Senate Commerce Committee Holds Hearing on FTC Nominees

June 2, 2004. The Senate Commerce Committee held a hearing on five pending nominations, including the nominations of Deborah Majoras and Jonathan Liebowitz to be Commissioners of the Federal Trade Commission (FTC). President Bush has nominated Majoras, a Republican, to replace Tim Muris as Chairman, and Liebowitz, a Democrat, to replace Mozelle Thompson.

The hearing did little to establish these nominees' positions on technology related maters within the jurisdiction of the FTC, or their qualifications to be Commissioners. Rather, most of the hearing was taken up by partisan election year posturing on issues largely unrelated to matters that will be decided by the FTC.

Most of the two hour long contentious hearing was devoted to gas prices on the West Coast. Sen. Ron Wyden (D-OR) and Sen. Barbara Boxer (D-CA), who are both Democratic members of the Committee, and who are both up for re-election in November, railed at length about gasoline prices and oil companies. Moreover, they directed their questions and statements solely at the Republican nominee, Majoras.

Sen. John McCain (R-AZ), the Chairman of the Committee, was alone in raising some technology related matters.

Sen. Wyden (at right) has invoked the Senate procedure of placing a hold a nominee, to at least temporarily block consideration of the Majoras nomination. He has cited gas prices as his rationale.

This contrasts with a recent conclusion of the Progressive Policy Institute (PPI), a Democratic think tank based in Washington DC. The PPI released a paper on May 27, 2004 in which it concludes that "The primary causes of higher oil prices are Saudi decisions to constrain output in the face of growing demand for oil -- particularly in the United States and China -- and President Bush's failure to successfully engage with OPEC in order to ensure that it provided enough oil to the market to support moderate prices." The PPI paper adds that "if President Bush were serious about driving prices down, he would stop topping off the Strategic Reserve, which is currently at 94 percent of its capacity."

The FTC has no authority to regulate gasoline prices. Nor does it have sectoral regulatory authority over gasoline retailers, oil companies, or the energy sector generally. Rather, it has limited statutory authority with respect to certain consumer protection matters, and it shares antitrust authority with the Department of Justice's (DOJ) Antitrust Division. Sen. Wyden and Sen. Boxer asserted that there is anti-competitive behavior by oil companies that warrants FTC action.

Sen. Wyden and Sen. Boxer (at left) repeatedly invited Majoras to join in their rhetorical assaults on oil companies and gasoline prices. She did not.

They invited her to commit the FTC to actions against oil companies. She is not yet a member of the FTC, would only be one of five Commissioners, and even if confirmed, would have no authority to predetermine enforcement actions prior to agency review.

Sen. Wyden stated that the FTC has engaged in a "long running campaign of inaction", and that he wanted to "hear more" from Majoras, and that he wanted "specific changes".

Sen. Boxer asked her to impose a moratorium on further oil industry mergers. Majoras said she knew of no statutory authority for imposing an industry wide merger moratorium.

Majoras stated that she shared the Senators' concerns, and promised to study the issues that they raised. Sen. Wyden called this "business as usual", and demanded that she "drain the swamp". Sen. Wyden repeated many lines of questioning over and over again.

Jonathan Liebowitz, who has also been nominated to be a Commissioner, was spared this line of questioning. Nevertheless, Sen. Wyden proclaimed that he is "eminently qualified" to be an FTC Commissioner.

Sen. Mike DeWine (R-OH) and Sen. Herb Kohl (D-WI) testified at the hearing. Liebowitz worked for Sen. Kohl for twelve years before going to work for the Motion Picture Association of America (MPAA) in 2000. The two Senators are the Chairman and ranking Democrat on the Senate Judiciary Committee's Antitrust Subcommittee.

Sen. DeWine praised both Leibowitz and Majoras, and recommended that both be confirmed. Sen. Kohl praised only Leibowitz, and recommended only his confirmation. He did not mention Majoras.

Sen. Kohl mentioned that Leibowitz had done fine work for the Antitrust Subcommittee on the issues of media concentration and media violence.

Sen. Wyden did not reference his hold on the nomination during the hearing. Although, he discussed it with reporters afterwards. He confirmed that he maintains his hold, and that is talking with other Senators who might also oppose the nomination.

Sen. Wyden did allude to his hold while briefly questioning Leibowitz. Without mentioning the hold, he told Liebowitz that he regretted the position in which he has put Leibowitz.

TLJ asked Liebowitz about the hold after the hearing. He declined to discuss it.

Hypothetically, if the Senate does not confirm Majoras, but it does confirm Liebowitz, and Chairman Muris leaves the FTC, then the Republicans would loose their 3-2 majority on the FTC. Thus, it is possible that Senate Republicans might not act on the Leibowitz nomination unless the Majoras nomination is also approved.

Leibowitz defended and praised Majoras several times during the hearing.

Sen. Frank Lautenberg (D-NJ) said of the five nominees, "every one of them is well qualified". However, he referenced the gasoline prices issue, and refrained from stating that all five should be confirmed. He devoted almost all of his time during multiple rounds of questioning to a nominee for the Amtrak Board. The Amtrak train runs across his state of New Jersey, and he is a supporter of federal subsidies for Amtrak.

While the FTC has no authority to regulate gasoline prices, and does not have sectoral regulatory authority over oil companies, it does play an increasingly important role in regulating new technologies. However, the members of the Committee all but ignored these technology related issues.

Opening Statements of Nominees. Majoras and Leibowitz made reference to a few of these issues in their opening statements.

Majoras said in her prepared testimony, which she read at the hearing, that "The range of commercial activity that the FTC must patrol is ever growing. The rise of the Internet and other technology-related developments have brought consumers and suppliers closer together, creating new fora for providing and obtaining marketplace information and engaging in efficient commercial transactions. But these new tools have also, in another sense, driven consumers and suppliers further apart, as those bent on deception now can hide behind phony identities and jurisdictional borders and can steal private information without immediate detection. Working cooperatively with other law enforcers and with Congress, the FTC must lead the way in the fight against fraud, in whatever form it takes."

Leibowitz described the mission and history of the FTC in his prepared testimony, which he read at the hearing. He said that "When SPAM began to clog the in-boxes of millions of computers and made parents afraid to let their children read e-mail, Congress turned to the FTC to start going after the worst spammers and help tackle this technological traffic jam."

Leibowitz also said that "when a constant barrage of telemarketing calls disrupted the dinner tables of America, the FTC devised a plan to protect the privacy that all Americans deserve in their own homes. The ``Do Not Call List´´ has improved the lives -- and the dinners -- of literally tens of millions of Americans."

Division of Antitrust Matters Between the FTC and DOJ. Sen. McCain asked Majoras about the short lived Memorandum of Agreement between the FTC and DOJ Antitrust Division concerning clearance procedures for merger reviews and other antitrust matters.

The FTC and Antitrust Division share antitrust authority. However, the Senate Commerce Committee oversees the FTC, but not the Antitrust Division. (The Senate Judiciary Committee oversees the DOJ.) Hence, the agreement also affected committee oversight. The FTC and Antitrust Division abandoned the agreement following opposition from, and threats of appropriations cuts by, Sen. Ernest Hollings (D-SC). See, story titled "DOJ & FTC Abandon Merger Review Agreement Under Threat from Sen. Hollings" in TLJ Daily E-Mail Alert No. 436, May 22, 2002.

Sen. McCain complained that there was little consultation with the Senate, and asked Majoras, "Why did you believe that this agreement was needed at the time?"

Majoras, who was a Deputy Assistant Attorney General in the Antitrust Division at the time, stated that "At the time we believed that the agreement was needed because the two agencies, which share jurisdiction for enforcement of the antitrust laws, had gotten quite bogged down. And indeed, there was one matter that was in need of investigation, and both agencies agreed on that, and yet they had allowed the matter to sit for sixteen months, not being investigated by either agency, because they were arguing over which one was entitled to do it. That was what at the time, Chairman McCain, we thought a change was a good idea. There is no question that we should have handled it differently. We did not handle it well. And, I regret that that was the case. I would also add, that, were I to be confirmed, Senator, I have no intention of resurrecting that clearance agreement, which, of course, has also been banned now by legislation."

Spam. Sen. McCain (at right) asked Majoras and Leibowitz about the CAN SPAM Act.

The Congress passed S 877, the Controlling the Assault of Non-Solicited Pormography and Marketing Act of 2003 (also known as the CAN-SPAM Act), late last year. On December 16, 2003, President Bush signed the bill. It became Public Law No. 108-187. It is codified at 15 U.S.C. § 7701, et seq.

McCain asked Majoras, "Do you share the concern that consumers are being rapidly driven away from e-mail as a result of spam?" She responded, "I do share that concern, Chairman McCain. I think the Federal Trade Commission --"

Sen. McCain interjected, "What do you think needs to be done?" Majoras responded, "I think, what needs to be done, now that the CAN SPAM has been passed, which is a very very good first step, in which the Federal Trade Commission --"

McCain again interjected, "Do you think that going after the businesses that hire the spammers is a method you might pursue?" Majoras said, "Absolutely, and indeed I think that the Federal Trade Commission is already pursuing that, and that is a method that I think should be further pursued."

Section 6 of the CAN SPAM Act provides that "It is unlawful for a person to promote, or allow the promotion of, that person's trade or business, or goods, products, property, or services sold, offered for sale, leased or offered for lease, or otherwise made available through that trade or business, in a commercial electronic mail message the transmission of which is in violation of section 5(a)(1) if that person (1) knows, or should have known in the ordinary course of that person's trade or business, that the goods, products, property, or services sold, offered for sale, leased or offered for lease, or otherwise made available through that trade or business were being promoted in such a message; (2) received or expected to receive an economic benefit from such promotion; and (3) took no reasonable action (A) to prevent the transmission; or (B) to detect the transmission and report it to the Commission." (Section 5(a)(1) prohibits false or misleading transmission information.)

"What else would you like to say on that?", asked Sen. McCain.

She said "I think that the CAN SPAM Act which was a very good first step. Part of the problem with new methods, such as spamming, and the like, is that those who those who engage in it, and much of the spam, of course, is deceptive, have all kind of new methods that the enforcement agencies need to learn about, and I think that we need to build on the CAN SPAM Act now, see whether there are any more gaps in the FTC's enforcement arsenal, and move forward in bringing the enforcement actions, and in discussing with the Congress whether any further legislation might be needed."

McCain then asked, "Do you have anything to add to that Mr. Leibowitz?"

Leibowitz responded, "Just a little bit. I generally agree with what Debbie said. I think the CAN SPAM bill is very very important, and a very useful tool for the Commission. I think you are saying, Section 6, which you are saying, as I understand it, says follow the money, is something that we should be looking at if we are fortunate enough to be confirmed. And, Debbie and I talked about it, and we will take a good hard look at that section. But, you know, we are not at the end of this process, with respect to the spam problem or the CAN SPAM bill. I think we are more at the end of the beginning at best, and spam is a problem that is going to take a lot of resources of the Commission, and it is going to require a lot of work with the Committee, and it is going to require, as well, more consumer education, and technology. It is not an easy problem to solve."

Issues Not Addressed. The hearing left altogether untouched most of the technology related issues before the FTC. Nothing was said about the relationship of antitrust law and intellectual property rights.

Nothing was said about privacy issues raised by the collection, storage, aggregation, and sharing of personal data made possible by new computer and internet technologies. There was nothing about radio frequency ID tags, online privacy practices, recent FTC privacy related enforcement actions, the Children's Online Privacy Protection Act, the privacy provisions of the Gramm Leach Bliley act, any pending bills that would give further privacy related rulemaking or enforcement authority to the FTC, or other privacy related matters.

Nothing was said about the FTC's efforts to promote consumer cyber security. Nothing was said about spyware.

Nor did the hearing touch on mergers of technologies companies, state barriers to electronic commerce, international cooperation on cross border consumer protection issues, or international cooperation on antitrust.

Sen. George Allen (R-VA), who usually takes a keen interest in technology related matters before the Senate Commerce Committee, did not participate in this hearing.

Conflicts of Interest and Recusals. Confirmation hearing also typically involve introduction of the families of the nominees. Liebowitz brought his wife, Ruth Marcus, who is a member of the editorial page staff of the Washington Post. Majoras brought her husband, John Majoras, an antitrust lawyer with the law firm of Jones Day, which has an extensive antitrust practice.

Sen. Wyden and Sen. Boxer questioned Majoras at length about the possibility that she might recuse herself in oil industry matters as a result of her having done work for Chevron Texaco when she worked at Jones Day. They did not enquire about recusals based on her husband's work. Nor did they ask Liebowitz about recusals from entertainment industry matters based upon his lobbying for the MPAA.