Law in Contemporary Society
*Guarding the Guards*

I began college at the University of Texas during the height of the 2008 Financial Crisis. After reading about how the collapse of the previously-stable housing industry (see http://research.stlouisfed.org/fred2/graph/?id=USSTHPI) triggered a catastrophic recession, I decided to major in economics in hopes of learning how to prevent future economic suffering. After several years of classes and academic research, I had come to the conclusion that inadequate regulation and enforcement had triggered the 2008 crisis. I was convinced that improvements in the law regarding regulation are necessary to maintain a healthy economy, and my views toward regulation had extended beyond only the financial sector. Since then, I have advocated for drastic regulatory reform.

I. The FTC

This summer, I am interning at the Federal Trade Commission’s Bureau of Competition. My division reviews potentially anticompetitive corporate mergers and occasionally litigates to block such mergers. The attorneys that I am working under are currently preparing to litigate to block a major communications merger within the next month.

Before working at the FTC, I was under the impression that current enforcement of existing laws by regulatory agencies was weak because of the employees at those agencies. Since law firm attorneys earn much more than government attorneys, I assumed that the most talented attorneys would choose to work at the firms. Also, because there is a “revolving door” system between firms and the FTC, I assumed that several of the FTC lawyers would have interests in helping their previous employers. I therefore was interested in joining the FTC in order to improve the agency from within. However, contrary to my presumptions, several of my supervisors are among the most brilliant people I have met. Also, our team works late nights and on weekends because of our strong passion for facilitating competition.

It is now my understanding that the problem is extremely complicated and originates from the system itself.

II. The Guards at the FTC

Roman poet Juvenal once raised the question, “quis custodiet ipsos custodies (who will guard the guards themselves)?”

One problem at the FTC is agency capture, or the control of a regulatory agency, via unofficial influence, by those the agency is intended to regulate. The commissioners at the FTC, who ultimately decide whether to litigate a case, are politically-appointed. Corporations often hire lobbyists to successfully advocate for the appointment of commissioners who support lax antitrust enforcement, rather than commissioners who are most qualified. At the commission meetings that I have attended, the commissioners have been extremely uncooperative, especially if a division intends to target a powerful corporation, such as Google. Even though the FTC attorneys prepare thoroughly for commission meetings, writing lengthy recommendation memos that address almost every possible antitrust issue, commissioners will still block most cases from litigation.

The management at the FTC also has agency capture problems. For example, like most of the previous Bureau of Competition directors, our new director, Debbie Feinstein, had worked in the private sector for most of her life. For over two decades, Debbie had worked against the FTC as a partner at Arnold and Porter. Until her last day at Arnold and Porter, she pushed for our division to approve an anticompetitive merger of GE and Avio. Coincidentally, within a month of her first day at the FTC, the GE merger was approved.

Because of capture problems, among other constraints, FTC management tends to advocate for settling with, rather than litigating against, corporations, even in cases of clearly anticompetitive behavior. Corporations have begun to view FTC investigations merely as a routine cost of doing business, rather than a process to avoid.

Even worse, several attorneys on my case have admitted that they “don’t know how to litigate because [litigation] doesn’t happen very often.” The attorneys are all capable and intelligent, but, because they lack the litigation experience, they are extremely worried about encountering problems if the case reaches litigation. Another FTC division recently won a Supreme Court case, FTC v. Actavis, which now prevents the pay-for-delay practice in the pharmaceutical industry. However, that division experienced multiple failures over the course of 15 years before pay-for-delay was remedied. Overall, the problem is that the guards at the FTC often choose not to guard competition and, when they do guard, they lack the experience to successfully guard. There is nobody to guard the guards to prevent inaction and maximize the guards’ effectiveness.

III. Enabling the Guards

Unfortunately, I do not know of a clear solution to the capture problems at the FTC and other agencies. Ideally, I would like to see the law restructured so that there is someone to guard the guards, or so that the guards could successfully guard themselves. However, I do recognize that the law, and its related institutions, is complicated.

Politics will always be a problem. There are already several precautions in place to prevent capture. Under the FTC Act, the FTC commissioners must be confirmed by the Senate, and no more than three of the five commissioners may be from the same political party, which mitigates the effect of politics on the appointments. However, as long as lobbying continues, special interests will continue to find ways to influence appointments. Regarding management, I would like to limit the appointment of management from the law firms, but that solution would raise concerns about passing over talent from the private sector.

I chose to study economics in college because I wanted to find solutions to economic problems. But I now realize that a necessary first step to finding a solution often is recognizing that there are no easy solutions. The guards cannot guard themselves yet, despite the best efforts of many policymakers. I hope that one day, we will see a remedy for the problem in the law and that I can be a part of finding that remedy. Until then, I can only try to further understand the problem in order to find not only solutions to the problem, but to my goal of becoming an effective problem-solver and lawyer.

-- LilyVo - 22 Jul 2013

 

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r1 - 22 Jul 2013 - 11:48:05 - LilyVo
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