Thunder on the Right

Republican FTC Commissioner Noah Phillips resigns to become a lawyer for Big Tech. Who will replace him? And what does the GOP's likely takeover of Congress mean?

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On November 8th, voters in the U.S. will go to the polls and render their verdict on the first two years of the Biden administration. Right now, polling suggests the Republican Party will win control of one or both chambers.

There would many implications of such a change-over and in this issue, I am going to try and tease out what they will be. An additional related question floating around antitrust circles is who the Republicans will nominate to enforce antitrust laws at the Federal Trade Commission. In many ways, both how the new Congress will operate, and the new GOP commissioner at the FTC, will determine how long it will take to address Big Tech and America’s monopoly crisis.

Republican FTC Commissioner Noah Phillips doesn’t but should wear a bow tie.

Big Business Hates Your Family

It’s a rough time these days for standard Big Tech-friendly Republicans. Six months ago, Google chief counsel Kent Walker attended a Republican Senate caucus lunch to discuss how the search giant filters email through its ubiquitous Gmail service. The meeting originated from an allegation that Google singles out right-leaning email to be sent to spam filters, and Walker was meant to soothe ruffled feathers among what had been a sympathetic libertarian political party. The meeting did not go well.

“Google deflected, refused to provide any data, repeatedly refused to answer direct questions,” said Sen. Ted Cruz of Texas. Republican Senators were in a rage, because Google was messing with their ability to talk to supporters and donors. In response, 20 GOP Senators, including Senate leader Mitch McConnell, introduced the Political Bias in Algorithm Sorting (BIAS) Emails Act, which would make it much harder to flag email from politicians as spam. It’s not a great solution, since there is actually a lot of political spam, but the overall point - why should Google make these highly political decisions?!? - is reasonable.

Over the last six years, this dynamic has been repeated over and over. Donald Trump called for the Department of Justice Antitrust Division to block the AT&T-Time Warner merger, because, as he put it, that was “too much concentration of power in the hands of too few.” In 2020, the Trump administration, at the prompting of Bill Barr, filed the first DOJ Federal monopolization suit in 20 years, this one against Google. His Federal Trade Commission then filed one against Facebook, to undo the Instagram and WhatsApp mergers.

And these ideological changes are broader than just big tech. In 2019, for instance, Fox News host Tucker Carlson spoke at the National Conservative Conference with a speech titled “Big Business Hates Your Family.” Carlson mocked the fecklessness and corruption of current antitrust thinkers. And this wasn’t fake - he was asked what he thought of Elizabeth Warren, and responded with, “Elizabeth Warren wrote one of the best books I’ve ever read on economics. She wrote a book called The Two Income Trap with her daughter. It’s an amazing book, you should read it.” He then proceeded to attack Warren over social policy.

And then there’s the strange specter of Republicans pledging to use their majority power to investigate the dominant big business lobby.

Ryan Grim @ryangrim

NEW: House Republicans plan to investigate Chamber of Commerce if they take the majority interc.pt/3QXsYxQ by @ryangrim

interc.ptHouse Republicans Plan to Investigate Chamber of Commerce If They Take the MajorityToday’s GOP war on the U.S. Chamber of Commerce represents a stunning turnaround from just a few years ago.

“Woke Activist Bureaucrats”

And yet, there is immense Republican support for rolling back government power, to block ‘the administrative state’ from doing anything to interfere in ‘the market.’ The Republican establishment is torn between seeking Google as an ally and seeing it as an enemy. And this dynamic will be core to debates if the GOP takes power. We got a sneak preview of these debates a few weeks ago, when 39 House Republican voted to defy their leadership and pass stronger antitrust legislation.

The two main characters in this debate are both conservative stalwarts, founders of the right-wing Freedom Caucus: Ken Buck and Jim Jordan.

Jordan is an extremely clever and effective politician who often blasts Big Tech censorship, while also supporting the policy stance of Google and the U.S. Chamber of Commerce when it comes to antitrust. Buck, by contrast, participated in the investigation of Big Tech, and has supported a raft of stronger antitrust laws to address their power. The right way to understand Jordan is as a rock star of the right, the brawler who will take on Democrats any time anywhere. Buck is a Republican member in good standing, but he doesn’t play the political game, focusing on the substantive merits of legislation. Jordan trades political favors in his sleep, Buck does not.

So it was very weird when Buck beat Jordan in this vote, and it gets more unusual when you look at the composition of the votes. It’s generally assumed that the populist far-right are the ones who want to strengthen antitrust. Indeed, over 100 GOP members, mostly on the right, originally supported the bill, and it was even endorsed by the Freedom Caucus. But when the time for the vote came, something odd happened.

The 39 members who ended up voting for it weren’t fire-breathing right-wingers, but cut across the Republican Party. Out of the most right-wing caucus, members like Matt Gaetz and Andy Biggs were supportive. But conservative firebrands Marjorie Taylor Greene and Lauren Boebert, both of whom were signed onto the bill initially, ended up voting with Jordan and Big Tech. Moderate establishment members, like former Energy and Commerce Chair Fred Upton and former Rules Committee Chair Pete Session, both voted for it. So did Steve Womack, who ran the Republican National Convention in 2016. Even Tom Cole, a stalwart ally of likely GOP Speaker Kevin McCarthy, supported the legislation.

What happened? Jordan’s arguments and Buck’s arguments both worked, but on different members. The legislation was substantively reasonable, written in fact by Republican state attorneys general and conservative Senator Mike Lee. So Jordan knew he couldn’t kill the legislation on the merits. Instead, he talked about FTC Chair Lina Khan and, as one GOP member told me, “some allegedly crazy thing she did.” Jordan’s key staffer Tyler Grimm spread rumors to Republicans that she is actively recruiting Marxists to the FTC, and that the legislation was intended to help “FTC and DOJ regulators to advance their socialist goals.” On the floor debate, Jordan argued the Antitrust Division might use the money to go after parents in school board meetings, or to censor conservatives. These arguments were enough to flip a lot of the far-right conservatives, who distrust Biden.

Buck had a different strategy. Over the last year, Buck sat down with 70-80 Republican members to explain antitrust legislation and how it works. Buck made an argument on the substantive elements of antitrust. He noted that it didn’t matter if the Democrats had MSNBC, because conservatives have Fox News. Same with the New York Times oped page vs the Wall Street Journal oped page. But, he said, if Google discriminates, there is no alternative, because Google is a monopoly. What conservatives dislike about Big Tech, he argued, is downstream from market power. And once Buck got people away from the personality issue, he was persuasive. Several Republican establishment members decided on the floor after listening to the debate, because they thought Buck had the better argument.

So that’s why Buck won. The most important impact of the legislative fight is less the victory than the fact that antitrust is now a hot issue on the right. For the last year, most Republican members refused to pay attention to the debate. They simply did not think the Democrats were serious about bringing legislation to the floor. But once Pelosi announced that there would be a vote, Republicans realized they had to learn about antitrust. Now, because of this vote, the incoming class of members will be more interested in the problem, and will try to understand the substantive merits.

If the GOP wins the majority in the House, conservative Jim Jordan, aided by Kevin McCarthy, will become the Chair of the Judiciary Committee. And he will spend time trying to undermine and defund the FTC, and undercut Ken Buck. We can expect oversight hearings, subpoenas, and lots of accusations of wrongdoing. But Jordan has a problem, because at least in this area, he’s cross-wise with his base. Republican voters are angry at Big Tech monopolists.

Meet the New Boss

And this brings me to the other significant shift on the right. Last week, Republican Federal Trade Commissioner Noah Phillips stepped down from the FTC, leaving an empty slot that will now be filled by Senate Republican leader Mitch McConnell. The FTC is a bipartisan commission, with five members who vote on every motion. Three members are appointed by the President’s party, and two are appointed by the party out of power. To bring a case requires a majority vote of commissioners, and out of power commissioners often indicate what the minority party will do if they win the next election.

So this brings an important question, who will replace Phillips? On first glance, this would seem to be relatively unimportant, far less meaningful than who controls Congress. It’s a minority slot, and Khan has three votes no matter what. But antitrust is about consensus, and if the GOP picks someone who actually wants to address Big Tech dominance, then there will be a bipartisan agreement among enforcers that we should do so. Judges will begin to move their views, as will Silicon Valley elites. It’ll be harder to eliminate the FTC itself, as some judges would want to do. So this is a deceptively important pick.

Let’s start with the retiring commissioner. Phillips, though young, represents the past, a symbol of the genteel pro-monopoly policy of the U.S. Chamber of Commerce that ran GOP politics since the 1980s. He was appointed in 2018 as a non-controversial Senate staffer, which was a lifetime ago on the right. Since then, Big Tech censorship has blown up in conservative politics, a major focal point for activists and politicians. The Supreme Court, nudged by Clarence Thomas, has taken up Gonzalez vs Google, a major case on the legal underpinning of platform dominance, a provision called Section 230 of the Communications Decency Act, that could radically change the business model of targeted advertising.

Jordan and Phillips are allies. Last year, for instance, in a little noticed antitrust subcommittee hearing, Jordan, desperate for a way to address Big Tech dominance without interfering with their corporate power, had a back-and-forth with Phillips. Jordan asked, “If we're not going to use antitrust to deal with censorship and you are reluctant to talk about Section 230, what's the answer?” And Phillips responded, "I'm afraid I don't have a good answer." Both Phillips and Jordan share political goals, but they are caught between a political base that wants action and a funding base that does not.

Ideologically, Phillips leans libertarian and is a skeptic of FTC authority, having voted against bringing Trump’s antitrust suit against Facebook, as well as opposing, at least temporarily, an investigation into pharmacy benefits managers, and supporting the long-standing goal of Chicago School enforcers to essentially eliminate the FTC itself. He has been a foil for FTC Chair Lina Khan, but also an ideological opponent of Republican members like Tom Cotton and Josh Hawley.

Phillips’s opposition to Khan went beyond substantive matters, to procedural ones as well. One of Khan’s first moves was to hold FTC meetings in public, instead of having the commission vote in secret. Phillips strongly opposed this idea, preferring that the commission maintain close relations with corporate antitrust lawyers instead of opening up to a broader audience. He generally opposed similar moves to democratize the commission. For Phillips, the last forty years of antitrust enforcement have been a tremendous success - if it ain’t broke, don’t fix it.

Earlier this week, he announced his new job, which is leading the antitrust practice at a major law firm, Cravath. Cravath is influential and prestigious, chock full of former government officials such as Jelena McWilliams, former Trump Chairman of the Federal Deposit Insurance Corporation, and Christine Varney, who was Obama’s first antitrust chief. The average partner there makes around $6 million, and it is one of the last of the big New York firms to open a D.C. branch. Phillips’s hiring is meant to make a splash, showing that Cravath is playing for keeps among its Big Law peers. Indeed, the broader list of ex-government officials is impressive.

Phillips will fit in extremely well at Cravath, since at the FTC he seemed to naturally take the side of Cravath’s clients. While a commissioner, for instance, Phillips was known to oppose action against the purchase of MGM Studios by Amazon, whose law firm in that deal was Cravath. Similarly, Phillips spoke out against the FTC task force on pharmaceutical mergers, an industry well-represented among Cravath’s clients. Same with medical middlemen, which Cravath repped while Phillips helped. He voted against bringing multiple antitrust cases against Facebook, Facebook is defended by Cravath. In many ways, it’s a logical pipeline for Phillips, from opposing open meetings at the FTC to becoming part of a shadow government at Cravath.

So that’s the old. Who is the new? We don’t yet know, and probably won’t, until after the election. The person who gets to pick the new Republican commissioner is Mitch McConnell, who is friendly to the U.S. Chamber of Commerce model of politics, but also aware of the rising anger in his caucus at Big Tech. According to Bloomberg, the possible picks include Senate staffers Mark Meador and Olivia Trusty, and big law partner Svetlana Gans. Virginia solicitor general Andrew Ferguson, a conservative Federalist Society lawyer, is perhaps the leading candidate.

The only candidate with a clear track record is Gans, who has worked for Facebook, Amazon, and Google. She is close with Eugene Scalia, a major player in both Republican politics and within elite conservative legal circles. Gans would be a U.S. Chamber of Commerce pick, but also has some qualities corporate liberals might admire. For instance, she runs the American Bar Association Antitrust Law Diversity Stipend Program, and is the Co-Chair of the Diversity Pipeline Program Federal Communications Bar Association. If McConnell picks Gans, it would be a clear signal the Republican Party establishment will try to avoid tangling with Big Tech in any meaningful way. I find it hard to imagine McConnell would go with Gans, since picking an Amazon lawyer would thoroughly embarrass the Republican Party establishment. But you never know.

In the weird war over corporate power, each side has different strengths. The judiciary is hostile to antitrust action, and yet the public is on the side of aggressive enforcement. So far, progress is slow, halting, and potentially reversible. But if the Republican Party abandons its traditional pro-Big Tech stance, it won’t be long before we break up dominant firms and restore some semblance of fair competition across many other sectors of the economy.

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cheers,

Matt Stoller