with Ms. Jayapal on the
propriety of the decisions made by the ethics individual or the
Ethics Department more broadly. I am simply opining on the
State of affairs in Washington, DC. Because for years we have
had FTC commissioners who had real conflicts of interest. You
didn't have any financial interest in Meta, right?
Ms. Khan. That's correct.
Mr. Neguse. You never worked for Meta?
Ms. Khan. That's correct.
Mr. Neguse. The basis as I understand it for the objections
by many of my colleagues and others is that you have a certain
view when it comes to putting consumers first and ensuring that
monopolistic power does not reign supreme in our country. I
just think it is unfortunate that some of my colleagues have
taken that approach.
I will say for my part I am grateful for the work that you
have done at the department. I also am grateful for the work
that your partners and of course other antitrust enforcement
regulators and Assistant Attorney General Kanter has done over
the course of the last several years.
We, as you know, passed a bill on a bipartisan basis last
year. It was my bill, The Merger Filing Fee Modernization Act,
which I believe is going to strengthen your efforts and your
ability and the efforts of your hardworking workforce within
the FTC by changing the fee schedule for mergers, actually
decreasing the fees for smaller mergers, but increasing the
fees proportionately for billion dollar transactions and giving
you the resources that you need to fight for consumers on
behalf of the American public.
I wonder if you might talk a bit about that particular
bill, its implementation, and the impact it will have on agency
resources.
Ms. Khan. Thanks for the question and thanks for your
effort leading that bill. It was a much overdue effort to
update the filing fees. As you noted, make it clear that for
larger transactions there is a higher fee; for smaller
transactions a lower fee. We, in part, rely on those fees to be
able to fund our enforcement and so that's absolutely going to
be making a difference.
Mr. Neguse. Well, as I have said, I am grateful for the
approach that you all are taking. I was proud to work on that
bill with Representative Buck who has been a champion on these
issues, among other colleagues of mine on both sides of the
aisle. I think we look forward to continuing our work with you,
Madam Chair, for years to come on this front.
With that, I will yield back.
Chair Jordan. The gentleman yields back.
The gentleman from Kentucky is recognized.
Mr. Massie. I thank the Chair.
My constituents aren't contacting me worried about mergers
between tech companies or that sort of thing, but one of the
things I have been contacted about multiple times is the small
independent grocers feel like they are--monopolistic practice
is being used against them. Mr. Correa and I sent a bipartisan
letter to you asking for an update because on November 29,
2021; this is 17 months ago, the FTC ordered nine large
retailers, wholesalers, and consumer goods suppliers to provide
detailed information to help you study the causes behind
ongoing supply chain disruptions.
I appreciate you being willing to give us briefing, but can
you brief us today? Like what have you found and are you going
to be able to help these folks who are complaining about they
can't get products or there is discriminatory pricing not based
on quantity, but based on other things, or different package
sizes? What can you tell us here today?
Ms. Khan. Yes, this is such an important issue. We've heard
from those independent folks as well and it's partly what
informed our decision to launch this study. We're moving as
expeditiously as we can. As you can imagine, sometimes firms
don't have an incentive to give us all the information we need
as quickly as we need it, but we are moving ahead full speed
and happy to be providing you with the nonpublic briefing to
share what we've found so far. We'll be looking to make our
findings public as soon as we can.
Mr. Massie. I hope that is soon. It has been 17 months
since you asked them to give the information. I understand it
takes them a while to get it to you, but I would hope we could
get that very soon.
Another issue that concerns many of us are these so-called
preconsummation warning letters. On August 3, 2021, FTC
announced that it would send warning letters in connection with
transactions it cannot fully investigate with the time provided
by the statute before the deal closes.
Now, why should people trying to do regular business be
punished because it is taking you too long to do your job? How
many of these so-called pre-consummation warning letters have
been sent by the FTC?
Ms. Khan. So, the statute gives us only 30 days to look at
a deal to determine whether we need to investigate it further.
As deals have become more complex, that can be a very, very,
very tight timeline. We have heard from some businesses that if
we don't act within that 30-day period, the takeaway for them
is that there are no issues and there are no concerns.
So, we thought it was important to put business on notice,
to provide them clarity and transparency that if there is a
deal that we think raised concerns, but we weren't able to act
within the 30 days, that we're putting them on notice about
that again to make sure that the market has clarity on it.
Mr. Massie. Commissioner Phillips publicly suggested that
within the first six months of this practice over 50 letters
were sent and raised the question of whether any of those
investigations actually remained open and whether this approach
was simply a tactic to scare business. I am worried that
whether it is a tactic or not that is the effect that it is
having. It is having a chilling effect. Then when you issue one
of these letters and then you never tell them whether the case
is closed or not kind of without doing anything, you have
stopped transactions that would be helpful to Americans.
I want to now yield back the remainder of my time to Chair
Jordan.
Chair Jordan. I appreciate the gentleman yielding.
When the FTC attorney deposing Mr. Roque asked him to
confirm that quote, ``no one from the FTC directed you to reach
a particular conclusion about Twitter's program.'' He explained
to the contrary.
There were suggestions of what they would expect the
outcome to be. He testified that the FTC communicated to Ernst
& Young--again Ernst & Young is the independent assessor, the
fact finder that the FTC selected and made Twitter pay for--
that he communicated to Ernst & Young that, quote, ``Ernst &
Young under all circumstances will be conducting and issuing a
report on behalf of the FTC order,'' and was very adamant about
this is absolutely what you will do and this is going to occur
and you will produce a report at the end of the day. The FTC
was so adamant. Ernst & Young leaders feared that the FTC would
take exception of they chose to withdraw from the case.
So, on the one hand you are harassing Twitter. Then you are
saying to the guy we have selected, the entity we have
selected, Ernst & Young, the accountant we have selected to be
the fact finder, you better find what we want. If you try to
get out of it, we are going to retaliate against you. That is
frightening. We talk about the weaponization of government?
This from the same agency that said tell us all the journalists
you are talking to? That is what we are concerned about, Ms.
Khan. That is what has to change.
You can comment if you want, but I am reading from the
motion filed today in court. It is amazing to me you don't even
know this guy, you don't even know who this person is and your
lawyers deposed him. He is the guy that you have set up as the
fact finder and you didn't know who he was. Did you sign off on
any of those 12 letters sent to Twitter in that 10-week
timeframe?
Ms. Khan. Congressman, we're fortunate to have a lot of
work underway. A lot of this work is delegated to the front-
line staff that are able to move quickly and nimbly to make
sure--
Chair Jordan. Yes, but you are in front of Congress today.
You knew you were going to get questions about this. The idea
you don't know this, I find amazing.
Ms. Khan. It sounds like it was a late-breaking development
and a filing this morning. It's not something that's on my
radar. I'd be reluctant to weigh in on it in this setting
without looking more closely at it. Happy to take questions for
the record on it and engage later.
Chair Jordan. Not on your radar that you told--based on the
testimony of this guy that he felt there would be retaliation
if Ernst & Young tried to get out of the agreement? Wow.
Mr. Massie. I yield back.
Chair Jordan. The gentleman yields back.
I now recognize the gentlelady from Pennsylvania for five
minutes.
Ms. Dean. Thank you. Before my five minutes I ask unanimous
consent to enter into the record what Mr. Neguse had hoped to
enter: ``Ethics Official Owned Meta Stock While Recommending
FTC Chair Recuse Herself From Meta Case.''
Chair Jordan. Without objection.
Ms. Dean. Thank you. Thank you, Mr. Chair.
Thank you, Chair Khan, for being here, for speaking with us
today about the important work that FTC does to safeguard
consumers and crack down on companies that would exploit them.
I come from a perspective as a mother, as a grandmother. I care
about exploitation of seniors, children, businesses, and
consumers generally.
In your written testimony you explained that FTC works to
protect privacy and data security, fight fraud, including fraud
related to opioid recovery, and ensure that domestic
manufacturers and small businesses have a chance to compete
fairly. Somehow Republicans are using this time in other ways.
I apologize I am late to the hearing today, but I am pretty
sure I am glad I missed some of what happened. I was in another
hearing with Secretary Kerry on the climate crisis, so forgive
me for coming late.
I wanted to ask you about the issue around opioid addiction
and abuse and what FTC is doing. I know that FTC recently
returned $60 million to people suffering from opioid addiction.
I know you know, as well I, that the crisis, the health crisis,
public health crisis in this country around the flood of
opioids and opioid addiction is grave. A hundred and ten
thousand people died last year of overdose. That is 300 people
a day.
Can you tell us about your work, FTC's work to try to
protect consumers, maybe this case, the $60 million case with
Reckitt--I don't know how to say that. Can you tell us about
your work in that area?
Ms. Khan. Happy to. When we were--this is a newer authority
that Congress gave us, and I've been pleased that we have been
able to quickly put it into action. We brought a set of
lawsuits using this authority to make sure that if companies
are deceiving potential patients of opioids recovery
facilities, that we are acting quickly to prevent that
deception.
We brought a case against a firm called R360 because we
found that they were engaging in some of these deceptive
practices in ways that were harming opioid recovery patients.
We recently brought another action that also noted that
deception around tobacco addiction recovery is also illegal
under the statutory authority.
So, we are working to make sure if people are being
deceived in ways that are illegal under this authority, we are
acting and we are getting the money back.
Ms. Dean. I thank you for that work. I hope you will
continue in a robust way. Full disclosure, I have a son in
long-term recovery, 10 years in recovery, from opioid
addiction. We have lost too many others to this problem, and
the deceptive practices are so egregious that it is very
upsetting.
I wanted to move to--I have some time--I do; good--pharmacy
benefit managers. They operate behind the scenes. Consumers
don't really know what they are all about. They are a middleman
in the drug market and determine patients' access to
medications as well as the prices consumers pay.
In this role, PBMs have the power to raise prices and are
part of the reason that consumers pay 20 percent more than they
should for generic drugs. Can you speak to what FTC is doing
around the issue of PBMs and disclosure to consumers and
cracking down on the price hikes?
Ms. Khan. You are absolutely right that these firms are
oftentimes behind the scenes, so people are not directly
interacting with them. Oftentimes, their decisions are
determining what medicines make it onto what is known as the
formulary.
Unfortunately, we have heard reports that suggest that
rebates between the drug manufacturers and the PBMs may be
keeping lower cost generics off the formularies.
So, what that means in practice is there is a lower-cost
generic out there, but when patients are going to the pharmacy,
they are not actually able to get it. They are having to pay
more for the branded drug. So, we have said in our policy
statement we are very concerned about that and are looking at
it.
Ms. Dean. Yes, how can we interrupt that, and FTC have some
rulemaking, some effectiveness in interrupting that blockage of
information to the consumer?
Ms. Khan. So, we are looking closely at whether there may
be violations of the FTC acts. The Robinson-Patman Act also
prohibits certain types of kickbacks, I believe under 2(c) of
the Robinson-Patman Act. So, we are really laying out all our
authorities and making sure we are using them to address these
issues.
Because oftentimes we hear from insulin patients about how
they haven't been able to afford lifesaving medicine,
potentially because some of these tactics. So, we recognize the
urgency of this work.
Ms. Dean. Again, on behalf of consumers, seniors, and kids
out there, thank you for your work and the work of your entire
team. I yield back.
Chair Jordan. The gentleman from Arizona is recognized.
Mr. Biggs. Thanks, Mr. Chair.
Thank you for being here today. I will say I wrote down
something you said, I think I got the quote exactly right. I
wrote it down because not only was it substantively
meritorious, but also it was alliterative, ``People's privacy
is paramount.'' If only the FBI leadership believed and acted
that same way, I would be happy.
I want to ask you first about the EU's Digital Markets Act.
You previously commented and opined in response to Mr. Cline's
questioning. He asked you how much spin, I think you said you
don't know. I am wondering how many employees or personnel are
working on the EU Digital Markets Act.
Ms. Khan. So, my understanding is we currently have one
employee that is detailed to Brussels. These details are
routine, that have gone on for many years. They help improve
coordination among agencies for us to better understand--
Mr. Biggs. Is that employee working to help implement the
EU Digital Marketing Act, or are they just observing? What is
their role there?
Ms. Khan. So, as a general matter, when we do these
details, they are focused on antitrust enforcement, enforcement
of the competition laws.
Mr. Biggs. This is in Europe, though. This is
implementation of a new law.
Ms. Khan. So, these--
Mr. Biggs. So, how does that impact antitrust law in the
United States of America?
Ms. Khan. So, these laws, as you noted, govern Europe. If
the European Commission is working on implementing them, that
is work that they are doing. Our work is focused on enforcing
the U.S. laws, these types of details across agencies--
Mr. Biggs. Right, but that begs the question, and I am
looking for--I will move on because we always--the five-minute
format is ridiculously absurd. We can't get a full answer or
full question.
So, I am hoping that maybe you or your team will respond
more fulsomely as to why we have someone there, even observing
the implementation of an EU law that is not here, unless you
are intending to support something like that here.
Are you familiar with someone named Rebecca Kelly
Slaughter?
Ms. Khan. Excuse me?
Mr. Biggs. Are you familiar with someone named Rebecca--
Ms. Khan. She is my colleague.
Mr. Biggs. Yes, right there.
Ms. Khan. She is here.
Mr. Biggs. So, I have a quote from her, interesting. We are
glad you are here. She has called for an equity, inclusion, and
antiracist agenda in the antitrust enforcement, yet antitrust
enforcement typically is focused on the consumer welfare
standard, right?
So, do you agree with Ms. Slaughter, Commissioner
Slaughter's call for equity, inclusion, antiracist approach to
antitrust enforcement?
Ms. Khan. So, let me say, first, it is just such a huge
privilege to serve on the Commission alongside Commissioner
Slaughter. She has thought so hard about how we make using all
our tools--
Mr. Biggs. That is beautiful. We only have five minutes.
Send me a letter telling me how glad you are, please, but
please respond to my question.
Ms. Khan. She has thought an enormous amount of these
issues and I won't claim to speak for her. The way I--
Mr. Biggs. I am not asking you to speak for her. I am
asking whether you agree that this is the appropriate approach
and when it is a de facto departure from the consumer welfare
standard.
Ms. Khan. So, we enforce the laws that Congress charged us
with. That includes prohibitions on unfair methods of
competition--
Mr. Biggs. So, not to interrupt, but to interrupt, you are
not answering my question. My question is really specific. Do
you support and agree with this new approach--which is what it
would, because it would be a departure from the consumer
welfare standard--do you agree with Ms. Slaughter's call for
equity, inclusion, and antiracist as a basis to examine
antitrust violations?
Ms. Khan. So, again, we examine antitrust violations under
the laws that Congress wrote.
Mr. Biggs. Can you name a single law dealing with antitrust
that obviates the consumer welfare standard and replaces it
with an equity, inclusion, and antiracist standard? Any
statute?
Ms. Khan. The statute--
Mr. Biggs. Federal statute.
Ms. Khan. The statutes are worded broadly. We look closely
at the text of them, as well as any case law.
Mr. Biggs. Can you give me one that would facilitate
obviating the consumer welfare standard and replacing it with
the equity, inclusion, and antiracist standard?
Ms. Khan. So, Congressman, look, you are right, there
aren't cases on these specific questions. I will say, when
Congress was passing the antimonopoly laws, they were doing so
because they were worried that concentrations of economic power
hurt everybody. That is the mandate we have.
Mr. Biggs. That is right. That is right. They--but that is
from that point of view how the consumer welfare standard
developed and evolved. Now this, if you were take the equity,
inclusion, antiracist agenda and use that as your new standard,
you would have moved away from statutory and case law and tried
to impose a new standard.
That is the point I am trying to make, and that is the
point you are not responding to. I would ask that maybe you, or
Ms. Slaughter even, whatever, would respond in the future so we
have a chance to get the bottom of that.
Appreciate you being here. Thank you. I yield back.
Chair Jordan. The gentleman yields back. The gentleman from
Maryland is recognized.
Mr. Ivey. Thank you, Mr. Chair. I do want to start by
commending Congressmen Buck and Gaetz for their comments
earlier today. I was pleasantly surprised to hear the
affirmative comments they made with respect to the FTC, but
also legislation they are working on with Ms. Jayapal that I
think is important and critical legislation that could be very
useful.
I kind of note that we haven't had hearings on legislation
like that. We have had a lot of hearings for the weaponization
issues and a lot of hearings trying to attack the Biden
Administration in various ways. We haven't had any hearings on
affirmative legislation that would have an impact on people in
these markets.
I am on the Antitrust Subcommittee, and I think we have had
two hearings there. We had one Mr. Massie put together that
dealt with agriculture issues, I think it was meatpacking in
small entities.
It wasn't explicitly an antitrust hearing. It just so
happened that the witnesses at the table noted that the big
four companies that are dominating that industry are the ones
that are crushing small farmers and running them out of
business and increasing prices. I requested at the hearing some
sort of approach that would try and address that concern, but
nothing has come back yet.
I would note this too, we have got matters pending in the
United States here before your commission or Department of
Justice. It has been mentioned today already the PBMs,
Ticketmaster, JetBlue, Kroger Albertsons merger, and the
Microsoft matter that was handled yesterday.
The Subcommittee on Antitrust has had no hearings on any of
those issues whatsoever. So, I know this an oversight hearing
with respect to the FTC, but it might make sense if we would
take a moment and have a little oversight for ourselves on what
is going on here on the Subcommittee.
A few minutes ago, it was raised that--about a subpoena
that the FTC had issued. I guess the comment was that it was
over-broad.
I did want to raise this as well, the Judiciary Committee
on May 25, 2023, sent a document demand to the Department of
Justice that demanded, and I am quoting,
All documents and communications between or among the
Department of Justice and the Internal Revenue Service
referring or relating to any investigations involving both the
Department of Justice and Internal Revenue Service from May 1,
2023, to the present.
Now, we will set aside for a fact for a moment that this
would include grand jury materials potentially, which of course
they can't turn over based on a letter like this, even from
Congress.
If we are going to throw rocks, let's make sure we are not
in the glass house. Because that is beyond over-broad. I think
it is--and this isn't, I just picked one out of many, but
there's a lot of requests that this Committee has sent out to
the administration, and in some instances to private companies,
depending on whether they are on the good side of the
Republicans or not.
I think we should be very careful in making sure we are
using the power of the Committee and the House of
Representatives in an appropriate way, just like they are
asking the FTC to do.
Then I did want to close with this point. That is with
respect to the recusal issue. That has been discussed quite a
bit. I think it has been addressed and Judge Boasberg's opinion
I thought made it crystal clear why you didn't need to recuse
yourself. In fact, he said in judging the motions that had
filed to him, that it wasn't necessary or even appropriate.
At the same time, this Committee again is ignoring one of
the most obvious issues with respect to recusal ethics, and
that is with respect to the Supreme Court.
We had 35 Members send a letter to the speaker and to the
Committee Chair raising the issues, and we have all heard of
them. Justice Thomas, and you know, he has got billionaires
buying property from his mother and taking him on yacht trips
and the like. Justice Alito had similar sorts of issues.
We sent a letter to both the speaker and the Committee
Chair asking to have hearings, that we should take a look at
code of conduct for the Supreme Court justices. That we should
consider whether there should be rules in place with respect to
recusal for Members of Congress.
To the best of my knowledge, there has been no response to
this letter. More importantly, no steps that have been taken to
try and address the issues that have been made very obvious by
the conduct of Justice Thomas and Justice Alito. That is just
the beginning.
So, I would move for unanimous consent to have an op-ed
from Jesse Wegman, ``Does Justice Alito Hear Himself?'' and
then Daniel Boguslaw, ``Samuel Alito's Wife Leased Land to an
Oil and Gas Firm While the Justice Fought the EPA.''
Then the letter that is dated April 17 to Honorable Kevin
McCarthy and Honorable Jim Jordan, and it is from 35-plus
Members of the House. I would ask that all these be made part
of the record.
Chair Jordan. Without objection. The gentleman from
California--the gentleman yields back. The gentleman from
California is recognized.
Mr. McClintock. Ms. Khan, there is a The Wall Street
Journal column written by Christine Wilson. She resigned from
the FTC because of a range of concerns over how you discharge
your duties. What caught my attention was the censoring of her
dissent in the Meta acquisition case.
Severe disagreements around here are par for the course,
and we go to great lengths every day on this Committee to
demonstrate that. We sort out our differences by freely
exchanging our views, confident that this process will separate
truth from lies, wisdom from folly. A free society depends on
people knowing the difference for themselves. Censoring speech
is utterly destructive of this process.
Can you explain why Commissioner Wilson's dissent
criticizing your conduct was censored?
Ms. Khan. So, Congressman, I couldn't agree more that this
type of debate and discussion is critical. Congress designed
the FTC as a multimember commission, and we really enjoy
internally those discussions and debates.
Mr. McClintock. Well, obviously not, because her comments
were, in her dissent, were censored. So, why was that? How do
you explain that?
Ms. Khan. So, the way the Commission procedures work is
that I was walled off from those decisions. As the majority of
the Commission explained, they were identifying nonpublic
information relating to staff analysis and material protected
by deliberative process that we have longstanding FTC policy,
adopted during the Reagan Administration, that says we don't
disclose that type of analysis because we don't want to chill--
Mr. McClintock. This was specific to criticism of you. Did
you have any discussions with your colleagues over this?
Ms. Khan. No, again, I was totally walled off from the
proceeding.
Mr. McClintock. What do you see as the role of government
in determining what is misinformation or, for that matter, hate
speech?
Ms. Khan. The FTC is focused on deceptive advertising, so I
guess, if a company says something is made in America, but it
is actually made in China, that from our perspective is fraud
and deceptive--
Mr. McClintock. Well, you were discussing Twitter just
about an hour ago. Do you see the government having any role in
determining what is misinformation or what is hate speech?
Ms. Khan. We are not involved with that. Again, we are
focused on deceptive advertising, like Made in USA fraud. That
is really what we are focused on.
Mr. McClintock. Let me ask you, what is your view of
capitalism?
Ms. Khan. Excuse me?
Mr. McClintock. What is your view of capitalism?
Ms. Khan. The FTC's job it to promote competition and--
Mr. McClintock. Oh, no, what is your view of capitalism?
Ms. Khan. Could you explain what you mean by that term?
Mr. McClintock. Good system, bad system? What do you say is
its strengths and weaknesses?
Ms. Khan. So, I think open, competitive, robust, resilient
markets are critical to America's economic success. The FTC has
the honor of playing a really important role in ensuring that
our markets are open and competitive and position America to
compete globally.
Mr. McClintock. Of course, the beauty of a capitalist
system is the fact that consumers everyday vote with every
dollar they spend on what the economy will produce and what
prices they are willing to pay. Do you see a role in government
in interposing its judgment for theirs?
Ms. Khan. The role of the FTC is really one of a referee.
We believe in open, competitive markets, but for these markets
to deliver good outcomes, we need to make sure the companies
are playing by the rules of fair competition. That is the job
that Congress gave the FTC, and that is what we do.
Mr. McClintock. I think you go much farther than that. I
certainly hope that you will take to heart the economic
criticisms that you have heard today. Mergers, for example,
generally occur when companies determine that it is going to
improve their efficiency, productivity, and hence their ability
to serve their consumers. That grows the economy and it helps
consumers.
I would urge you to be very careful, and your colleagues,
very careful and very humble with your powers. Because when
your decisions harm the economy, you are also harming your
administration. Now, the average consumer might not follow the
day-to-day decisions of your commission, but they know how they
are doing in their own lives.
I will yield the balance of my time to the Chair.
Chair Jordan. I will waive that. I appreciate the gentleman
yielding, but--
Mr. McClintock. Then I will yield back.
Chair Jordan. Thank you. The gentleman yields back. The
gentlelady from North Carolina, OK, North Carolina is
recognized for five minutes. Thank you, Tom.
Ms. Ross. Thank you very much, Mr. Chair, and thank you,
Chair Khan, for joining us today.
Also, thank you for mentioning your work on PBM reform in
your opening statement. This is a very important issue for our
healthcare industry, and as you pointed out, for the health of
our constituents.
This Congress I have been working with a bipartisan
coalition of lawmakers to address abusive and exclusionary
pricing practices by pharmacy benefit managers, or PBMs. Access
to affordable prescription drugs is a critical issue for all
Americans. I am hopeful that the FTC will take substantive
steps to address the ways in which PBMs take advantage of
patients and providers in their pricing strategies.
I know that you got a general question from Congresswoman
Dean a little bit earlier, but I want to be much more specific.
The FTC has been working on a 6(b) study since June 2022. When
do you anticipate completing that study, and do you have any
interim conclusions or findings that you can share with us
today?
Ms. Khan. Thanks, Congresswoman. As I noted, we recognize
very deeply the urgency of this work because it potentially
means that patients are not getting access to affordable
medicines, and that, as we all know, can have life-or-death
consequences. So, we are moving with great haste.
We are dependent on the companies to provide us information
in a timely way. We are trying to drive that forward as much as
we can in general. Historically some of these studies at the
agency have taken 4-5 years. My goal is for us to be able to
move more expeditiously.
I should also note that if, as a matter of course during
this inquiry we instead identified practices that we would
determine are unlawful, nothing would stop us from being able
to focus on some of those law violations and proceed on the
enforcement track instead.
Ms. Ross. Great. Then also, the FTC recently expanded the
scope of its PBM investigation to include group purchasing
organizations, or GPOs, that have opened in recent years. How
does the FTC believe that PBMs might be using these GPOs, and
what kind of harm could they have in the market for affordable
drugs?
Ms. Khan. So, GPOs are another one of these kinds of
entities that are not visible to consumers but play a really
central middleman role in the market. We have sent out these
additional requests because we want to make sure that we are
getting a full 360 view of what is happening with these
practices.
I should also note we have all read stories about major
shortages of critical drugs. We have also received letters and
inputs suggesting that the role of the GPOs may also be
contributing to some of those shortages of essential medicines,
so that is something that is on our radar as well.
Ms. Ross. Great. Given that the three large PBMs are
currently--they currently control 80 percent of the market, I
am interested in how consolidation within the PBM industry
affects patient access and costs.
In addition to this PBM consolidation, the largest drug
plan sponsors also own their own PBMs. So, we are seeing a
great deal of vertical integration as well.
We know that PBMs set out to pocket costs based on full,
undiscounted list prices of drugs, so patients don't see a lot
of the PBM discounts at the pharmacy counter. We know that some
health-plan-owned PBMs require patients to fill prescriptions
only at certain pharmacies or providers, which reduces access.
How are you seeing this consolidation and vertical
integration impacting patients?
Ms. Khan. Yes, it is such a great point. This is one of the
issues on which we are routinely hearing from people. We opened
a docket to kind of collect input around what people are seeing
about PBM practices.
We received thousands of patients--thousands of public
comments, many of them from patients who were concerned that
some of these decisions about which medicines the PBMs are
putting on the formulary or not putting on is not being driven
by what is best for the patient but is instead potentially
being driven by which is going to give the PBM the highest
rebate.
So, I think that could be an instance where there is a
conflict of interest between what is in the PBM's own interest
and what is best for patients. So, that is something that we
have heard a lot about.
Ms. Ross. Final quick question, do you see a role for
Congress in this area as well, not just what your agency does?
Ms. Khan. Absolutely. This is such an urgent problem
relating to unaffordable drug prices for Americans that I think
it is an all-hands-on-deck moment.
Ms. Ross. Thank you. Mr. Chair, I yield back.
Chair Jordan. The gentlelady yields back. The gentleman
from Texas is recognized.
Mr. Roy. I thank the Chair. Ms. Khan, thanks for coming
here testify before the Committee.
Would you commit to me to provide all updates necessary
with respect to the LIV Golf PGA Tour merger and all of youare
looking into whatever is occurring with that?
Ms. Khan. So, Congressman, I believe it is our partners at
the Justice Department that are looking at that.
Mr. Roy. The FTC is also having some look into what is
going on there, at least the news accounts I see. I would just
appreciate any updates from your office about that and the
concerns about it. I am going to yield the balance of my time
to the Chair.
Chair Jordan. Thank the gentleman for yielding.
Ms. Khan, earlier, and I believe the gentleman from Arizona
brought this up, you said people's privacy is paramount. I
couldn't agree more. As we talked earlier, I do think there is
bipartisan support to deal with that, this sweeping up of data
that happens, and scarier yet is FBI purchasing that data. So,
that is of paramount importance.
I would say the First Amendment is of paramount importance
too. Would you agree?
Ms. Khan. Absolutely.
Chair Jordan. Then the gentleman from California, Mr.
McClintock, asked you what is disinformation? You said you
don't really have an opinion on that, is that a fair assessment
of your answer?
Ms. Khan. As part of our job at the FTC, we are focused on
deception and fraud and that sort of thing.
Chair Jordan. Well, you wrote a couple years ago in a Law
Review article, ``Digital businesses such as Twitter disserve
their users by facilitating the spread of disinformation.''
What were you talking about there then, what is disinformation?
Ms. Khan. I am happy to take a closer look at the material
you are mentioning, but as part of our work at the FTC, we have
seen how fraud and scams can sometimes proliferate on these
social media websites. We have launched an inquiry to try to
understand why are some of these crypto scams really
proliferating on these sites and what can we be doing--
Chair Jordan. So, these are the first two sentences in the
introduction of the piece you wrote, again, just a couple years
ago. ``Digital businesses such as Twitter disserve their users
by facilitating the spread of disinformation.'' Who decides
what is disinformation?
Ms. Khan. From the FTC's perspective, it is deception.
Deception and fraud.
Chair Jordan. That is fine, you can keep using synonyms,
but I want to know who decides that it is deception, who
decides that it is fraud, who decides that it is
disinformation. In this case, you are talking about social
media companies and what gets posted on their platform. Who
decides what is disinformation, what isn't?
Ms. Khan. So, Congressman, again, at the FTC, we are
focused on fraud and deception. There is a legal standard about
what constitutes fraud. Again, this is about--
Chair Jordan. You didn't say fraud or deception, you said
disinformation. My concern is again, and it is probably the
third time I have talked about this, but the sustained attack
on Twitter when the ownership there changed and the platform
was committed to not taking down speech, not taking down posts,
allowing the sharing of information and not censoring.
We just had a major decision last week from a court in
Louisiana, Federal court in Louisiana, where they said the
government was in fact pressuring Big Tech companies to censor
and Big Tech companies willing to go along with it. Now, we
have a change there and you are going after the one company
that has changed how they are doing things.
That is what concerns me, particularly, in light of the
fact that you just wrote about this a few years ago saying this
is what goes on.
Ms. Khan. Congressman, I am glad to have the opportunity to
clarify some issues here. So, we at the FTC have no view on who
should or should not own a company. All we care about is that
the company is following the law. That is really what our focus
is--
Chair Jordan. We have covered that ground. I want to know
about disinformation and who decides what is disinformation.
You think the government should decide that?
Ms. Khan. Congressman, the way I see it is concentrations
of economic power including over speech platforms and
communication platform, that it is that concentrated power and
the ability to pick who gets heard, who doesn't get heard to
make these types of decisions, that I think is concerning to
all of us. The FTC's job is to be promoting--
Chair Jordan. You know what kind of speech was getting
censored? Do you know what the court said last week, what kind
of--have you read the opinion, by the way?
Ms. Khan. I have not. It did not concern the FTC.
Chair Jordan. You know what kind of speech was getting
censored, you know what the court said? Conservative speech.
Conservative speech as well as all--the suppression was
virtually all conservative. This is not Jim Jordan talking
about it is not Republicans on the Judiciary Committee talking.
This is the Federal judge who had the facts, 86 pages, the
facts, and laid out and put the facts and the law together in
his opinion, strong opinion, which said it was the conservative
speech that was getting censored and labeled as disinformation.
Ms. Khan. So, Congressman, I fully understand why, given
the extreme concentration of power over some of these speech
platforms, why people would be afraid and worried about
censorship. I couldn't agree more that when you have a handful
of people making decisions about what gets seen, what doesn't
get seen, who gets heard--
Chair Jordan. You think the remedy for that is for
government to decide what is disinformation and what is not?
Ms. Khan. Congressman, at the FTC, our job is to promote
competition. More competition means more people making these
decisions, and I think that can alleviate some of the concerns
about censorship that you are sharing.
Chair Jordan. The gentleman's time has expired. The Chair
now recognizes the--is Georgia? Or yes, OK. I didn't know who
had walked in first, or how the gentlelady from Georgia is
recognized for five minutes.
Ms. McBath. Thank you, Mr. Chair.
Good afternoon, Chair Khan, it is a pleasure to have you
before us today. I have read your testimony. Thank you for your
time and your testimony.
Ensuring that emerging American businesses have an
opportunity to grow and to thrive is essential for our economy,
and one of the most American of practices, so to speak. America
is a country that is built on the success of creative and
innovative ideas. The determination of grit of its people is so
vital, and the endless opportunities of its society.
For these reasons, we must do all that we can in our power
to support competition, as you have just mentioned, and fight
monopolies, which crush American opportunities. A robust
antitrust framework supports small businesses by helping to
ensure that they are not intimidated into conciliation.
It empowers the American people by allowing them freedom of
choice in the marketplace. A robust antitrust framework
strengthens American workers against monopolistic efforts to
lower wages and eliminate their benefits.
That is why it is so wonderful to have you here today.
Thank you so much for being here at the helm of FTC. You have
actually been a champion of enforcing America's antitrust and
competition laws for years, and America's economy is much
stronger for it.
In fact, the U.S. has the highest post-pandemic growth of
any Nation in the G7 and the lowest inflation, with a historic
low unemployment rate of 3.7 percent, and that must be noted
here today.
As I spoke on earlier, enforcement of antitrust laws helps
to promote fair competition across the United States economy
while protecting consumers and workers from deceptive and
unfair practices. Balancing competition and effective antitrust
enforcement are critical to protecting our consumers, our
workers, innovation, and economic equity in this country.
Over the past 20 years, the U.S. has seen consolidation
across all markets, whether it be in a nursing home industry,
tech industry, or agriculture industry. Can you please comment
on how this is applied in the context of large mergers that
affect smaller competitors in the marketplace?
Ms. Khan. So, Congresswoman, when we see mergers between
two large firms, especially if they are competing in the same
market, that can make it more difficult for newer entrants to
come into the market.
We have seen how entry barriers can be raised and
independent firms, small businesses can have a difficult time
really competing on a level playing field if the merger is
leading to market power that allows the merged firms to get
special types of terms or discriminatory benefits that are not
available to others.
Ms. McBath. Thank you. So, these past two terms, Congress
has actually been examining the role of Big Tech companies and
their exercise of market dominance, which has allowed them to
make a profit and to leverage their gatekeeper power over small
or new companies and competitors.
Can you talk about the steps that you are taking to ensure
smaller companies, especially in the tech marketplace, get a
fair chance to compete against bigger, more entrenched
companies?
Ms. Khan. So, the FTC has been looking closely at digital
markets since before I joined the Commission. One of the first
actions that we took when I joined was refiling the FTC's
amended complaint against Facebook, where the FTC is alleging
that Facebook's acquisitions of Instagram and WhatsApp were
anticompetitive and really helped Facebook maintain its
dominance in ways that locked out rivals. It really hurt
consumers at the end of the day.
We are continuing to look closely at mergers and
acquisitions to make sure that if we worry that these
acquisitions are similarly going to create dominance and allow
firms to maintain their monopoly, that we are acting swiftly
there.
Ms. McBath. So, under your tenure, FTC has endeavored to
restore meaningful antitrust law enforcement over the last two
years. In this process, the FTC has made some powerful enemies,
have you not? Yes, you have, I can answer that for you.
Ms. Khan. We hear from a lot of folks, yes.
Ms. McBath. So, isn't the lesson learned here that
antitrust agencies should trust vigorous competition and
antitrust enforcement to deliver innovation and better
services, rather than enabling entrenched gatekeepers to
continue growing through acquisition in markets?
Ms. Khan. Absolutely. I think America's history shows that
when we promote fair and open competition, that is what best
produces innovation and allows us to succeed.
Ms. McBath. Thank, and I am out of time.
Mr. Van Drew. [Presiding.] Thank you. I recognize the
gentleman from Wisconsin for five minutes.
Mr. Tiffany. Thank you very much. I am not going to take
five minutes; I am just going to take a real brief time here.
We heard some of the same pablum yesterday. I don't have a
question for the witness, but we heard some of the same stuff
from the FBI yesterday that boy, we respect the Constitution
and all the rest. Nonetheless, they are ending up censoring the
American people.
It was so interesting to hear yesterday when the Director
of the FBI was here, and he said, well, these companies work
within the free market. We can't change how they go about
operating.
When you have a Federal agency, whether it is the FBI or
the FTC, that comes calling at your front door, and they say
gosh maybe you should be doing things a little bit differently,
they pay attention.
I have used the example of the man who originated Facebook.
He said in a podcast in the last year that in regard to the
FBI, when they come calling, you are going to pay attention.
Censorship happens from there.
I hope that you are cognizant of that as you go about doing
your business.
Second thing that I would say is that we talked about
entrenched gatekeepers and stuff like that. The barriers to
entry that have been built here in Washington, DC, over the
last few decades are significant. I can go back to two major
bills that are over a decade old now, one being Obamacare, the
other one being Dodd-Frank.
We see probably the least entrepreneurship that has
happened in the healthcare and finance banking industries that
we have seen in decades because the barriers to entry are so
high. I sure hope that you will respect that.
That you, while building these regulations out here, while
passing laws as happened over a decade ago in regard to
Obamacare and Dodd-Frank, it has harmed the rest of America. It
has harmed entrepreneurs. It has harmed main street America.
When they no longer have a bank with their bank being
consolidated into something that is bigger.
So, you may say that boy, we are going to go after these
big companies. Well, hell, we created them here. I hope you
won't participate in creating additional barriers to entry so
that entrepreneurs cannot participate in the free-market
society that was built in the United States of America over the
last nearly 250 years.
I will yield back.
Mr. Van Drew. Thank you. A couple questions I had. I just
wanted, using a little bit of this time there. The gentleman
from Georgia mentioned that he thought you were being treated
unfairly, if you remember, at the beginning, that is about an
1\1/2\ hour ago, and differently because of your ethnicity and
because of your color.
Do you believe that is true?
Ms. Khan. Congressman, I am focused on really--
Mr. Van Drew. I know you are, but just--
Ms. Khan. Very diligently the questions you are asking, I--
Mr. Van Drew. I am just curious; do you believe that is
true? Because if you watch the hearing, I was offended by it,
to be honest with you. If you watch the hearing yesterday, we
gave a gentleman a pretty thorough raking over asking some
difficult questions.
I hope that you know it has nothing to do with ethnicity or
color. I hope you don't feel that way, and I was wondering if
you do. It's a yes-or-no--
Ms. Bush. A point of order.
Mr. Van Drew. Yes?
Ms. Bush. Mr. Chair, just wondering whose time we are using
right--
Mr. Van Drew. He yielded back his time to me.
Ms. Bush. OK.
Mr. Van Drew. He had time left over.
Ms. Bush. Thank you.
Mr. Van Drew. Mr. Tiffany. Yes, go ahead. Just give me a
yes or no, do you think you are being treated fairly?
Ms. Khan. It sounds like a robust debate among the
Committee about these issues and I defer to you all.
Mr. Van Drew. One of the things I would love to change is
that when we ask people to say yes or no, they would. It is so
hard when people come before us. I just wanted to say one other
thing too, and then we will move on.
Robocalls. I know you heard about them today. It is a
really big deal. You want to talk about a way that you are
affecting people's lives. They are sophisticated, they are
scary. People are getting in trouble because of them in
everything from social security to buying timeshares. It is a
really big problem.
I would love to, and I am going to speak to Mr. Correa, I
would love to work with him across the aisle, love to work with
whomever to do something about that issue.
I have other questions for you later, but at this point I
will recognize the gentlelady from Missouri.
Ms. Bush. Thank you. St. Louis and I are here today in
strong support of the rights of workers, of consumers, small
businesses, and the broader public to be free from corporate
greed that monopolizes our access to information and treats
employees and communities as expendable.
Thank you for being here, Chair Khan. I appreciate your
service as a staffer on this Committee, your groundbreaking
scholarship on antitrust law and antimonopoly issues, and your
record of accomplishments as FTC Chair.
The Commission has an important role to play in protecting
our economy from the harms caused by greedy, reckless
corporations that put profit and power over people. Look at Big
Tech, Big Pharma, Big Oil, and any other concentrated industry,
these companies and the profit-obsessed executives behind them
have abused their power for too long, and it is time that they
be held accountable.
So, we absolutely need to level the playing field for
workers and consumers. The FTC can and is trying to help under
your leadership, and I appreciate that, because it makes a real
difference in communities like mine.
For example, in recent years, FTC lawsuits have resulted in
more than $33 million provided to more than 178,000
Missourians. In 2020 alone, the FTC provided $8.6 million to
people in Missouri, including St. Louis.
That is real money for real people harmed by corporate
greed. It is food on the table, it is a roof over a head, it is
clothing for a child. Another example was the FTC's proposed
rule to ban noncompete agreements.
Chair Khan, as was brought up earlier, banning noncompete
agreements is estimated to raise wages by over $200 billion
each year and to close racial and gender wage gaps by up to 9.1
percent. Is that correct?
Ms. Khan. Congresswoman, as we laid out in our notice of
proposed rulemaking, those are some of the estimated effects,
yes.
Ms. Bush. Thank you. It is a lot of money in the pockets of
workers and Black and Brown people and women, in particular.
Can you explain specifically how banning noncompete agreements
means workers will get paid more?
Ms. Khan. So, what our staff did is they looked very
closely at the empirical evidence that has now surfaced in
light of the different State policies that we have seen.
What we have seen is that states that have limited
noncompetes are able to ensure that workers are moving around
more freely. Though, unfortunately, we still see that all too
often companies are still trying to include noncompetes.
What we have also seen is that being able to switch jobs,
being able to move freely between jobs and get better job
opportunities is a key mechanism that workers have to use to be
able to get higher wages and better employment opportunities.
When you freeze workers in place, when you lock them in
place through these noncompetes, that means that they are not
able to go across the street, even though the firm across the
street is offering them better wages or better working
conditions, and that is bad for workers.
Ms. Bush. Absolutely. Thank you, and that is a real impact
that will save lives. Republicans don't like this. The party
that is in the pocket of White supremacists and wealthy
corporations will talk a big game about fighting for everyday
people and then show up to Congress and do whatever their
corporate donors want them to do.
That is what these attacks, that is what this is about. So,
let me be clear. There is nothing unethical about standing up
for workers, consumers, and small businesses. There is nothing
unethical about enforcing the law against powerful and
destructive companies like Amazon, Meta, and Twitter. There is
nothing unethical about putting your principles into practice.
What is unethical is being apologists for the corporate
greed that is fleecing our communities. What is unethical is
claiming to care about workers, and then selling them out. That
is the real ethics scandal here, and we need not forget it.
The bottom line is that corporate monopolies are a recipe
for social destruction. Any lawmakers who claim to stand for
workers and consumers must advocate against dominance by large
private companies that care more about profit than people. We
need to aggressively enforce our antitrust laws for the
purposes Congress intended.
We also need to move beyond a digital economy dominated by
billionaire-owned for-profit companies.
Chair Khan, you have never tried to hide who you are or
what you believe, and I admire you for that. I thank you for
your leadership, and I look forward to working with you and
your agency on these critical issues.
Thank you, and I yield back.
Mr. Van Drew. [Presiding.] Thank you. I recognize the
gentleman from North Carolina, Mr. Bishop.
Mr. Bishop. Thank you, Mr. Chair.
Ms. Khan--is this working? Yes, I guess they hear it.
Someone pointed out to me that just this morning the FTC--well,
it was disclosed the FTC sent a civil investigative demand to
OpenAI. Are you familiar with that?
Ms. Khan. Congressman, this involves nonpublic information,
but if it has been publicly reported then it may be accurate. I
am hesitant to share anything nonpublic in this--
Mr. Bishop. It is on Twitter. It seems to be asking among
other things for whether ChatGPT or whatever other products
they would generate statements about persons. Can you explain
the gist of that or what is the regulatory authority of the FTC
that it is that civil investigative demand is being issued
under?
Ms. Khan. So, as a general matter, some of the concerns
that we are seeing in this AI space is that ChatGPT and some of
the other services are being fed a huge trove of data. There
are no checks on what type of data is being inserted into these
companies.
We have heard about reports where people's sensitive
information is showing up in response to an inquiry from
somebody else. We have heard about libel, defamatory
statements, flatly untrue things are emerging. That is the type
of fraud and deception that we are concerned about.
Mr. Bishop. So, as a general proposition, and you just said
something, you spoke to libel and slander or defamation issues.
I am going to come to that, because that is an issue of State
law as I understand it.
Is your regulatory reach there defined by the FTC act? Is
that the basis under which you guys explore, investigate that
stuff with a company like OpenAI?
Ms. Khan. So, it is absolutely true that we don't directly
address those things. We are focused on is their substantial
injury to people.
Mr. Bishop. Yes.
Ms. Khan. Injury can look like all sorts of things.
Mr. Bishop. So, like, and you were speaking earlier in
communication with the Chair or your colloquy with the Chair
about Twitter, the Twitter background of releasing private
information.
Was that also subject to your regulatory reach under the
FTC act because it was somehow deceptive? Or is there some
other statutory source that generally puts you guys in charge
of sensitive information about people?
Ms. Khan. Yes, it is the FTC act that prohibits unfair or
deceptive practices and unfair methods of competition. That is
primarily the authority we have used in these instances.
Mr. Bishop. OK, and that is interesting. Just for the
people in the public, the operative language of Section 5 that
you guys I think are using there and in the context of the
noncompete rule that you have come out with, it just says,
. . . unfair methods of competition in or affecting commerce
and unfair or deceptive acts or practices in or affecting
commerce are hereby declared unlawful.
Right, that is the language?
Ms. Khan. That is right.
Mr. Bishop. So that, it is not really very detailed. Let me
ask you for a minute about the noncompete rule. So, you guys
have this proposed rule you are seeking comments on.
Administrative process, then once those comments are reviewed,
you guys will decide, the FTC will decide whether to proceed
with a final rule. Is that the way it works basically?
Ms. Khan. That is correct.
Mr. Bishop. So, in that case, I litigated these types of
contracts in State law for 30 years, and in North Carolina. I
know California has a rule that absolutely bans them. There are
different renditions of law, some statutory, some made by the
courts over time in States all over the country, and there have
been for a long, long time.
So, what your rule would do would displace all that State
contract law in one fell swoop if it were made final, wouldn't
it?
Ms. Khan. It would create a new floor, yes.
Mr. Bishop. It would create a what?
Ms. Khan. Yes, it would be creating a new provision that
would be determining that these noncompetes are ruled unlawful.
Mr. Bishop. So, you would not only--and it would be per se.
I know some of the stuff stated in your notice of proposed
rulemaking that I glimpsed said it would be that you saw these
as inherently coercive or the product of unequal bargaining
power.
The rule would be per se, except for a very narrow
category, the overwhelming majority would be per se, even if
the people involved in those contracts wanted to make them,
right?
Ms. Khan. That is the proposal. We did ask as part of our
notice of proposed rulemaking some questions about whether
there are adjustments we should make.
Mr. Bishop. OK, and I don't want to get into the minor
details because we only got 30 seconds left. Let me just ask
you this, because if you take that example or many of the
others that have been talked about, you spoke a moment ago
about being concerned about concentrations of economic power. I
get that.
Isn't there a basis to be concerned about concentration of
legal power, lawmaking power? So, you got 30,000 State judges
have made those rules, you got 7,558 State legislators, you got
lots of Members of Congress, you got multiple chambers in
Congress.
The fact that you really as the bare majority on the FTC
could make such a ruling, isn't that something that Congress
should concerned about, how much power you wield?
Ms. Khan. So, we make these determinations pursuant to
authority that Congress has given us. When we promulgate rules
pursuant to the Administrative Procedure Act, there are a whole
set of procedural protections that go into play relating to the
comment periods that we have to use to get public input.
There are certain standards of review for judicial review.
There are so many checks as part of this process, and it is
really quite regular for administrative agencies to be engaging
in rulemaking.
Mr. Bishop. You get to say what is unfair, right?
Ms. Khan. So, interestingly, Congress, when passing the FTC
act, was having a debate. They said should we actually define,
should we list out in the statute all the practices that should
be unfair.
Congress determined businesses are so innovative, they will
find ways to do an end-run around any of the practices we list.
Let's allow the FTC to use their expertise to make sure that as
markets are evolving, as business trends are evolving, that
they can make sure that their statutory authority is keeping
pace.
So, this was a determination and decision that Congress
made to use that language, and we follow the text of the law.
Mr. Bishop. Thank you, ma'am, I wish had more time. Yield
back.
Mr. Van Drew. [Presiding.] I recognize the gentlewoman from
Vermont.
Ms. Balint. Thank you, Mr. Chair.
Before I begin my line of questioning, I just want to make
note of something. Our Republican colleagues have touched a few
times today on the words of a third-party auditor who was
deposed as part of the Twitter lawsuit.
I think it is really important to point out for the sake of
transparency that this deposition was filed last night, and
here we are talking about it today.
I believe in coincidence, I really do, but that is a pretty
lucky coincidence that a pretty--that evidence supposedly
providing the Republican accusations today was released in such
a timely manner. So, I think it is really important to make
note of that.
Chair Khan, thank you so much for being here. Thank you for
being here to the bitter end. I really appreciate your
testimony this morning.
I would like to touch on a extremely timely and
controversial issue, which is artificial intelligence.
Specifically, I would like your thoughts on generative AI and
competition.
It is tough to imagine online platforms gaining even more
power, but it seems that Big Tech firms who control their own
AI systems and access to cloud data are in a position to do
just that. I find that alarming, as do many of my constituents
back in Vermont.
So, what I would like to ask you is how could AI technology
lead to an even more consolidated internet landscape with even
few choices for consumers?
Ms. Khan. So, Congressman, let me say, first, these moments
of technological disruption, when you have these game-changing
technologies enter the market, these moments oftentimes provide
a lot of opportunity for disruption and for displacing some of
the existing incumbents and giants. So, there's always a chance
that will be the effect.
I think you're right that, with these technologies, we see
inputs required, required here that really favor dominance and
favor scale. So, you need huge amounts of compute; you need
access to huge amounts of data; the models.
Our staff recently published a blog post laying out what
some of these competition concerns could be, but I think you're
absolutely right that we all need to be very vigilant to make
sure that this potentially transformative technology is not
further consolidating market power in ways that could really
harm competition.
Ms. Balint. How would a firm use AI and cloud access to
illegally expand their market power? What would that look like?
Ms. Khan. So, I don't want to get into hypotheticals, but
the types of--as we lay out in the blog post--traditionally,
the types of concerns that you might have is if firms with
market power or conditioning access to one set of technologies
and critical inputs, on firms having to also buy other
services, those types of tying agreements, and especially when
they're having an exclusionary effect, can be concerning under
the antitrust laws.
Ms. Balint. Are you concerned about this issue in relation
to the digital markets?
Ms. Khan. In general, we're very concerned about
competition in digital markets, yes.
Ms. Balint. OK. In my last time here, I also wanted to
touch on another issue, which is dark patterns. Amazon Prime
has reached a point where it's practically impossible to avoid.
FTC recently took Amazon to task for using a series of digital
tricks or dark patterns to enroll people in Prime without their
consent or to prevent people from canceling their subscription.
This is something that I hear a lot from my constituents about.
Last year, the agency reported that, quote,
More and more companies are using digital dark patterns to
trick people into buying products and giving away their
personal information.
How common is it for online companies to use these dark
patterns?
Ms. Khan. Unfortunately, through our work, we've seen that
it is too common; that we see companies using these tricks. Our
staff published a report going into detail about the different
types of dark patterns that we see, which, in practice, end up
tricking or manipulating people into making choices that
they're not really seeking to make.
So, we want to make sure that we're fully grasping how
these dark patterns are working. We've been bringing onboard a
whole set of technologists that are able to kind of dig deep;
look under the hood; figure out what's really going on. So,
it's going to continue to be an area of focus for us.
Ms. Balint. Something that you said there really, really
struck me. It is, essentially, about taking away people's
choice. When you're not transparent about the ways in which
consumers are being entrapped into signing up for something or
not being able to cancel something, that is taking away their
ability to vote with their dollars, essentially, which is
something we've heard about in this hearing today.
What effect does this, then, have on competition and
privacy and innovation? Just briefly.
Ms. Khan. So, we want to make sure that companies are
competing on honesty. We don't want honest businesses to lose
out to firms that are engaging in dark patterns and these types
of deceptive practices. So, there's a consumer protection
dimension to it, but, as you noted, there's also a competition
dimension.
Ms. Balint. I really appreciate that. Thank you.
I yield back.
Mr. Van Drew. [Presiding.] Thank you.
I recognize the gentleman from Oregon.
Mr. Bentz. Thank you, Mr. Chair.
Thank you for being here today and for your patience. I
disagree with the ``bitter end'' phraseology that was used. I
think the entire conversation has been extraordinarily
interesting, and I appreciate your being here to share your
thoughts.
I'll set this up with a standard question. Do you agree
with the following statement from former Commissioner Wilson?
The agency lacks the expertise (and, in some cases, the
jurisdiction) to pursue the additional societal goals embodied
in the Strategic Plan.
Jumping just to the phrase ``unwarranted health, safety, and
privacy risks''--I'm actually looking at the plan right now.
``For example, unwarranted health, safety, and privacy risks,''
tell me how that, those became part of the focus of the FTC?
Because that seems to be an expansion of what the FTC used to
focus on. Or maybe I'm wrong. That's how my question is set up,
my first one.
Ms. Khan. So, I think you said, ``unwarranted safety,
health, and privacy risks,'' is that right?
Mr. Bentz. Yes. Actually, I'm just reading from,
The FTC focuses on investigating and litigating conduct that
causes or is likely to cause substantial injury to the public.
This includes not only monetary injury, but also, for example,
unwarranted health, safety, and privacy risks.
Ms. Khan. So, the statute says that an unfair practice is
one that causes--one of the problems is substantial injury.
Substantial injury is not defined, but, for years now, the FTC
has interpreted that, and courts have ratified that, to mean
not just monetary harm, not just losing money, but certain
types of harm to wellness and safety and health. So, some of
the deceptive advertising cases--
Mr. Bentz. Are you referring to courts? Is that what you
said?
Ms. Khan. That's right.
Mr. Bentz. OK. So, just because I want to move on, if you
could provide me with the cases that you're referring to,
please? So that I can see the courts that you're relying on for
that, that effort.
Now, let me slide that aside and let me go to the next
issue. This is one, of course, that you brought up in your
famous paper, the ``Amazon's Antitrust Paradox.'' The issue
is--and forgive me; I'm not an expert in this space. I didn't
even take this class in law school. So, my question--
antitrust--so, my question is: What, if not the consumer
welfare standard, what standard? I'm, basically, lifting this
right out of Bork's book--about 25 hours I'll never get back
that I went and spent reading it. My question to you is: If not
that standard, what standard are you going to apply? Do you
still apply just that sole standard in determining the
challenges that bigness creates?
Ms. Khan. So, we applied the text of the statutes that
Congress passed, and we look closely at the language in the
statutes that Congress passed, consistent with legal precedent.
There are some case holdings related--
Mr. Bentz. If I may--
Ms. Khan. Yes.
Mr. Bentz. If I recall correctly, before Bork's learned
treatise, there was mishmash of legal precedent. You could
select among almost any standard. That's one of the reasons he
was so clear in stating what he thought would be the proper
standard. That is the best for the consumer.
So, I'm asking you, if you're going to move away from that
standard--what he so artfully articulates in his book--what is
the new standard?
Ms. Khan. So, we're focused on the law, including the case
law, not on a--
Mr. Bentz. Wait, wait, wait, wait, wait, wait.
Ms. Khan. Yes.
Mr. Bentz. I just pointed out that, before Bork, there was
any number of standards. Just grab one. So, when you say you're
looking at ``the law,'' which law?
Ms. Khan. The Sherman Act, the Clayton Act, the FTC Act,
the Safe Harbor Act--
Mr. Bentz. OK. Those are extraordinarily--they were, they
were written to be very broad and to give you the power to try
to control this, this economy that we've got. Bork went in and
tried to find some sort of a--create some sort of a standard
against which you could measure your actions. His ideas were
accepted.
I think your article--this way better than anybody in this
room. So, my question is, what's the new standard? Don't,
please don't take me into the law and don't do that. Tell me,
what do you have that's better than what Bork suggested?
Ms. Khan. So, in instances where the Supreme Court has
said, for example, that the Sherman Act should be interpreted
consistent with consumer welfare, of course, we look closely at
that. The Sherman Act is not the only statute, right? For the
FTC, we're charged with prohibiting unfair methods of
competition. I think it's incredibly important for us to honor
Congress' intent in creating multiple--
Mr. Bentz. Wait, wait, wait, wait, wait. Stop. You're a lot
of generalizations. What's the standard that you are suggesting
to take the place of the consumer welfare? What is your
standard? Please don't give me generalizations.
Ms. Khan. So, the standard depends on the statute that
we're enforcing because each statutory scheme is slightly
different. When we're enforcing the FTC Act, the words of the
FTC Act are ``unfair methods of competition.'' That's the
standard we're enforcing. We laid out a policy statement last
year that laid out in very clear and in great detail what that
standard means, reflecting a century of case law.
Mr. Bentz. So, I'm out of time, but I will look at your
explanation, and I appreciate your time here today. Thank you.
Mr. Van Drew. [Presiding.] We are going to take a five-
minute recess, and we're going to strictly adhere to that. It
will be five minutes.
[Recess.]
Mr. Van Drew. [Presiding.] I recognize the gentlelady from
Texas--Florida. I'm sorry. My God.
Ms. Lee. Thank you, Mr. Chair.
Mr. Van Drew. [Presiding.] Both the Texas folks and the
Florida folks are going to get mad at me now.
[Laughter.]
Ms. Lee. Thank you, Mr. Chair.
Good afternoon, Chair Khan. I'd like to focus our attention
on the recent Notice of Rulemaking and proposed changes to the
premerger notification form requirements and instructions. So,
this new proposed rule would require submission of substantial
additional documents from what is currently the status quo,
including draft agreements and term sheets, as opposed to just
the final proposal for review; information about creditors,
minority shareholders, officers, directors; and information on
labor markets; data about workforce, including geographic
information about employees, and details about prior penalties
and findings by the NLRB, is that right--among other things?
Ms. Khan. Yes, we issued a proposal of suggestions for
additional information that we'd be getting.
Another key area would be foreign subsidies. So, Congress
told us to get information about whether firms that are looking
to merge are getting subsidies from China or other countries--
Ms. Lee. So, thank you. In summary, this proposed rule
would substantially expand the types and volumes of documents
and information that are being submitted as part of this
premerger review process, correct?
Ms. Khan. That's right.
Ms. Lee. OK. We also know that this rule, this new rule, if
adopted, would substantially affect the time and the cost
associated for entities who want to participate and make
submissions under the premerger review process. Correct?
Ms. Khan. Yes, people would have to comply with the new
form which is seeking additional information.
Ms. Lee. Right. Your agency, in fact, has estimated that
this would increase by over 100 hours the time necessary to
compile compliance documents to make this submission, and in
some cases, in some of the more complex or larger cases, even
much more than the 100 hours. Correct?
Ms. Khan. These are some of the estimates in the NPRM, yes.
Ms. Lee. Yes. The internal estimate also identified a cost
estimated at $350 million impact for the change in the rule for
compliance, is that right?
Ms. Khan. That's on the higher end. I will say, a lot of
this will depend on the complexity of the transaction. If
you're seeing a merger between two fairly small firms that
don't have any complex holdings or that sort of thing, I
imagine it would be much less.
Ms. Lee. You just raised a very interesting point, and it
was one of the things that I wanted to ask about. So, if we
know, going in, that the time and the cost now associated with
this premerger review process--the time is going to increase;
the cost is going to increase--won't this affect the businesses
that are at the lowest end of the reporting thresholds the
most? Would they be the least able to incur those costs and
time without affecting their overall margins?
Ms. Khan. So, again, it really will depend on the
complexity of the merger. If it's a fairly simple transaction,
I imagine it will be much easier to comply.
I should also note, this is all about what firms need to
produce on the front end. It's our belief that, by getting more
information on day one, that will allow us to more efficiently
and effectively administer the laws in ways that could create
more certainty for businesses on the back end. We're able to--
Ms. Lee. At the conceptual level, the large corporations--
the ones, in fact, that I believe you're probably the most
concerned about--the very largest corporations are the ones who
are the most capable of saying, ``Yes, let's bring in our
outside counsel and spend a few couple more hundred hours,'' or
``Let's allocate additional costs to go through this process.''
They will be the ones who could most easily absorb this change,
as opposed to the smaller entities at the lower end of that
threshold.
Now, let's go here: So, by expanding the types of documents
by the types of information that you all are reviewing in
assessing whether a merger should be approved and allowed to
proceed, you're really expanding the bases upon which the FTC
could choose to approve, seek more information, or disapprove,
are you not?
Ms. Khan. We're still squarely focused on whether the
merger may substantially lessen competition or tend to create
the monopoly. That remains our legal standard. We're seeking--
Ms. Lee. How is it that some of the information that you're
requesting, though, such as demographic information about
employees, or information about shareholders and officers, how
would that relate back to that core mission that you all have
been pursuing prior to now?
Ms. Khan. So, issues relating to officers or things like,
potentially, overlapping directorates, those can affect, for
example, Section 8 of the Clayton Act in terms of if you have
interlocking directorates. So, those are some issues in which
they're squarely within the confines of the antitrust laws.
Ms. Lee. So, let me ask this then: The proposed rule, it's
something that you all have, have developed, in essence,
because you believe that it would have a significant impact,
correct, on mergers, on the health of the economy, on
businesses? You're pursuing this because you think it's
meaningful. Correct?
Ms. Khan. We're pursuing it because we think it will allow
the FTC to administer the laws that Congress has charged us
with more effectively and efficiently.
Ms. Lee. So, you believe it's consequential?
Mr. Van Drew. Go ahead. The last question.
Ms. Khan. We think it will meaningful to enable the FTC to
do its job, yes.
Ms. Lee. Without a specific mandate from Congress to engage
in this behavior. Correct?
Ms. Khan. I disagree with that. The Hart-Scott-Rodino Act
allows the agencies to get information on the front end, when
firms governed by this law are required to do so. We're acting
pursuant to that authority.
Mr. Van Drew. [Presiding.] The time has expired.
Ms. Lee. Thank you, Mr. Chair. I yield back.
Mr. Van Drew. [Presiding.] I recognize the gentlelady from
Indiana.
Ms. Spartz. Thank you, Mr. Chair.
Thank you, Commissioner Khan, for being here. So, I wanted
to bring two issues, and I would like you to respond.
First, I belong to a group of people, even though I very
much agree with Mr. Tiffany that the majority of monopoly
problems which are significant, because we created these
monopolies, incentivizes monopoly. Unfortunately, we created
more companies now too big to fail. All the laws that we try to
deal with them, including the Dodd-Frank Act, which I was
actually one of the implementers when I worked in public
accounting, now created this institution even bigger. Now,
we're going to be dealing with that.
I also understand those are, too, now, some of the areas
where we have now problems so big that it involves us to look
at the barriers of entry, like healthcare, and then, look in
what are we going to deal now these monopolies that are
distorting the market and using their aggressive behaviors to
suppress consumers, to suppress competitors, and really not
delivering value, because they can. They are not a natural
monopoly. We created it. We have to look at that.
So, I think your agency has an important function, but,
unfortunately--and I want you to really respond--that we have a
lot of concerns from the Republican side, and that the agency
is being politicized and the agency is being used to really--
the hammer and sickle and to actually to pick, kind of in a
fashion to pick losers and winners.
It's becoming a problem. If you look at your even the
missions that you set and the objectives you set, where we
really need to have more work together for consumer protection
and competition. You want your agency shapes distribution of
power. I truly don't believe that is the agency's--I think the
agency should be dealing with the real abusers in the system
that want to not have competition, use monopolistic power. So,
even in the statements, it's a problem.
I would like--I think we have one common ground, that it
seems like a lot of times we have a lot of talk on healthcare,
but when we come to the action--it's even recently--we put it
on the table with President Biden's Administration on dealing
with with site-neutral-type payments and hospitals that's been
gypping Medicare--total abuse of power. Allowing them to buy
private practices; allowed them to put these doctors in crazy
noncompetes, enslave them. Building Taj Mahals, not paying
taxes. Investing billions in Wall Street and paid billions to
executives by subsidies that now our country's going bankrupt
on, because we're sort of outspending on healthcare and not
delivering value.
They didn't want to deal with that. Then, you have a
challenge now because a lot of these answers is nonprofits,
which is really it doesn't even have guidance. Like the next
business I'm going to have, is going to be tax-exempt. You
don't have a full jurisdiction to deal with these entities, and
no one has. I would like you to deal with that.
Now, my colleagues here have concerns. Now, we have,
actually, a bipartisan bill, but a lot more people here feel
concerned with you, that you are not going to be enforcing it
properly and will use it as a power to actually pick losers and
winners again.
So, I wanted you to see how you can respond with what you
are doing in this area. I think there is a PBM probably common
ground. We have that area. If we look at that, 50-60 percent
expanders hospitals and physicians. Five to 10 is actually only
spent on drugs. So, this is a huge amount of money.
How would you respond what you are doing on that and how
you would address some of these Republican concerns? Because I
think your agency has some functions, but, unfortunately,
everything gets so politicized. A lot of people here on my side
of the aisle don't feel comfortable to give any more power to
your agency.
Ms. Khan. Thanks for the question, Congresswoman. You're
absolutely right, we have a whole set of workstreams underway
relating to healthcare markets. We're concerned about
instances, in which, monopolistic practices or a lack of
competition in healthcare markets may be raising prices for
consumers, may be depriving them of access to quality
healthcare.
Our teams have for many years now been challenging hospital
mergers, where they've determined that the merger would either
raise prices or lessen competition in ways that was harming
patients.
We have work underway, as we talked about extensively
today, relating to PBMs and the potential conflicts of interest
that are created through their vertical integration, as well as
issues that may be created through the rebate schemes that they
have in place.
We also have work looking more directly at drug prices and
whether mergers and acquisitions done by pharmaceutical
companies may be inhibiting innovation, may be keeping lower-
cost alternatives out of the hands of American patients.
So, that's all work that we have underway and we're working
hard to move quickly on all that.
Ms. Spartz. My time has expired. We still need to figure
out how you can address concerns of my colleagues.
I yield back.
Mr. Van Drew. [Presiding.] The gentlelady yields back.
I recognize the gentleman from Texas.
Mr. Gooden. Thank you, Madam Chair. It's good to have you
here today. I'd like to talk about the Horseracing Integrity
and Safety Act's--well, it's called the Horseracing Integrity
and Safety Authority, which Congress created and put under your
Commission's rulemaking authority. I know you didn't ask for
this, but you got it.
I've got some questions. They're not complaints directed
toward you or your leadership, but I just would like to say
that I'm very disappointed in how they have operated. The HISA
was intended to improve safety and fairness in horseracing.
It's fallen short of its promises.
Some of the issues I have, I'm not even sure you're aware
of. When I'm done, I want to ask, so we can sit down and talk
about it more.
The FTC has allowed them to operate in a way that they are
making rules, I believe, without the authority, or without any
oversight. There's also a budget of $66 million. My question
is, does the FTC monitor how these funds are being spent and
who the recipient of their budget funds is going to?
Ms. Khan. So, the statutory scheme lays out the
relationship between the FTC and this kind of self-regulatory
organization. You're right that we didn't ask for this
authority. To be honest, it's been a bit of a challenge for us
fully implementing it. We don't have real deep expertise in
this area.
On your specific question, to be honest, I'm not totally
sure. I don't think we have that authority to be overseeing how
they use their money.
Mr. Gooden. OK.
Ms. Khan. I'm happy to get back to you on that.
Mr. Gooden. Separately, if the FTC enforcement staff was
investigating an antitrust case and thought it needed to
conduct a search of a business' premise, would the FTC need a
search warrant for that search?
Ms. Khan. Presumably, though I do know that, I believe it's
Section 9 of the FTC Act, does give the FTC ability to engage
in some of that activity as well.
Mr. Gooden. All right. I would just let you know that this
authority under your supervision can conduct a search without a
warrant. They can also impose an immediate suspension on
horses, trainers, and owners, if there's any evidence of
suspicion of doping.
One of the reasons they were created was because of the
deaths in the horseracing in the past. We've seen just this
year that even more deaths have happened. I would make a case
that this authority is poorly run and operating in a way that I
suspect, if all of you really knew, you would disapprove of. I
would like to sit and talk with all of you you about that after
this hearing down the road.
Moving on, I want to talk about some of the mergers and the
policies with respect to those. I'm specifically curious--
because I'm looking at a letter that Senator Warren sent you in
January of this year about some pharmaceutical mergers--how
much interaction does her staff or her have with you with
respect to these? Do they have influence with the direction all
of you go on some of these investigations?
Ms. Khan. Congressman, we hear routinely from Members of
Congress. We get letters week after week, including from many
Members of this Committee. We take all that under advisement
and want to understand what are the Members' concerns.
Any law enforcement decisions that we're making, we're
making on an independent basis, based on the facts and law
before us.
Mr. Gooden. Well, I'm looking at, particularly, the Amgen
and Horizon merger, which I understand was moving along pretty,
pretty well. It's different than some of these mergers that she
mentions in this letter that I'm reading, and I know all of you
probably have a copy of. I'll get you one, if you don't.
Horizon is an Irish company. It's kind of a special case
because it inverted in 2014 by acquiring this Irish company.
So, they actually left the U.S. for tax benefits. Now, Amgen,
as I understand it, is looking to acquire this company. They're
involved in totally different drugs. What this would do is
actually bring a company back to the United States, which I
believe is a goal that we all share, is bringing industry here
at home.
So, I would also ask, especially since it seems to have
been stopped right after Senator Warren sent this letter, if I
could sit down with you all at some point and we talk about
this one as well. Can we commit to doing that?
Ms. Khan. We'll be happy to have a followup conversation
with you, yes, Congressman.
Mr. Gooden. I appreciate your work and thank you very much
for being here.
I yield back.
Mr. Van Drew. [Presiding.] The gentleman yields back. We
are going to take a recess. We have to vote. As soon as votes
are completed, we will be back. Thank you. You're going to get
a long recess now.
[Recess.]
Mr. Van Drew. [Presiding.] Call the meeting back into
order.
We will start with the gentleman from Texas, Mr. Moran.
Mr. Moran. Thank you, Mr. Chair.
Ms. Khan, I would like to talk to you about something you
said earlier today when you were talking with Mr. Massie. You
said, quote,
We do things to make sure that the market has clarity . . . .
To make sure that the market has clarity.
Was the quote I wrote down from you?
I was glad you brought that up because the 2nd Circuit, as
you know, back in 1984, said of the FTC, quote,
The Commission owes a duty to define the conditions under which
conduct would be unfair, so that businesses will have an
inkling as to what they can lawfully do, rather than be left in
a State of complete unpredictability.
By moving away from the consumer welfare standard, I would
posit that the FTC has, effectively, created a moving goalpost
standard. Mr. Bentz pressed you on that with several questions,
and you just said, ``Well, basically, it kind of depends case-
by-case. We're going to look at different laws.'' Is that,
effectively, the summary of what you said and the guidance that
was provided last year in the policy statement regarding the
scope of unfair methods of competition under Section 5 of the
FTC?
Ms. Khan. So, Section 5 of the FTC Act is a different
statutory scheme than the Sherman Act. So, we look at case law
that's specific to Section 5 and specific to the FTC Act, when
interpreting that provision.
Mr. Moran. With respect to that November 10, 2022,
dissenting statement of Commissioner Christine Wilson as it
relates to that, Section 5 of the FTC and the policy statement,
she stated this, quote:
Unfortunately, instead of providing meaningful guidance to
businesses, the policy statement announces that the Commission
has the authority summarily to condemn, essentially, any
business conduct it finds distasteful.
Did it concern you that one of the Commissioners would issue
such a statement and reach such a conclusion?
Ms. Khan. So, the benefits of having a multi-member
Commission are that we can have that discussion and debate and
disagreement, and we always take seriously input that we're
getting from other Members of the Commission.
As you'll in the policy statement itself, it has--well, it
reflects decades of case law that our team took a very close
look at to make sure that we were hewing very closely to the
text of the statute, as well as the relevant precedent.
Mr. Moran. With respect to the early terminations issue
that Mr. Bentz talked to you about earlier, I sent you a letter
earlier this year about that issue, and you wrote, in response,
that ``Granting early terminations'' causes--or ``consumes
agency resources.'' Can you explain how reinstating the early
terminations diverts agency resources?
Ms. Khan. Sure. So, our staff is reviewing merger filings.
They're in the process of litigating. They're investigating.
When they are looking at the HSR filings, their primary goal,
our statutory mandate, is to be identifying transactions that
may violate the Clayton Act or any of the other antitrust laws.
Granting early termination is a discretionary function. So, we
decide to put resources toward the mandatory functions in the
statute over the discretionary ones.
Mr. Moran. For years, that early termination policy allowed
the FTC to allow mergers and acquisitions of a small size or
size where there was really no competition issue really
presented, for you to go ahead and give surety to those
businesses that they could proceed with those mergers and
acquisitions. That's no longer the case in the FTC, right?
You're holding businesses in limbo because you're giving
them these letters and saying, ``Well, we're going to look at
it. We're not sure.'' Then, businesses have trouble moving
forward with those mergers and acquisitions because sometimes
the financing is tied up in the timeframe that they need a
quick M&A. Is that, is that true or that untrue?
Ms. Khan. So, Congressman, the context here is, we're
talking about 30 days the firms have to wait before they are
able to consummate if they don't hear from the agencies. In the
past, maybe firms would have gotten early termination on day
25. Now, they're not getting it. After day 30, they're able to
consummate.
So, we've decided that, as a matter of where we're
allocating our resources, it's a better use of resources to be
identifying which transactions may be creating problems for
consumers, for workers, for honest businesses, rather than
prioritize the kind of five days that firms may have gotten in
the past.
Mr. Moran. It seems that a lot of the resources, when you
talk about allocation of resources, have been going toward new
rulemaking in the FTC, rather than actually working through
some of these issues that you guys are looking at--some of
which you should be looking at; some of which you probably
shouldn't be looking at.
Is that the reason why, in 2020, the FTC brought 31
challenges to mergers, which was a two-decade high, but, in
2021, the year you became Chair, the FTC took only 15 actions
against mergers and, in 2022, only 17 actions? Is that because
you're focused too much on rulemaking and all your resources
are allocated in that direction?
Ms. Khan. So, there are no real--we have looked--we've
proposed a rule to update the HSR form in the Bureau of
Competition, but, aside from that, the vast majority of
resources are focused on enforcement.
I think some of those numbers you mentioned are outdated.
Our team would be happy to provide you with updated numbers.
Our enforcement is squarely in line with prior years.
Mr. Moran. Thank you. I yield back.
Mr. Van Drew. [Presiding.] The gentleman yields back.
I recognize Mr. Hunt from Texas.
Mr. Hunt. Thank you, Mr. Chair.
Thank you for being here, ma'am. I really appreciate your
time. I know it's been kind of a long day. The first question
for you is, on July 13, 2022, the FTC proposed the motor
vehicle dealers trade regulation rule. Are you familiar with
this rule?
Ms. Khan. Yes.
Mr. Hunt. OK. Did the FTC conduct a cost-benefit analysis
for this rule and determine what costs of implementing this
rule might be? What did the cost-benefit analysis conclude, if
you can recall?
Ms. Khan. So, we did have to conduct that analysis,
pursuant to the Administrative Procedure Act, and the Notice of
Proposed Rulemaking lays out some of that preliminary analysis.
Mr. Hunt. Any idea on the cost?
Ms. Khan. I'm not recalling off the top.
Mr. Hunt. OK. I'd like to ask for unanimous consent, sir,
to enter this into the record. This is a research study that's
done by the Center for Automotive Research, which conducted a
full cost-benefit analysis of this rule and determined that the
rule would impose a cost of $38 billion with a ``b'' over the
next 10 years.
Mr. Van Drew. [Presiding.] Without objection.
Mr. Hunt. Thank you.
Ms. Khan. This is a study done by some outsiders, you said,
or this is the FTC analysis?
Mr. Hunt. No, this is, actually, an outsider, the Center of
Automotive Research.
Ms. Khan. I'm not familiar with it. I know we got a lot of
comments on the rule. So, our teams are looking at those
closely, and maybe this was one of those.
Mr. Hunt. So, what we will do is we will send this to you.
I would implore you to take a look at it. Now that you have a
copy of it, I would love for you to reconsider that burden and
that cost that it would actually place on the American people,
if you don't mind.
Ms. Khan. Happy to. I will say, generally, the auto rule
that we've proposed is designed to address junk fees, bait-and-
switch tactics, some of the harms that consumers time and time
again have been encountering in these contexts.
We received over 100,000 complaints from consumers over the
last few years relating to some of these deceptive practices in
the auto-purchasing context. So, that's what our rule is really
designed to address.
Mr. Hunt. OK. Understood. I think this is kind of what our
goal is, is to make sure that we prevent any undue burden on
the American people. Obviously, the issue that you just
addressed and, also, most importantly, just cost, because right
now we, as a country, are suffering immensely with inflation,
and we've been saying so. I want to make sure that we do
protect the American voter here in this country.
Switching gears, the FTC has made a mandate protecting
consumers and their privacy. Under that mandate, do you think
it's appropriate for the FTC to compel a company to collect and
retain consumer data, including their personal identifiable
information?
Ms. Khan. Is there a particular context you're thinking
about, Congressman--
Mr. Hunt. There is a particular context, but I was just
kind of wondering what your overall feel of this issue is. I
can't, I can't exactly say who asked this question for their,
for their own anonymity. I was just wondering what your overall
feel is about including their data that has their personal
information in it, as the FTC.
Ms. Khan. Overall, the goal of our data privacy and
security is to protect the privacy and security of Americans'
data. What ultimate remedy or relief we're seeking is,
generally speaking, designed to minimize the data being
collected. I'm not sure what specific instance you're
referencing.
Mr. Hunt. I understand. The last question, do you think
it's appropriate to suspend the collection of this data in the
name of protecting consumer data as a whole?
Ms. Khan. Again, we'd be happy to look at any specific
matter that you're considering. A key goal of some of our
recent privacy work has been data minimization to really limit
what data is being collected in the first instance, because
we've seen that's the best way to minimize the risk of privacy
breaches and security breaches.
Mr. Hunt. Thank you very much. Thank you for your time. I
yield back the rest of my time. Thank you.
Mr. Van Drew. [Presiding.] The gentleman yields.
I recognize the gentleman from South Carolina for five
minutes.
Mr. Fry. Thank you, Mr. Chair.
Ms. Khan, thank you for being here. I know it's been a long
day. Now, the FTC's mission is to protect the public from
deceptive and unfair trade practices and from unfair methods of
competition. Even on your website, the FTC's work to protect
consumers and promote competition touches the economic life of
all of us. I'd say the FTC is charged with a very important
mission and have for a long time.
A Bloomberg report recently found that 71 attorneys left
the agency in a two-year period between 2021-2022. This is the
highest number of departures in 20 years. That being said, it's
pretty tough, I would imagine, to protect the American consumer
and promote competition when your staff is leaving.
As you know, Congress receives Federal Employee Viewpoint
Surveys, or FEVSes, to inform us on how agencies are
functioning. In 2020, 87 percent of FTC employees agreed that
senior leaders maintain high standards of honesty and
integrity. In two years, that dropped to 53 percent, and also,
in 2022, to 49 percent.
Similarly, in 2020, 83 percent of FTC employees agreed that
they have the highest level of respect for FTC's senior
leaders. Again, in 2021, that dropped to 49 percent, and in
2022, to 44 percent.
In 2020, again, 80 percent of FTC respondents agreed that
senior leaders generate high levels of motivation and
commitment in the workforce. Under your leadership, that has
dropped to 42 percent in 2021 and 40--or 36 percent,
alarmingly, in 2022.
So, I think my question, quite frankly, is, why is it so
unpopular to work at the FTC?
Ms. Khan. So, we have fantastic career staff who day-in and
day-out are fighting for the American people and looking to
protect them from unlawful business practices.
I take those survey results seriously, and we've been
engaged in taking a series of steps to make sure that the FTC
is a great place to work. I've been really thrilled that, over
the last couple of years, we've been able to onboard hundreds
of new employees at the FTC.
Just the other month, we launched a new Office of
Technology. Within a matter of a week, we got 600
applications--technologists, these are data scientists, data
engineers, highly qualified people who want to come work at the
FTC to make sure that we're able to use their technological
expertise, as we continue to do our work to protect the
American public.
Mr. Fry. Well, Chair, I would imagine, with the high number
of vacancies that have been as the result of the last two
years, that you would be hiring more people, in addition to the
33 percent increase in your budget. So, I would imagine that
there is a drive to hire people just in general to fill those
spots.
I think my concern is the unhappiness of people within the
agency and why that is. Would you care to comment on that?
Ms. Khan. Yes, I take that very seriously, and we've
engaged in a lot of conversations and meetings to understand
what some of the source of those issues were. We've been able
to implement a set of steps, including streamlining
decisionmaking, expanding communications around priorities. We
clarified what our workplace flexibility policies would be. I'm
hopeful that each of those steps has contributed.
Mr. Fry. Yes, and, Chair, please don't take my comments as
me attacking you or your agency, but it is of concern to me
when I read that. Of course, my colleagues up here have echoed
a lot of policy frustrations with your organization and maybe
you. When I'm reading about the employee satisfaction the FTC
serves such a vital purpose in our country. It's just really
alarming to see it go from one of the top-performing agencies
of employee satisfaction to really the bottom in a two-year
period. It's just really alarming.
So, what do you think that you've learned? You've been here
for two years, and you've seen some tumultuous times. Do you
think you've learned anything as a result of maybe your
leadership or leadership around you on how to handle this and
correct it?
Ms. Khan. So, as I said, we undertook a set of steps to
make sure we were appropriately streamlining decisionmaking,
expanding communications with staff across the agency.
In terms of learnings, I've had the privilege of seeing
firsthand just how hard FTC staff are working day-in and day-
out. Oftentimes, they're having to go up against companies that
are--whose resources really dwarf ours, and there's a clear
mismatch in resources, but we're still able to go toe-to-toe on
talent. That just reflects the sheer talent and dedication of
our staff.
Mr. Fry. Well, good, and I hope that these issues correct.
There's a lot--I think Mr. Gaetz talked about an important
issue about creepy data collection that's going on, and you've
hit on that all day.
The mission is important, but you have to correct the ship.
You have to correct the type of management that you perform,
and I think that starts with you and it starts with your team.
Because I don't want to read about toxic environments or people
feeling like they're not heard or mismanagement at the highest
levels. There has been a lot of ups and downs with the FTC over
the last two years, and I'm hopeful that you can correct that.
Thank you, Mr. Chair. I yield back.
Mr. Van Drew. [Presiding.] The gentleman yields back.
I yield five minutes to myself. I just wanted to take up a
little bit where Congressman Biggs and Congressman Johnson were
speaking, talking about the diversity, equity, inclusion issue
that Commissioner Slaughter has, evidently, championed.
Do you believe--and I know it's hard, but if you could just
give me a yes-or-no answer--do you believe that should be a
major and significant part of antitrust enforcement? Do you
believe that's your job?
Ms. Khan. So, our job is to enforce the antitrust laws,
which prohibit unfair methods of competition or deals that
substantially lessen competition or tend to create a monopoly.
We endeavor to do that work to protect everybody--
Mr. Van Drew. So, what does that have to do with diversity,
equity, and inclusion?
Ms. Khan. I'm not really sure. Could you share more about
what you specific concerns are?
Mr. Van Drew. Well, Commissioner Slaughter has said--and we
have quotes--that this needs to be and have a major role in
antitrust enforcement; that's a very major piece of it; that
it's part of it. Do you agree with that or not?
I didn't think--in all honesty, there are agencies who have
that job and that responsibility; I didn't believe that yours
did. I was just concerned. Are we going to--as it is, you're
short of resources. We can't do all the things we want to do to
protect the consumer. I don't know why we would divert
resources, time, energy, and people power to actually going
forward with that.
Ms. Khan. Yes, look, I won't speak on behalf of my
colleague. Again, what I think about is the ways in which
concentration of economic power and monopoly power hurts
everybody.
Mr. Van Drew. I understand.
Ms. Khan. We need to keep that in mind, as we're using
these tools and making sure we're protecting all parts of the
American public from these practices.
Mr. Van Drew. I agree. I'm concerned--and I'm just picking
up where Congressman Fry left off on the State of morale at the
FTC since you began your tenure. Examples such as hiring a
Chief of Staff described as ``frequently creating friction with
an aggressive managerial style'' or choosing an Associate
Director for Litigation in the Bureau of Competition with less
than two years of legal experience before joining your office
as a high-ranking member. Can you speak on that for just a
moment?
Ms. Khan. Yes. I'm really lucky to have a fantastic senior
leadership--
Mr. Van Drew. You do have good staff. I'm sorry to
interrupt you, but you do have a good staff. Some things--let
me say this, just to maybe clarify this more: On the matter of
agency morale, the Bureau of Competition, which you're familiar
with, whose mission is to enforce the Nation's antitrust laws--
one of your top priorities, I believe it is--saw its engagement
and satisfaction score drop by 33 percent since you began your
tenure. Do you think that's a result of your leadership style?
Is it a result of something else? Are there other factors that
are affecting FTC employees?
You do have a lot of great people there, but the point is a
lot of those great people have also expressed that they're not
happy. Why?
Ms. Khan. I couldn't agree more that it's important for us
to understand what some of the sources of those numbers are. As
we've been looking to do--and I should also note, for the
Bureau of Competition, in particular, over the last couple of
years they've been on the front lines of a surge in merger
filings. I mean, year over year, they were seeing a 70 percent
increase in the number of filings coming in, while their
numbers are--
Mr. Van Drew. I understand that, but they're not happy. We
have a lot of people that work very hard, but they're happy.
Ms. Khan. Just to commend them, of course. So, we've been
looking to understand, again, what more can we be doing to
organize--
Mr. Van Drew. So, you're working on this?
Ms. Khan. Correct.
Mr. Van Drew. OK. You think it's going to get better?
Ms. Khan. I'm hopeful.
Mr. Van Drew. OK. I wanted to talk about unpaid consultants
for a moment, which the Office of the Inspector General--this
was not me saying this; the Inspector General said this--
labeled as, quote, ``unprecedented.''
The Inspector General report from last year said you didn't
give these consultants clear guidance or limits--I'm not saying
it; this is not a Republican saying it or a Democrat, or
anybody else--on their work, and that there was concern that
these practices may, quote, ``violate policies for Federal
agencies'' that stipulate that such agencies--these hires are
not allowed to play an inherently, quote, ``an inherently
governmental function.''
Can you tell us how many of these consultants are working
at the FTC, what they're doing, and how often you meet with
them?
Ms. Khan. So, there is Federal authority allowing
government agencies to make use of some of these consultants,
especially in areas where we don't have existing expertise--
Mr. Van Drew. Respectfully, I understand that. We're
running out of time. Why did the Inspector General sound an
alarm, though?
Ms. Khan. The Inspector General's report identified certain
areas where we could be tightening up our processes and
procedures to make sure we're mitigating against risk. We
followed very closely the IG's recommendations and have been
moving forward to implement those recommendations.
Mr. Van Drew. OK. I have items for the record. I have two
articles from the Americans for Tax Reform titled, quote,
``Lina Khan Has Some Explaining to do,'' as well as Khan
reveals that she, quote, ``handpicked controversial unpaid
consultants.''
Mr. Van Drew. [Presiding.] Thank you for your answers.
I'm going to yield back.
With that, I think that will conclude today's hearing. We
thank our witnesses for appearing before the Committee. We
thank you for being here.
Without objection, all Members will have five legislative
days to submit additional written questions for the witnesses
or additional materials for the record.
Without objection, this hearing is adjourned.
[Whereupon, at 2:54 p.m., the Committee was adjourned.]
All materials submitted for the record by Members of the
Committee on the Judiciary can be found at: https://
docs.house.gov/Committee/Calendar/ByEvent.aspx?EventID=116199.
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