FTC’s Khan Pressed by House GOP on Noncompete Proposal, Meta and Twitter Actions

The U.S. House of Representatives’ Committee on the Judiciary yesterday held a hearing featuring Federal Trade Commission (FTC) Chair Lina Khan, who has recently come under fire from the Republican-led House leadership.

Judiciary Committee Chair Jim Jordan (R-OH) repeatedly grilled Khan about testimony from the independent assessor for Twitter, Ernst & Young, in the Commission’s recent investigation into the social media platform, which Jordan characterized as “targeted harrassment.” According to Jordan, a court filing shows that Ernst & Young leaders alleged that the FTC pressured Ernst & Young to file a negative report about Twitter and said it would “take exception” if the assessor chose to withdraw from the investigation. Khan did not comment on the allegations as she said it was the first time she was hearing about the testimony or accusations.

Jordan and other Republican members also brought up former FTC Commissioner Christine Wilson’s accusations that Khan refused to recuse herself from review of Meta’s proposed merger with Within Unlimited, despite her comments that “Meta should never be allowed to merge with any company,” according to a letter sent by Chairman of the House of Representatives’ Committee on Oversight and Accountability, James Comer (R-KY), to the FTC in June.

Wilson sent a resignation letter to President Joe Biden in March claiming that his appointment of Khan as Chair brought “an abrupt halt” to Biden’s promised “return to normalcy” for the agency. She said that Khan “scorned and sidelined” knowledgeable career staff, in part by imposing a gag order on staff “that prevented them from engaging in consumer and business education — a vote of no confidence in our staff and a disservice to those we serve.”

Wilson also cited statistics raised by Jordan in yesterday’s hearing that purportedly show employee confidence in senior leadership has sharply declined since Khan’s appointment. The stats are the results of the Federal Employee Viewpoint Survey (FEVS), which found that responding employees’ view of the honesty and integrity of senior leaders fell from 87% approval in 2020 to 53% approval in 2021, bringing the FTC from best to worst among all surveyed federal agencies. In 2022, approval fell further, to 49%.

The statistics similarly dropped from 83% agreement among those surveyed in 2020 that they have a high level of respect for the FTC ’s senior leaders, to 49% in 2021 and 44% in 2022. And 80% agreed in 2020 that senior leaders generate high levels of motivation and commitment in the workforce, but only 42% responding in 2021 and 36% in 2022 agreed with that statement.

Comer’s June letter further questioned whether the FTC has become “a rogue agency” under Khan’s leadership and asked the agency to deliver on nine requests to aid the investigation, including providing an unredacted version of Wilson’s dissent regarding the Meta-Within Unlimited merger, which was allegedly censored by the Commission.

In response to a question from Representative Tom McClintock (R-CA) on the latter topic yesterday, Khan said she was “walled off” from the decisions to censor the dissent and that the majority of the Commission explained they were “identifying non-public information related to staff analysis and material protected by deliberative process – we don’t disclose that type of analysis,” Khan said.

While Republican members focused on her alleged ethics violations, Democrats praised Khan for taking aggressive action to protect consumers. Judiciary Committee Ranking Member Jerrold Nadler (D-NY) told Khan that “today is the chair of the FTC’s turn to step into the ‘alternate universe’ that is the House Judiciary Committee under MAGA Republican leadership…Ultimately, you will face attacks today because you are doing your job.”

Noncompete Ban

Many members of the Committee asked Khan about the progress on the FTC’s proposed noncompete ban, which the Commission and Democratic members argue could raise wages by up to $300 billion each year and close racial and gender wage gaps by up to 9.1% by allowing workers to more freely move between companies.

However, those in IP circles have warned such a ban could harm competition and put trade secrets protection at risk. The U.S. Chamber of Commerce submitted comments in April urging April Tabor, FTC Secretary, to withdraw the proposed rule. Sean Heather, Senior Vice President of International Regulatory Affairs and Antitrust at the Chamber, said “[s]uch a proposal fails to recognize that noncompete agreements can serve vital procompetitive business and individual interests—such as protecting investments in research and development, promoting workforce training, and reducing free-riding—that cannot be adequately protected through other mechanisms such as trade-secret suits or nondisclosure agreements.”

Khan told the Committee that the agency has received more than 24,000 comments and is considering all of the input, but conceded the proposed rule would “ban the vast majority of noncompetes.”

Other topics addressed during the hearing included the Commission’s involvement in right-to-repair cases; its inquiry into the effects of pharmacy benefit managers (PBMs) on accessibility and affordability of prescription drugs; and the recent news that the Commission is now investigating ChatGPT maker OpenAI regarding potential consumer protection issues.