FTC Chair Lina Khan Testifies Before The House Energy And Commerce Committee

3 months ago

The House Energy And Commerce Committee held a hearing to receive testimony from FTC Chair Lina Khan and FTC Commissioners Rebecca Kelly Slaughter, Alvaro Bedoya, Melissa Holyoak, and Andrew N. Ferguson about the agency's FY2025 budget.

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Transcript

00:00:00statement. Good morning, everyone. We appreciate y'all being here. Welcome to

00:00:06the subcommittee's budget hearing for the Federal Trade Commission. Unlike last

00:00:11year, this hearing will feature the full slate of all five FTC commissioners'

00:00:17testimony, and I want to welcome the two newest commissioners, Andrew Ferguson and

00:00:23Melissa Holyoak. Thank you both for serving and being here. I look forward to

00:00:30hearing how you plan to balance out the perspective and representation of the

00:00:36FTC as it protects consumers. Unfortunately, up until this year, the

00:00:42commission has lost its balanced approach, in my opinion. Since being

00:00:46confirmed over three years ago, Chair Khan has taken an aggressive stance

00:00:51towards the use of its authorities, leaning to internal discord.

00:00:58Employee-staff morale fell from 83 percent in 2020 down to 53 percent last

00:01:06year. I'm afraid it has lost its roots as a well-respected bipartisan law

00:01:12enforcement agency focused on protecting against bad actors. Despite restraints on

00:01:19statutory authority, the FTC has plowed forward out of bounds with sweeping new

00:01:26rulemakings, attempting to create policy in the process. Most notably, the

00:01:32commission's commercial surveillance and data security proposed rulemaking is an

00:01:37overreach, in my opinion, and raises significant legal concerns. I was hopeful

00:01:43that today could be a new start, but I worried that releasing actions of the

00:01:48commission less than two hours before this hearing commences is not a positive

00:01:53sign for transparency of the work you are engaged in. For instance, on pharmacy

00:02:00benefit managers, there's no way for either side of the dice here to analyze

00:02:06the interim report announced this morning. Moreover, have a broader view on

00:02:12whether this means the Biden administration has failed to address

00:02:16this issue broadly at HHS. Commissioners Holyoke said it best, and I quote,

00:02:24creating new law is the job of Congress, not the Federal Trade Commission. Yet

00:02:32many of these proposed rules generously interpret existing statutory authorities

00:02:40in the broadcast terms, the broadest terms, the broadest terms, excuse me. This

00:02:46goes beyond the clear directives that Congress has provided. Chair Kahn, I fear

00:02:52that your approach can cause severe damage to innovators who have become

00:02:57afraid of arbitrary and punitive actions by the FTC. These efforts, which erode

00:03:04public trust in the commission, have not been successful in the courts. I want to

00:03:10reiterate what I made very clear in last year's budget hearing. The existing

00:03:16charge and mission of the FTC is too important and must be prioritized.

00:03:25Every day scam artists take advantage of seniors, Children and other unsuspecting

00:03:32Americans defrauding them of billions of dollars. I want to ensure that the

00:03:38commission is effectively using its existing authority to go after and hold

00:03:44these bad actors accountable, protecting Americans from deceptive deception and

00:03:50fraud. Nonetheless, the committee has been hard at work on a bipartisan basis

00:03:57to provide new proportionate authorities for the commission. This includes the

00:04:03protecting Americans data from Foreign Adversaries Act, as well as other

00:04:07bipartisan efforts like the Informing Consumers About Smart Devices Act and

00:04:14the No Hidden Fees on Extra Expenses for Stays Act and the Ticket Act. We've

00:04:20been very busy doing great bipartisan work. We are actively working towards

00:04:26bipartisan agreements, as I said, on the American Privacy Rights Act to ensure

00:04:31we're providing one national privacy standard and protecting Americans data

00:04:37from being manipulated and abused without their consent, and the Kids

00:04:41Online Safety Act to safeguard our Children from the online harms of big

00:04:47tech. I assure you this subcommittee will continue to work together to

00:04:52support and protect consumers from harmful and deceptive practices. But in

00:04:57the process, you must regain our trust by ensuring any authority we provide

00:05:04will not be stretched or contorted to reach your desired result. I implore the

00:05:12chair to work with all the commissioners, protect consumers from real bad

00:05:18actors and be faithful stewards of the law. I look forward to conducting this

00:05:24critical and necessary oversight and to hearing each of your testimonies. With

00:05:30that, I thank the commission, the entire commission for being here and now

00:05:34you're back to balance of my time. And now I will recognize Miss Dingle from

00:05:39the great state of Michigan. Uh, she is the acting chair or excuse me, acting

00:05:45ranking member of the committee today. The full committee, even though we have

00:05:49a subcommittee today, Mrs Schakowsky is on her way. So we recognize Miss Dingle

00:05:54first for your five minutes opening statement. Thank you. Thank you, Mr

00:05:59Chair. I know I look like Frank Pallone. The ranking member asked if I would

00:06:05give opening remarks for him. So we want to start by thanking Chair Kahn and the

00:06:10other commissioners for being here today. And I always like being here with my

00:06:14Republican colleagues there. We don't always agree, but we work together. The

00:06:20Federal Trade Commission fights unfair, deceptive and anti competitive conduct

00:06:26across the entire economy. Under Chair Kahn's leadership, it has taken on some

00:06:31of the largest companies in the world, including Amazon, Facebook and Google on

00:06:37behalf of American consumers, workers and small businesses. Since

00:06:42commissioners last testified before this committee, the FTC has finalized a rule

00:06:47banning non compete agreements, proposed a rule to ban junk fees economy wide

00:06:53and exposed collusion between some of the world's largest oil and gas

00:06:58companies. It has also fought back against pharmaceutical companies

00:07:02illegal hold on drug patents and ordered data brokers to stop selling American

00:07:08geolocation data. I want to commend the commissioners and their staff for this

00:07:14incredible work, especially in the face of attacks from Republicans who would

00:07:19like to see the FTC hobbled and ineffective. I know Republicans don't

00:07:25like how the FTC fights to ensure a fair economy that will grow the middle class

00:07:30and protect consumers from corporate greed. What concerns me is that House

00:07:35Republicans are seeking to cut the legs out from under the FTC through extreme

00:07:41budget cuts. The Republicans fiscal year 2025 appropriations bill would slash

00:07:49the FTC's budget by almost $40 million. It would also prohibit the FTC from

00:07:55finalizing or enforcing rules like the combating auto retail scams rule, which

00:08:02banned certain junk fees, material misrepresentations and omissions

00:08:08of key information that cost consumers when they are purchasing a car. The

00:08:14commission has estimated this rule alone would save consumers $3.4 billion

00:08:21and 72 million hours of time spent on car shopping each year. In addition to

00:08:29repealing pro-consumer rules, the Republican budget cuts will hamper the

00:08:33FTC's ongoing work to protect Americans from scams, privacy violations and

00:08:40corporate greed. And Republicans want to go much further with Trump's Project

00:08:442025 plan, which will eliminate expert agencies, gut the civil service and

00:08:51consolidate power under the president. I don't care who's president, Republican or

00:08:56Democrat, that is not a system of checks and balances. This would have a

00:09:00devastating impact on the federal government's ability to protect

00:09:03consumers in the future. The FTC is facing coordinated attacks from big tech

00:09:09and Republicans in Congress. For example, an FTC investigation found that when

00:09:14Elon Musk took over Twitter, he directed employees to take actions that would

00:09:19violate a privacy and data security consent decree between the company and

00:09:25the FTC. The Republican response to that investigation was to attack Chairman Kahn

00:09:31and intimidate the FTC staff in an attempt to protect X and its CEO. These

00:09:37attacks, however, have not stopped the FTC from filling its mandate to protect

00:09:43consumers' personal information and ensure that companies are safeguarding

00:09:48Americans' data, something all of us should be able to agree on. The FTC has

00:09:54also taken historic action against data brokers hiding in the shadows while

00:09:58collecting and selling Americans' geolocation data. It's also acted against

00:10:04large brick-and-mortar companies like Rite Aid, which has used faulty

00:10:08facial recognition software to falsely identify people of color as shoplifters.

00:10:14The FTC is also working to reduce the number of unwanted robocalls that we are

00:10:21all sick of that afflict millions of Americans each year. Over the years, the

00:10:27FTC has filed 170 enforcement actions against more than 560 companies and 440

00:10:34individuals alleged to have placed billions, billions of unwanted robocalls.

00:10:39And as a result, the Commission has collected nearly $400 million in civil

00:10:44penalties and equitable monetary relief for these violations. The FTC does all

00:10:50this work with fewer employees than it had 45 years ago when the American

00:10:55economy was smaller and simpler. In addition to assuring the FTC is

00:11:00properly staffed, we must restore the FTC's full legal authority that was

00:11:04struck down by conservatives on the Supreme Court. Last Congress' subcommittee

00:11:10led legislation that passed the House that would restore FTC's authority to go

00:11:14to court to force scammers to return money to the consumers they harm.

00:11:19Unfortunately, the legislation never passed the Senate. We must continue to

00:11:24work to restore this authority. We must also work to ensure the FTC has the

00:11:29authority to independently seek civil penalties against rule and order

00:11:33violations. Again, I want to commend Chairman Kahn, the other commissioners,

00:11:39and the staff of the FTC for the work they do each and every day to protect

00:11:43American consumers. And with that, I yield back the balance of my time.

00:11:47Thank you. I thank the gentlelady. And now I'll recognize the Vice Chairman of

00:11:52the full committee, Mr. Armstrong, to give a statement on behalf of Mrs.

00:11:57Rogers, the chair of the full committee. You're recognized for five minutes. Thank

00:12:02you, Chair Bill Arrakis, for your leadership. And again, I am giving the

00:12:06statement on behalf of Chair Rogers. Chair Kahn, we appreciate your

00:12:10testifying today, along with Commissioners Slaughter and Bedoya, and

00:12:13welcome to the newest additions to the commission,

00:12:16Commissioners Holiak and Ferguson. We appreciate all of you being here today

00:12:22and for your service. Chair Kahn, the last time you were here, I expressed my

00:12:27serious reservations over the court cases you have lost and some of the

00:12:31priorities you have unilaterally undertaken without clear review and

00:12:34purpose. I know you and the FTC staff have a tough job. With what we have

00:12:39seen from big tech during my time on this committee, I certainly have my own

00:12:43concerns over how they abuse their power and how best to hold them accountable

00:12:47in order to protect Americans. I continue to be concerned that the FTC's

00:12:51court losses are degrading the agency's effectiveness at a critical time when

00:12:56we are trying to modernize the commission's authority to better

00:12:59protect Americans online, something that will be a fixture of the FTC long after

00:13:04the tenure of you or your fellow commissioners. The challenges we're

00:13:09working to address need strong bipartisan collaboration and consensus.

00:13:13That has always been my goal with Ranking Member Pallone, and it should be

00:13:16the goal of the FTC as well. The FTC also must live up to its tradition of

00:13:22remaining independent from political influence. Under this administration, we

00:13:26have seen time and again the FTC echoing the talking points of the White

00:13:30House. Just last week, we saw President Biden blame higher costs for consumers

00:13:35on price gouging by companies, ignoring how his own policies have caused out of

00:13:40control inflation, leading to the high costs across the board. Meanwhile, this

00:13:44subcommittee has been leading on several bipartisan solutions to address the

00:13:48root causes of increased costs by strengthening American supply chains and

00:13:52easing the barriers facing American businesses. More can and must be done,

00:13:57and we need the FTC to foster an environment that both protects consumers

00:14:01and allows businesses to grow and innovate. Eliminating guardrails

00:14:05designed to prevent government overreach, like your removal of a longstanding

00:14:09phrase in the FTC mission statement, without unduly burdening legitimate

00:14:14business activity, are violating due process laws and the intimidation of

00:14:19business. Go against the FTC's core mission as directed by Congress. Chair

00:14:24Khan, the last time you appeared before us, I asked you to convince us that the

00:14:28FTC's core mission to protect Americans was not taking a backseat to the Biden

00:14:33administration's radical agenda. You were unable to do so. I still remain

00:14:38committed to establishing the FTC as the preeminent data protection agency in

00:14:42the world at the direction of Congress. But before that can happen, critical

00:14:46guardrails must be established to prevent the agency from further abusing

00:14:50its power and making sure it's transparent and accountable to the

00:14:53American people. The FTC plays a critical role in protecting Americans

00:14:58here at home and threats from abroad. As you know, over a year ago, I laid out

00:15:03the case directly to the CEO of Tick Tock for the harms that his company

00:15:07perpetrated against our national security, American liberties and the

00:15:11privacy and online safety of our kids. Had comprehensive data, privacy and

00:15:16security legislation been in place, you would have had the tools to enforce

00:15:20against Tick Tock and other big tech for violating Americans' privacy rights.

00:15:25These are goals that I know we share, and I hope that we can work together to

00:15:28achieve them. Thank you, and I yield back.

00:15:31Thank the gentleman for doing his statement on behalf of Mrs. Rogers. We

00:15:36appreciate it very much. Now I recognize the ranking member of the

00:15:41subcommittee, Ms. Schakowsky, from the great state of Illinois, for her five

00:15:44minutes.

00:15:46Thank you, Mr. Chairman, and I apologize so much for being late. I think I

00:15:53have a quite a different view from my colleague, and he is my colleague, Mr.

00:16:00Armstrong, about the role of the Federal Trade Commission, and I am happy to

00:16:05see all of you, that the five of you are here, that we finally have a full array

00:16:13of all the commissioners, and I thank you all for being here. I think that the

00:16:21Federal Trade Commission fights higher than its weight, and I appreciate that,

00:16:29and I appreciate the work that all of you are doing to help consumers get the

00:16:35protection, and small businesses, the protections that they need, that we

00:16:41need. And I just want to say that with only 1,300 employees, that the Federal

00:16:52Trade Commission has been able to return $14 for every $1 that it costs

00:16:59taxpayers. So you do a pretty good job, and bring in the money that we need to.

00:17:08And in particular, I mean, there is a whole list of things that the Federal

00:17:13Trade Commission has done that has been very important for consumers that

00:17:17returned over $280 million back to Americans in FY 2013, that what we see

00:17:32is that it is making rules that will make sure that, let's see, let me make

00:17:45sure I do non-competes. Oh, well, actually banned some non-competes so that more

00:17:53people would be able to work and get the money that they deserve to make, but

00:18:02also, yeah, and you have absolutely done great work on junk fees and protecting

00:18:13data privacy. This is also an issue of the Federal Trade Commission. We have

00:18:21seen lower costs for inhalers and EpiPens. That's a work of the Federal

00:18:30Trade Commission. So on and on it goes, and I really appreciate taking on the

00:18:37things that every single day consumers and all of the small businesses are

00:18:43really needing to go after scammers, which has been such an important

00:18:50thing. So I look forward to your testimony. I look forward to asking some

00:18:55questions, some specific questions about what the FTC is looking in the future to

00:19:02do and the leadership that you want to take that the consumers really need. So

00:19:08with that, I want to yield back my time. I appreciate it very much. I thank the

00:19:12General Lady. Oh, can I want one more thing? Yes, please, you're recognized.

00:19:16What's our bill? Okay, the Ticket Act. We got that passed in the

00:19:30Congress, and I am hoping that the Federal Trade Commission supports this

00:19:37effort to make sure that the overpricing that we are seeing for consumers is

00:19:45taken under control. I mean, we are so proud, both our chair, that we were

00:19:54able to get that legislation passed in the House, but I think the Federal Trade

00:19:58Commission may have that the hidden fees are dealt with. So thank you. I'm

00:20:04going to yield back for sure this time. I appreciate it, no problem, and you know,

00:20:08let's hope that the Senate will take up our bill and get it done because I think

00:20:13it belongs in a legislative process. So in any case, thank you very much. Our

00:20:19witnesses today are the five commissioners of the Federal Trade

00:20:23Commission. Our first witness is Andrew Ferguson, the Commissioner. You're

00:20:28recognized, sir, for five minutes. Thanks for being here. Chairman Bill Rackus,

00:20:36Ranking Member Schakowsky, and members of the subcommittee, thank you for the

00:20:40opportunity to discuss the important work of the Federal Trade Commission. The

00:20:44Commission serves a critical role in the American economy. It ensures that the

00:20:48free enterprise system works for everyone, not just the rich and powerful,

00:20:52by enforcing our competition laws and protecting consumers from unfair fraud

00:20:57and unfair practices. What I've learned in my brief three months at the

00:21:01Commission is that our most valuable asset and our most important tool in

00:21:05fulfilling our important mission is our people. Our lawyers, economists, and

00:21:10professional staffers are the lifeblood of the agency. They are consummate

00:21:14professionals dedicated to the vigorous enforcement of our competition and

00:21:17consumer protection laws, protecting our free enterprise system. Every win the

00:21:22agency claims on behalf of the American people is ultimately a victory won by

00:21:26the hardworking staff. The vast majority of our work is bipartisan and unanimous.

00:21:31I've joined my fellow commissioners in supporting a number of important

00:21:35competition and consumer protection matters, and I think the agency is at its

00:21:38best when we work together. But I'm not naive, and I recognize that Congress has

00:21:43created a Commission run by both Democrats and Republicans, and we will

00:21:47not always agree. I have not hesitated to oppose my colleagues when I believe

00:21:52they're leading the Commission in the wrong direction. That is particularly

00:21:55true for rulemaking. The Supreme Court has been steadily clawing back the power

00:22:00of the administrative state over the last decade. It recently discarded the

00:22:04Chevron doctrine that required courts to defer to agency regulations. But the

00:22:09Commission is going in the opposite direction, undertaking a brash of major

00:22:13rulemakings in the last 18 months, including the non-compete clause rule.

00:22:17I dissented from that rule, and it has since been preliminarily enjoined by the

00:22:21U.S. District Court for the Northern District of Texas. I will continue to

00:22:24speak out when I think the Commission has overreached its authority. The

00:22:28Commission confronts many important challenges. For example, the last time I

00:22:32testified before Congress, I told the Senate that confronting big tech is the

00:22:36fundamental competition question of our day. This is even more true today than it

00:22:40was last year. The Supreme Court has recently expressed skepticism about

00:22:44state efforts to regulate big tech, and Section 230 of the Communications

00:22:49Decency Act forecloses many of the efforts of private parties and state

00:22:53officials to provide much-needed accountability. Antitrust and consumer

00:22:58protection laws are therefore one of the last available avenues to address the

00:23:02many challenges posed by big tech. For example, I agree with my friend

00:23:06Commissioner Holyoake that the Commission should examine whether social

00:23:09media platforms were knowingly violating their terms of service when they

00:23:13deplatformed customers in 2020. And although it lies outside of the FTC's

00:23:17jurisdiction, the practice of debanking by large U.S. banks cries out for

00:23:22regulatory and congressional scrutiny for the same reasons. Similarly, the

00:23:27House Judiciary Committee recently released a report describing alleged

00:23:30collusion among large asset management firms intended to drive up the price of

00:23:35fossil fuels in order to meet emissions targets set by those firms. At least some

00:23:40European countries are becoming more permissive than the United States

00:23:43regarding exemptions for anti-competitive behavior, so long as

00:23:47that behavior has some connection to environmental goals. In America, we have

00:23:52rightfully rejected excusing anti-competitive behavior to further

00:23:55other social goals. Plainly, anti-competitive conduct in the form of

00:24:00horizontal restraints of trade, agreements between competitors to drive

00:24:04down output or to drive up prices, is illegal no matter the reason for it. The

00:24:10collusion alleged by the Judiciary Committee similarly should be the

00:24:13subject of scrutiny by the Commission. We cannot confront these challenges without

00:24:18the ability to retain our talented staff and to hire more like them. As the

00:24:22Congress weighs how to fund the Commission, I hope it will keep in mind

00:24:25the importance of the Commission's mission in protecting the American

00:24:28economy from monopolists and fraudsters, and that we cannot fulfill that mission

00:24:33without our hard-working and devoted staff. I look forward to your questions.

00:24:36I thank the Commissioner. I appreciate that. Our next witness is Rebecca

00:24:42Slaughter. Commissioner, you're recognized for your five minutes. Welcome. Thank you,

00:24:50Chairman Villaracas, Ranking Member Schakowsky, and subcommittee members. I'm

00:24:55really grateful for your invitation to testify today about the vital work of

00:24:59the FTC and how we carefully budget the appropriations you provide in support of

00:25:03that work. We last appeared before this subcommittee, as you recognized,

00:25:08Mr. Chair, about 15 months ago, and I want to begin by acknowledging a

00:25:12small but essential set of new expenditures that arose in that time, the

00:25:16salaries of Commissioners Holyoke and Ferguson and their staffs. I'm really

00:25:21thrilled that the FTC has been restored to full strength with the addition of my

00:25:24Republican friends. The FTC delivers best for the American people when our work

00:25:29benefits from different perspectives and ideas and even disagreement. We've

00:25:34already found many areas of common ground, as Commissioner Ferguson said, and

00:25:39some areas of dispute, but wherever we end up on a given matter, I know the

00:25:43outcome is better because of the rigor, wisdom, and care that our two newest

00:25:47colleagues bring to bear. Turning to the subject of today's hearing, I want to

00:25:52discuss an area of vigorous agreement among all five of us. Again, as

00:25:55Commissioner Ferguson just said, the FTC's brilliant and dedicated staff are

00:26:00the lifeblood of our work. Their expertise allows us to understand

00:26:04complex markets when evaluating mergers under tight timelines. Their creativity

00:26:09enables us to continue to deliver redress to your constituents who got

00:26:13scammed three years after the Supreme Court took away our best tool for doing

00:26:18so. Their technical sophistication helps us tackle novel challenges such as those

00:26:22posed by AI, and their commitment means that they do this work often on nights

00:26:27and weekends and always at salaries far less than they would command in the

00:26:31private sector. I foreground our staff's tremendous value at the outset of a

00:26:36budget conversation because personnel account for the supermajority of our

00:26:41expenditures. Generally speaking, when Congress increases

00:26:45appropriations to the FTC, we hire staff and put them to work, whether stopping

00:26:50robocalls or protecting kids online or advancing the right to repair. Likewise,

00:26:55if Congress were to cut appropriations, we would have to consider furloughs or

00:26:59reductions in force and pass up important investigations and

00:27:02enforcement matters. Fifteen months ago, my message to you is one of sincere

00:27:07appreciation. Congress had invested substantial new appropriations in

00:27:12the FTC, so let me say again thank you. I work hard and our staff works hard to

00:27:17use those resources efficiently. Returning money wrongfully taken from

00:27:21the American people is only part of what we do, but we do an astounding amount of

00:27:25it, delivering redress in each of the last five years of between $324 and $483

00:27:32million. But the FTC's value can be measured not only in the money we

00:27:36return, but also in the harm we prevent when we halt and deter illegal conduct. I

00:27:42know that you and so many of your colleagues recognize that value. We

00:27:46regularly receive letters from members of Congress asking us to investigate

00:27:50consumer protection and competition practices of all types across the

00:27:54economy. My message to you today is to please stay the course. Let me sketch

00:27:59out two scenarios. In one, imagine that our 2025 funding level is a 1% bump over

00:28:052024. In the other, imagine that our 2025 funding level is a 10% cut from 2024. The

00:28:12first scenario, with a 1% bump, does not put the FTC on a primrose path. Far from

00:28:17it. The reality is that a 1% bump and far more would be consumed by rising payroll

00:28:23costs, even with limited hiring and some attrition. In this scenario, we will

00:28:27likely cut back on some enforcement actions that require expert witnesses. I

00:28:31do not want to mince words. Some illegal deals in conduct would proceed

00:28:35unchallenged, and our ability to fulfill our mission would be constrained. In

00:28:40the other scenario, in which our 2025 funding levels are a 10% cut from 2024,

00:28:45the impacts would be nothing short of dire. As you know, the FSGG subcommittee

00:28:51received an allocation for 2025 that is 10% less than 2024, and the full

00:28:56appropriations committee recently voted to cut the FTC's appropriations by 9%,

00:29:02or $37 million. Under this scenario, our mission will be imperiled. We may have

00:29:07to furlough large cohorts of our staff. We will be unable to make necessary

00:29:12investments in IT infrastructure. Mergers we cannot afford to challenge

00:29:16will result in higher prices and less choice. Fraud will multiply unchecked,

00:29:21and we certainly will not be able to tackle the additional work that members

00:29:25of Congress regularly suggest. You may know that the word decimate comes from

00:29:29the ancient Roman practice of killing one in every 10 soldiers after a loss

00:29:34in battle. Our staff have been working so hard for the American people, and

00:29:38they win far more tough battles than they lose. Please, please do not

00:29:43imperil our mission and the Americans we all serve by decimating the FTC. I

00:29:48implore you instead to stay the course. I thank you and look forward to your

00:29:51suggestions. Thank you, Commissioner Slaughter. We appreciate it very much.

00:29:56Now, our next witness is Chair Lena Kahn, chair of the FTC, and you're

00:30:02recognized, ma'am, for your five minutes of testimony. Great. Thank you so much,

00:30:07Chair Bilirakis, Ranking Member Schakowsky, and members of the

00:30:11subcommittee. Thank you for inviting me to testify today. I'm glad to appear

00:30:16here alongside my four fellow commissioners, including Commissioner

00:30:19Holyoke and Commissioner Ferguson. We welcome them to the FTC just a few

00:30:23months ago, and their thoughtful engagement is already enriching the

00:30:27commission's work. I'm happy to share with you some of the critical work that

00:30:31the FTC has advanced this past year and to discuss with you the commission's

00:30:36budget request for fiscal year 2025. Our North Star at the FTC is fulfilling

00:30:42the important mandate that Congress gave us to check unfair methods of

00:30:46competition and unfair or deceptive practices. At its best, the FTC's work

00:30:52ensures that Americans can enjoy the opportunity and freedom that fair and

00:30:58honest and competitive markets provide. Our agency is small but mighty. For

00:31:03every $1 the FTC receives in funding, we provide $14 in benefits to the public.

00:31:09For the American people, there is no doubt that resourcing the FTC is an

00:31:15excellent return on investment. Of course, none of this work would be possible

00:31:19without the talented and dedicated staff of the FTC, whose hard work and fidelity

00:31:24to the FTC's mission protect Americans' pocketbooks, their privacy, and their

00:31:30economic liberty. As American families continue to struggle with higher prices

00:31:34for daily necessities, the FTC's work helps ensure that Americans can keep

00:31:39more of their paychecks. By preventing unlawful business practices, our work

00:31:43improves families' bottom lines and lowers costs, be it at the grocery store, at the

00:31:49pharmacy counter, or the gas pump. No American should pay higher prices

00:31:54because of illegal business practices. Accordingly, the FTC is taking on some of

00:31:58the most widespread consumer frauds and pain points. We are using all of our

00:32:04tools to protect Americans from hidden, deceptive junk fees that cheat them out

00:32:08of tens of billions of dollars a year. We are taking on auto dealers that trick or

00:32:13take advantage of Americans buying a vehicle, one of the biggest purchases

00:32:17that people make. We proposed a click-to-cancel rule that would make it

00:32:21as easy to cancel a subscription as it is to sign up for one, freeing people

00:32:26from subscription traps that can leave them paying hundreds of dollars for

00:32:29services they no longer want. And we finalized a rule to protect Americans

00:32:34from government and business impersonation scams, which are becoming

00:32:38ever more sophisticated with the adoption of AI. We also initiated the

00:32:43largest crackdown on illegal telemarketing in FTC history, working

00:32:47with all 50 state attorneys general to target those who distributed or

00:32:52facilitated billions of illegal calls. We recognize that there is much more work

00:32:56to be done, and as AI turbocharges scams, we're focusing on shutting down fraud

00:33:01affecting older Americans, veterans, and other underserved populations. The

00:33:07Commission is bringing all of its tools to bear to protect Americans' privacy. As

00:33:11Chair McMorris-Rogers recently said, quote, at its core, the massive commercial

00:33:16surveillance of data is fueling the problem. Nearly every data point

00:33:21imaginable is being collected on us with no accountability, end quote. Against

00:33:27this backdrop, the FTC is harnessing the full suite of its tools and authorities

00:33:31to protect the American public from unlawful tracking and misuse of their

00:33:36data. Over the last year, we have taken on unscrupulous data brokers and

00:33:41secured bans on firms who exploit or endanger people's sensitive health or

00:33:46geolocation data, including by sharing it with entities in China. We've pursued

00:33:51major enforcement actions against companies that endanger kids' privacy by

00:33:56unlawfully hoarding their data or exposing them to harassment online, and

00:33:59we are securing effective relief, banning companies from using facial surveillance

00:34:04tools they've recklessly misused, and requiring them to use settings that

00:34:09protect kids by default. No doubt, threats to Americans' privacy and security

00:34:14continue to loom, and I was grateful for this committee's work getting a law

00:34:18passed that will prohibit data brokers from selling American-sensitive data to

00:34:23foreign adversaries and charging the FTC with enforcement. I also hope this

00:34:28committee can continue its important work to guarantee strong privacy

00:34:32protections for all Americans, especially as AI tools further incentivize firms to

00:34:38vacuum up people's data, magnifying the privacy risks that

00:34:43people already face. Ensuring an effective FTC requires adequately

00:34:48resourcing it. Thanks to increased funding from Congress these past few

00:34:52years, we have been able to invest in our technological skills and IT

00:34:56infrastructure so that we can continue to keep pace with continued digitization

00:35:01across the economy. I was pleased that last year we launched a new Office of

00:35:05Technology and have been steadily recruiting great expertise to balance

00:35:10out the already talented staff we have at the agency. Ensuring the FTC can

00:35:15continue its good will require further support from Congress. In short, the FTC

00:35:21is firing on all cylinders to protect the American people. Unfortunately, the

00:35:25House has proposed a steep budget cut for the FTC for this upcoming year, and

00:35:29as my colleague Commissioner Slaughter just laid out, the consequences of this

00:35:33would be dire. Thank you so much to the committee for your support of the FTC's

00:35:37mission, and I look forward to your questions. Thank you, Chair Collin. I

00:35:40appreciate it very much. Our next witness is Alvaro Bedoya. Commissioner, you're

00:35:46recognized for five minutes, your five minutes of testimony. Thank you for being

00:35:50here. Thank you. Thank you, Ranking Member Schakowsky, members of the subcommittee.

00:35:54Before I start, I want to note I'm speaking just for myself, and when I talk

00:35:58about corporate conduct, I'm talking about allegations from FTC charging

00:36:01documents. I think a lot of people don't realize that the FTC is actually a

00:36:06relatively small agency with a very broad mandate. So to give you a sense of

00:36:11how far a dollar goes at FTC, I'd love to describe just one month in the life of

00:36:16our agency, and I'd love to start in mid-December when we had a case

00:36:21involving Pompe disease, which some of you may know is a debilitating genetic

00:36:25disease which can kill a child in its first year of life. Just one company has

00:36:29a monopoly on treatment for this disease. It charges a family hundreds of

00:36:34thousands of dollars for one year of treatment. When that monopolist found out

00:36:39a new company was developing new treatments, it tried to lock down those

00:36:43treatments through an exclusive license. On December 12th, FTC staff sued, and

00:36:47two days later, they stopped that. Three days after that, we stopped an

00:36:52anti-competitive hospital merger in the I-680 corridor of California. Three

00:36:56hospitals competed there. Two were more expensive. Those two were owned by one

00:37:01company. Those two more expensive hospitals tried to buy the third less

00:37:05expensive hospital. FTC staff sued, and the merger was dropped. That same day,

00:37:10December 15th, we had a big decision on cancer tests. Cancer, unfortunately, is

00:37:15usually discovered after symptoms occur, and unfortunately that's often too late.

00:37:19So right now, lots of companies are racing to develop tests that will detect

00:37:24cancer in the asymptomatic before symptoms show up. But just one company

00:37:29has the ability to actually run those tests in its platform, and so that

00:37:35platform company went out and bought one of those test companies in what FTC

00:37:39staff alleged was an effort to corner the whole market. FTC sued, and on that

00:37:43day, December 15th, the court agreed with the FTC, and soon thereafter, the company

00:37:47announced plans to unwind that purchase. Three days after that, we announced new

00:37:52merger guidelines. It's been clear since 1890 that competition law should make

00:37:58sure that companies compete for labor. They should compete on the pay they

00:38:02offer workers, on the benefits they offer workers, yet in well over a century, only

00:38:08one merger has been stopped because of how it would affect labor markets and

00:38:12labor competition. So FTC and DOJ issued new guidelines to help law enforcers

00:38:17find and stop those mergers. The next day, we announced a major case on algorithmic

00:38:24fairness. There was a retailer that was trying to spot shoplifters by scanning

00:38:28the face of every single person who walked in that retail store. Only problem

00:38:34was the algorithm did not work. Thousands of times, it identified completely

00:38:40innocent people as shoplifters. They were stopped, they were searched, they were

00:38:44accused, they were detained. This even happened to an 11-year-old girl. So FTC

00:38:51staff sued and stopped that. The day after that, we proposed updates to our

00:38:56children's privacy rules to address changes in how kids are taught in

00:38:59schools, voice-enabled technology, the nudges they receive online. Then after

00:39:04that, it was Christmas, but in between Christmas and New Year's, right in that

00:39:07period, a federal judge granted the FTC's petition to preliminarily enjoin a

00:39:12merger that would have let a company corner a market on health care ad

00:39:16technology. A few days after the New Year, they dropped that. Four days after

00:39:22that, we turned to medical privacy. There was a company that was actually tracking

00:39:25people when they went to the cardiologist, the endocrinologist, the

00:39:29gastroenterologist, bundling up that data and using it to sell for advertising. So

00:39:35FTC staff sued and we stopped that. Finally, three days after that, we had a

00:39:40major win on crop control products, on pesticides. These are major line items

00:39:45for farmers, and so ensuring them access to cheaper generics is really, really

00:39:51important. But two of the biggest pesticide brands were actually paying

00:39:56money to block the sale of those cheaper generics to farmers. So FTC sued

00:40:02alongside 10 attorneys general, bipartisan group, and on January 12th, the

00:40:06federal judge blocked an effort by those two companies to stop our lawsuit. Mr.

00:40:11Chairman, Ranking Member Schakowsky, members of the subcommittee, in a single

00:40:15month, FTC staff worked to keep health care accessible, affordable, effective,

00:40:21private. They work to keep our kids safe online. They work to make sure that

00:40:25algorithms don't hurt people and that companies compete for our labor. And they

00:40:30work to protect the American farmer, to try to keep those farmers in the black.

00:40:34And this is just what's public and these are just the highlights. I respectfully

00:40:41urge you to continue what you're doing, which is strongly supporting the people

00:40:44and the work of the FTC. Thank you. I thank the gentleman, appreciate it. Now

00:40:50I'll recognize, and welcome to the Commission, Ms. Holyoak. You're recognized

00:40:55for five minutes. Thank you.

00:40:59Oh, okay. Thank you, Chairman. I appreciate that. And thank you, Ranking Member Schakowsky, and members of the

00:41:19subcommittee. Thank you for the opportunity to be here before you today.

00:41:22And I am grateful to be here and I welcome this hearing. Congressional

00:41:27oversight is vital. The Federal Trade Commission's authority comes from

00:41:31Congress. Among the many critical powers vested in Congress is its authority to

00:41:36set the funding level for the Commission. Our Constitution forces agencies like

00:41:40the Federal Trade Commission to regularly come to Congress and

00:41:43demonstrate why their budget requests are warranted. So it is right that

00:41:48Congress consider the agency's stewardship of what's been entrusted to

00:41:51it. Your oversight helps ensure our faithful execution of the law. I'll note

00:41:57at the outset that since being confirmed in March, I have been fortunate in

00:42:00getting to know and work with a number of the public servants at the Commission.

00:42:04Career staff at the agency make important contributions every day, both

00:42:08here in Washington and in the Commission's regional offices. These

00:42:12women and men enable us, as commissioners, to do our jobs, and ultimately staff's

00:42:17hard work benefits the American people. A significant part of staff's most

00:42:22important work goes on behind the scenes and takes the form of investigations.

00:42:26These investigative efforts lay the groundwork for public enforcement

00:42:30actions and enable the Commission to bring lawsuits against wrongdoers. In my

00:42:35opinion, the agency is at its best when it robustly enforces the law and does so

00:42:40consistently with the authorities Congress has given us. Since being

00:42:44confirmed, I have voted on a number of these enforcement matters. I would like

00:42:48to highlight just a few examples of the Commission's activities in this area. In

00:42:51April, I voted for the Commission to file a complaint against a bill payment

00:42:56company and two of its co-founders. The Commission alleged that the company used

00:43:00misleading advertising to impersonate legitimate billers. These

00:43:04deceptive practices misled consumers, and thousands of consumers complained about

00:43:08this company's deceptive practices. The Commission alleged violations of Section

00:43:135 of the FTC Act, the Gramm-Leach-Bliley Act, and the Restore Online Shoppers

00:43:17Confidence Act. I also voted for filing a complaint against a payment facilitator

00:43:22and two of its executives. The Commission alleged that the defendants knowingly

00:43:26processed payments for deceptive and fraudulent merchants in violation of

00:43:30Section 5 of the FTC Act and the telemarketing sales rule. The defendant

00:43:33agreed to settle on terms requiring the return of $10 million for refunds to

00:43:38consumers and not processing payments for certain high-risk companies. I'm

00:43:43grateful for the opportunity to have participated in these and

00:43:46other important enforcement efforts. As a general matter, I

00:43:51believe the Commission is at its best when it focuses on enforcing the law, not

00:43:55writing it. Creating new laws, as Chairman mentioned, is the job of Congress, not the

00:44:01Federal Trade Commission. With that said, I'm not reflexively opposed to

00:44:05rulemaking where Congress has delegated the agency such authority. Accordingly,

00:44:10since arriving at the agency, I voted to amend or update several rules, such

00:44:14as the eyeglass rule. When engaged in rulemaking, though, the Commission should

00:44:19recall that Article I of the Constitution vests legislative powers

00:44:22in Congress, not with agencies. Congress, therefore, sets the requirements and

00:44:27boundaries the Commission must follow. We should never act inconsistently with the

00:44:31authority Congress has entrusted to us. Likewise, any rulemaking should rest on

00:44:36the sound economic and factual analysis that the law and good policy development

00:44:41require. Finally, I'll flag one other matter that is of great concern to me. As

00:44:47I've suggested recently, one of our country's most pressing issues is the

00:44:51relationship between large technology companies and individual liberty. The

00:44:56concern is one that should go beyond party politics, and I believe the FTC has

00:45:00more work to do on this front. My concern about large corporations and individual

00:45:05liberty has consumer protection implications. For example, when technology

00:45:10or financial services companies use ambiguous or unclear terms of service to

00:45:14shield assessments of consumer conduct in ways that are inconsistent with

00:45:17consumers' reasonable expectations, and sometimes in response to political or

00:45:22other pressure unrelated to traditional market constraints, those companies may

00:45:26violate the law. And when platforms take steps based on their terms of service,

00:45:31that can have significant ramifications. Put bluntly, denying access to financial

00:45:37services or deplatforming can reduce these consumers to second-class citizens.

00:45:41In an era when cancel culture is rampant, including in corporate America, such

00:45:47concerns are far from hypothetical. To the extent we at the Commission can

00:45:52wield our existing enforcement authorities to combat some of these

00:45:54problems, we should do so aggressively. I also believe the Commission should

00:45:58seek to better understand the role that platforms play in

00:46:01controlling and denying access to the digital commons. The Commission should

00:46:07use its 6B authority to better understand how platforms enforce

00:46:10relevant contract terms and how the enforcement of those terms affects

00:46:13consumers. I again thank you for the invitation to appear, and I'm happy

00:46:18to answer any questions you have. I thank you very much for your testimony, and

00:46:24I'll begin the questioning and recognize myself for five minutes. Chair Kahn,

00:46:30welcome back. As you know, the third branch of government spoke once again on

00:46:36how government agencies should be conducting their work. On June 28th, the

00:46:42Supreme Court, as you know, in its decision on Loper Bright Enterprises

00:46:46v. Raimondo overruled the 1984 decision in Chevron v. Natural

00:46:54Resources Defense Council and its 6-3 majority. This will certainly impact the

00:47:01FTC's authority and how it enforces its regulations currently on the books and

00:47:06how it issues new rules. Can you explain how this will now frame your work going

00:47:13forward, please? Thanks, Congressman. So at the FTC, we've been following closely

00:47:21a lot of the developments across the courts, including at the Supreme Court,

00:47:25where, as you just noted, there have been a set of opinions recently that deeply

00:47:29implicate administrative agencies, and so we've been digesting those opinions and

00:47:33making sure that across the board our work closely hews to what those rulings

00:47:39say. I'll say a general matter. A core pillar of my approach to the FTC is

00:47:44making sure that we are being faithful to the text of the laws that Congress has

00:47:50written and making sure that we are honoring all of the provisions and not,

00:47:55you know, as unelected bureaucrats, by de facto nullifying authorities or tools

00:48:01that Congress has given us. And so that's really informed my approach to the FTC's

00:48:06enforcement work, and we'll continue to do that in adherence with all court

00:48:10rulings. Thank you. Commissioner Slaughter, same question. Can you discuss how this

00:48:15is going to impact how you review rulemakings going forward, please? Thank

00:48:23you, Mr. Chair. Yeah, I will associate myself with the Chair's remarks. I agree

00:48:28that there's a lot of opinions to digest. We always have to make sure we are

00:48:33faithfully following not only the statutory text but the court

00:48:37interpretations of those texts, and we will look at them closely and understand

00:48:42how we'll proceed. I will note that as a general matter, much of the rulemaking

00:48:46that we've done at the FTC for decades, since the 1970s, has not been general APA

00:48:53rulemaking. It has been under the specific framework in the Magnuson Moss

00:48:59Act, which provides both structural guardrails on how we do rulemaking in

00:49:06terms of additional procedural steps and also substantive guardrails that are

00:49:10really important for us to follow. We cannot, by rule, prescribe or prohibit

00:49:16conduct that would not be prohibited by the FTC Act at all. In fact, by rule, we

00:49:22can only address conduct that is already an unfair or deceptive act or

00:49:26practice and is prevalent in the economy. So those guardrails are really

00:49:32important, and we will continue to apply them faithfully, consistent with the

00:49:36Supreme Court precedent. Okay, Commissioner Ferguson, same question.

00:49:42Thank you very much. Appreciate it, Commissioner. Commissioner Ferguson, you're

00:49:46recognized. Thank you, Mr. Chairman. I think it's going to discipline agency

00:49:51process across the board. Commissioner Slaughter's right that a lot of our

00:49:56rulemakings are governed by a different statute than the APA, but I think since

00:49:591984 and especially over the last 20 years, agencies have relied on Chevron

00:50:04to get away with a lot of stuff that I think they would have a hard time

00:50:07defending if they just had the text of the statute to rely on and couldn't rely

00:50:11on judicial deference. That has come to an end. I think that Loper Bright

00:50:16is going to sort of discipline internal agency behavior as they come up with

00:50:19their rules, and if it doesn't, the courts of appeals will. Thank you very much,

00:50:23Commissioner Bedoya, you're recognized. Same question, please. Yes, Mr. Chairman. I'll add to the

00:50:29course you're hearing here. Of course, you know, we have to take into account

00:50:33these decisions, and if it's a different level of deference, obviously our staff

00:50:36and we have to take that into account. At the same time, as my colleagues have

00:50:40said, you know, I'll say that the court didn't overrule our authorities under

00:50:44Magma's say to issue rules and our mandate to identify prevalent unfair

00:50:47trade practices and make sure the American people are protected from them,

00:50:51and so that process has guardrails. We have to follow them, and that I think is

00:50:55what you will see us doing. Thank you very much. Commissioner Holyoke, again, can

00:51:00you discuss how this is going to impact how you review rulemaking? Absolutely. Yes,

00:51:06thank you. As Commissioner Ferguson said, I think it will discipline the agencies.

00:51:10As I review Loper, I particularly paid attention to something that

00:51:16Justice Gorsuch was talking about in terms of what is required. We need to be

00:51:21looking at statutory text, linguistic context, and the canons of

00:51:27statutory interpretation, and that will be our burden. We will be, we have to be

00:51:31prepared to go to court and defend what we are doing, going back to the statute

00:51:35and looking at those, and not just a permissible interpretation of a statute,

00:51:39but the right interpretation, and that's what we will have to do, and I have done

00:51:43that just recently in one of my dissents in the health breach notification rule,

00:51:46relied on statutory canons of interpretation when I showed that the

00:51:50rule was overbroad in with respect to the specific statute at issue. Thank you

00:51:55very much. I appreciate that. I'd like to remind all the commissioners how

00:51:59important the consumer protection mission is on fraud and deceptive

00:52:03practices, as it is invited to debate. Again, we can, we talk about the

00:52:09antitrust theory. The single most important thing to me is how consumers

00:52:15are getting ripped off, and they are getting ripped off and scammed by bad

00:52:20actors, especially, you know, I'm concerned about our seniors. I ask you not to lose

00:52:26sight of that. None of you. Please don't lose sight of that. It should be a

00:52:31priority. Not divert resources under the assumption that it is best left to state

00:52:38attorneys generals, and I have to yell back because I don't want to be fair to

00:52:43my ranking member. So I yell back, and I recognize the ranking member of the

00:52:47subcommittee, Ms. Schakowsky, for her five minutes of questions. Thank you, Mr.

00:52:51Chairman, and I agree with everything that you said. Let me just say this. I

00:52:56know that some of my colleagues, the Republicans, proposed cuts to the, to your

00:53:04budget, and I'd like to ask you, Chair Khan, what would be the effect of nearly

00:53:12a 9% cut in the budget of the Federal Trade Commission? Thanks, Congresswoman. I

00:53:20mean, it would be extraordinarily dire. As Commissioner Slaughter laid out, we

00:53:24would be in the very difficult position of most likely having to furlough staff.

00:53:28We would undoubtedly be further shrinking the size of the FTC, and as

00:53:34you know, we are actually 400 people smaller today than we were in the early

00:53:391980s, even though the economy has grown 16 times over. And so that would mean

00:53:45that our work across the board would be diminished, and so we're talking about

00:53:50work taking on fraud and scams, including those that are targeted at elderly

00:53:55Americans, as we just heard, at veterans, at underserved communities. It would mean

00:54:01we wouldn't be able to take on made-in-USA fraud when companies say

00:54:05their products are made in America, but actually they're made elsewhere. It would

00:54:09mean we wouldn't be able to go after as much companies that, through lawbreaking,

00:54:14are inflating costs for Americans across the board, be it their health care costs,

00:54:19be it how much they're paying for groceries. It would mean that our work

00:54:24protecting Americans from data abuse would suffer. And so across the board, we

00:54:29would be able to do less of the fantastic work that our staff have been

00:54:33doing, and Americans would be more exposed to corporate lawbreaking. And so,

00:54:37the prospect here is quite dire, and so I really hope that Congress can

00:54:42instead continue to support the FTC's mission and fully resource us. Thank you

00:54:48for that, and I agree that we need to fight for that. As I mentioned earlier,

00:54:55the chairman and I have been working on some surprise fees on the

00:55:04Ticket Act, but what are you doing? Because this is certainly only one example of

00:55:10what happens with surprise fees. So what is the FTC doing on that? So we are

00:55:15pursuing action against unfair or deceptive fees, both through our law

00:55:20enforcement work, as well as through rulemaking. Just the other month, we

00:55:25pursued a enforcement action against a company that had basically included

00:55:30these deceptive early termination fees. And so when people were signing up for

00:55:35subscriptions, they were not being told clearly that trying to exit the

00:55:39subscription would actually require paying hundreds of dollars. And so we're

00:55:44going to continue to do that enforcement work. We've also proposed a rule that

00:55:49would prohibit junk fees and basically require companies to upfront include in

00:55:54the price all of the mandatory charges, rather than saddle people with surprise

00:56:01fees after they're already captive to the process. And so we hear time and time

00:56:06again just what a big pain point this is. That rulemaking is ongoing, but we've

00:56:10already gotten 60,000 comments. Thank you. Let me ask one more question. In 2001, the

00:56:18Supreme Court said that the FTC did not have to give money back to consumers,

00:56:28which had been in place. And I am just wondering if I could go one by one, from

00:56:35left to right, if you could tell me if you think that there should be a change

00:56:41in what is the name of it? 13B. 13B that would allow money to go to consumers.

00:56:49Could I start with you? Thank you, Madam Ranking Member. Yes, I think

00:56:54AMG was correct, but I think it is super important that Congress restore the

00:56:57authority we thought we had under 13B as soon as possible. Agree that restoring

00:57:03this authority would be critical for our ability to protect consumers. Absolutely.

00:57:08Yes. I agree. Thank you. And with that, I'm going to yield back.

00:57:14The only yields back, I now recognize myself for five minutes. I want to thank

00:57:18Chair Bilirakis for calling today's hearing and to all the FTC

00:57:22commissioners for being here today. Oversight is a critical part of this

00:57:25committee's job, especially over parts of the government that impact the lives of

00:57:29every American and nearly every industry. With Chevron, Congress needs to

00:57:34aggressively reclaim our authority and stop allowing federal agencies to create

00:57:40laws where they do not exist and force them to follow congressional intent when

00:57:46they do. It's really important. Frankly, honestly, from my perspective, agencies

00:57:52have, and I'm speaking of all agencies, I'm not singling out the FTC, have had

00:57:59minimal accountability to the American people. With Chevron, I think we add

00:58:05some accountability, even though it is in the courts. Since June of 2022, the FTC

00:58:13has been studying the contracting practices of pharmacy benefit managers,

00:58:17PBMs, and their impacts on patients getting access to life-saving drugs they

00:58:21need. I'm in full support of injecting transparency into their operations. In

00:58:28fact, I believe their compensation needs to be decoupled from drug list prices.

00:58:33They do add value, but we need to tighten up the ship. I'm concerned about the

00:58:40market impacts of both consolidation and vertical integration in the PBM market

00:58:44and find it puzzling that even with all the power PBMs have amassed over the

00:58:48years, they felt the need to create a whole new entities called GPOs or

00:58:52government or group purchasing organizations. As I'm sure you're aware,

00:58:56the Ohio Attorney General recently filed a lawsuit against one of these

00:58:59GPOs and several PBMs, alleging that these entities were engaged in

00:59:04anti-competitive behavior. Very little is known about these GPOs except that

00:59:09they've created new revenue streams for PBMs and insurers that own them. I know

00:59:14that two have been set up offshore in Ireland and Switzerland, and there are

00:59:18indications they did that to take advantage of lower foreign corporate

00:59:22tax rates and privacy laws. Chair Kahn, is this something the FTC is examining?

00:59:31Thanks for the question, Congressman, and on both fronts, yes. As you noted, the FTC

00:59:37has been scrutinizing the pharmacy benefit managers for a couple of years

00:59:41now. We just released an interim report with some of our staff's initial

00:59:45findings laying out, as you just noted, the significant vertical and horizontal

00:59:51consolidation, as well as the concerns we've heard from independent pharmacies,

00:59:56for example, as well as the risk of potentially inflated prices. We do two

01:00:02case studies in the report, specifically on cancer drugs, showing some

01:00:06potentially troubling outcomes there. On GPOs specifically, we've heard concern

01:00:12from doctors in particular that shortages in areas like antibiotics and

01:00:18chemotherapy may be driven in part by the practices of these GPOs, and so a few

01:00:24months ago, in partnership with the FDA, we launched an RFI to collect comments

01:00:30from the public on these GPOs, and we're continuing to review those comments.

01:00:35Commissioner Holyoak, you want to comment on that? You have any comment or

01:00:38anybody else have a comment on that subject? On that subject, certainly. As you

01:00:43may know, I dissented from this morning from approving this report. I don't

01:00:50believe the report is sufficient. I think it lacks economic and empirical evidence.

01:00:54I think it doesn't look at all of the players in the pharmaceutical field. I

01:00:58think it doesn't look at all at consumer prices and how

01:01:03consumers are impacted. I'm also concerned that there was a very thorough

01:01:07report from 2005. It doesn't attempt to look at that report and describe the

01:01:12changes from the market conditions from that report. It doesn't explain

01:01:16why those changes exist. I think the two case studies are not... we don't know if

01:01:22they're representative of the field. It's too early to know. It's

01:01:27not sufficient. It doesn't provide enough evidence to understand what that

01:01:31actually means. Those two case studies also talk about reimbursement rates to

01:01:37the PBM-affiliated pharmacies, but don't tie that to actual consumer harm and

01:01:42what's happening with prices. I think there's a lot of work that needs to be

01:01:46done still on that. I hope that the Commission can commit to doing

01:01:52that work and providing a fulsome report. Thank you for that. I have a few

01:01:58seconds. Chair Kahn, how did we lose the UnitedHealth Group change health care

01:02:02case? The government. It may not have been just exclusively you.

01:02:07Because you see what happened, right? Subsequently, change health care was

01:02:11hacked because their security wasn't properly evaluated in this process.

01:02:17So how did we lose? This was a Justice Department effort to block that merger.

01:02:22Unfortunately, as you noted, they lost in the DC District Court. That was a

01:02:27vertical merger and the judge ultimately ruled that he didn't think the risks of

01:02:32anti-competitive effects would be resulting. He thought that some

01:02:36safeguards that the companies had promised they would put in place would

01:02:39be adequate. I do want to just step back and note a broader trend here where we

01:02:44see time and time again, as companies become more dominant, we are seeing how a

01:02:49single data breach or a single hack can have cascading consequences, be it in

01:02:55health care, be it for auto dealers. There was just a big hack that rendered auto

01:03:00dealers kind of captive to a single company. So this is a broader trend,

01:03:04especially for the FTC that oversees both competition and data security.

01:03:10Being able to connect the dots here is going to be critical. Fair enough, and I

01:03:14think in the PBM space and in this type of situation that Congress, in light of

01:03:19Chevron, needs to put some laws in place, potentially, or at least debate them to

01:03:24help us and help you. I now yield back and I yield to Ms. Dingell. Five

01:03:30minutes. Thank you, Mr. Chairman. Privacy should be a phenomenal right in this

01:03:35country, and this committee has been diligently working to advance privacy

01:03:40protections. I'm hopeful that this Congress we can pass comprehensive

01:03:44federal privacy law, Oaks brings eternal. We must focus on ensuring that consumer

01:03:52data collection is minimized and that only necessary data is collected, used,

01:03:57retained, and transferred. Building consumer trust requires robust

01:04:01protections for sensitive data and stringent enforcement mechanisms for

01:04:06when those protections are violated. As vehicles become increasingly connected

01:04:11and capable of collecting vast amounts of data, it is essential to understand

01:04:16the implications of potential privacy risks associated with this technology

01:04:21and its impact on consumers. Recently, my colleague, Grubb Caster, and I wrote the

01:04:26Commission to Express Concerns Around Automotive Manufacturers' Data Privacy

01:04:31Practices. I appreciate your timely response and I want to follow up with

01:04:35some questions, and I am going to say again, I think the American people have

01:04:39no idea how much of their privacy is being given away, and until they read in

01:04:44the New York Times that car companies were giving their data to insurance

01:04:49companies and it was hiking up their prices, it wasn't real, it didn't cost

01:04:53them money, and maybe, maybe we'll start to see more emphasis on why we need to

01:05:00do something. Chair Kahn, can you elaborate on proactive steps to prevent

01:05:05future privacy violations and talk about enforcement mechanisms related to

01:05:09connected vehicles? So this is an important area of inquiry for us. We read

01:05:17a lot of those reports, we'd separately been hearing a lot of concern about this,

01:05:21and I think for a lot of people, they assume that when you're driving in your

01:05:25car, there's a base level of freedom that you have, right? You're not being

01:05:29surveilled, and I think across the board, people have been waking up to the

01:05:34reality that unfortunately, their precise geolocation is not only being collected

01:05:40and tracked by private companies, but oftentimes is being trafficked, being

01:05:44bought and sold, including to foreign adversaries, to companies across the

01:05:48world, and so this is a major, major issue. At the FTC, we have kind of put

01:05:55market participants on notice about how we would view some of these data

01:05:59sharing and collection practices. We need to make sure, at the very least, that

01:06:03people are not being deceived. I'm limited in what I can share about any

01:06:07non-public investigations, but I can assure you that we are tracking this

01:06:11closely. Thank you. Chair Kahn, what measures are being taken to ensure the

01:06:16consumers are fully informed about their data in relation to connected

01:06:20vehicles, third parties, and data brokers? So if companies were to engage in

01:06:28certain data collection practices that they were not being fully upfront with

01:06:33users about, that could give rise to potential deception violations. More

01:06:39generally, the FTC has been very focused on categories of sensitive data, so that

01:06:44includes health data, it includes geolocation data, and through our

01:06:48enforcement actions, we have made clear that there has to be a presumption

01:06:52against selling this sensitive data, and so if you're collecting somebody's

01:06:56geolocation data, you can't just share it or sell it without getting their

01:07:01affirmative permission, and so that's a principle that would apply across the

01:07:06board, be it an app or a car. Chair Kahn, given the rapid evolution of

01:07:12connected vehicle technology, how does the Commission plan to stay ahead of

01:07:16emerging data privacy challenges and ensure comprehensive protection for

01:07:21consumers? So we have fantastic experts on board that are studying this closely,

01:07:27that are really looking under the hood to understand what are the precise

01:07:30mechanisms by which some of this data is being collected, how can it be used. We

01:07:36have our law enforcement work ongoing, we have potential rulemakings underway, and

01:07:41so we will faithfully continue to use all of our tools and authorities to make

01:07:45sure that people's sensitive data is protected. Thank you. I'm going to do a

01:07:49really fast question on total pricing rule and probably do more follow-up. Can

01:07:56you work, will you be working on the total pricing rule with the industry

01:08:01specific regulatory agencies, including the FCC, which is

01:08:07testifying before the Communications and Technology Subcommittee downstairs

01:08:11today, to ensure that your rules are harmonized with the rules of other

01:08:15federal agencies? You two run up, FCC and FTC, run up against each other. Yeah, as a

01:08:21general matter, we're always keen to be learning from our sister agencies. We

01:08:26have a great relationship with the FCC. As you know, there are areas where our

01:08:30jurisdictions do not overlap, and so they have oversight over common carriers and

01:08:36other providers that we cannot oversee. But nonetheless, it's always very useful

01:08:40to be learning from one another. Thank you. I'm going to send more questions

01:08:44for the record on that. And I'm just going to say as I close, I remember

01:08:48sitting with my colleagues on both sides of the aisle several years ago when I

01:08:53was bringing up issues and someone said, what do you do? Do you take drugs and

01:08:58think about these things at night? People had no idea that cars are smart cars,

01:09:03just like they are on phones. And that's one of the serious issues facing us. I

01:09:07yield back, Mr. Chair. I recognize Mr.

01:09:11Wahlberg. Five minutes. Thank you, Mr. Chairman, and to my colleague from

01:09:16Michigan, I never thought whether you took drugs. I wouldn't have suspected

01:09:25that. Protecting kids and my colleagues and teens online is a top priority for

01:09:36me and so many others across the country and on this this committee. I led COPPA

01:09:422.0 along with my friend Representative Castor, which would update and

01:09:47strengthen the Children's Online Privacy Protection Act by expanding protections

01:09:52for teens, prohibiting targeted ads, and establishing clear data minimization

01:09:57requirements. Commissioner Holyoak, welcome. Can you speak to the importance

01:10:03of COPPA in the past and how we can continue to improve online protections

01:10:07for minors? Absolutely. Thank you for that question. This is an

01:10:12important issue for me. I have four kids and tracking what they do online

01:10:16sometimes feels like a second full-time job. So it's tough and COPPA is

01:10:22an excellent tool for the Commission. Just today we announced a

01:10:27settlement with the company and it was a complaint that included a COPPA claim

01:10:32and this is an app that would send anonymous messages to teens saying

01:10:37things like, I know what you did, I see you on Instagram. I mean it's terrible

01:10:42things. There's terrible problems out there and so it's an important tool

01:10:46for that and I thank you for your leadership on this and I think Congress

01:10:51should continue to look at these issues and continue to see if we can we can

01:10:54find ways to strengthen our enforcement efforts and if whatever if those laws

01:11:00are passed I will vigorously enforce those. Yeah, well we need to work together

01:11:04strongly on that and I think the time has come, well past come. Chair Kahn, the

01:11:11Northern District of Texas preliminarily enjoined the FTC's non-complete compete

01:11:18rule stating that the rule likely exceeds the agency's authority and that

01:11:23it is arbitrary and capricious. Strong words. Assuming this is a final decision

01:11:28of the court, will the FTC stop trying to promulgate this rule? So as you know this

01:11:35was a preliminary injunction hearing and the judge has said that she will issue a

01:11:42full opinion by the end of August so we will wait to see what happens there and

01:11:49of course we would proceed with in accordance with you know court decisions

01:11:53that come down. We're still reviewing and proceeding accordingly. More generally I

01:11:59mean non-competes now trap over 30 million American workers and we've heard

01:12:03from over 25,000 people across the country about how non-competes are

01:12:09keeping them locked into their current job, preventing them from going to get a

01:12:13better opportunity elsewhere. We actually brought a case involving janitors and

01:12:19security guards in Michigan who were making close to minimum wage who wanted

01:12:24to be able to switch jobs to get a higher wage and instead they were

01:12:28threatened with lawsuits for tens of thousands of dollars. So we're talking

01:12:32about real harms to real people as our rulemaking lays out. We think that not

01:12:38only are American workers less free but our economy is worse off, less dynamic,

01:12:43less competitive. Well we'll look forward to court having a final decision on that

01:12:47and I'm encouraged that you say you will follow that. Commissioner Holyoak, the

01:12:52court's decision largely tracks your dissent. What's your assessment? Thank you

01:12:58for the question. Yes, my dissent points out that the first and foremost

01:13:04when we're doing a rule we need to look and see what is our source of authority.

01:13:07Here the non-compete relies on both section 5 of the FTC Act and section 6

01:13:12working together. Section 5 is where unfair methods of competition is

01:13:16contained but section 5 sets forth a really comprehensive adjudication

01:13:21framework. Section 6 by contrast sets forth our authorities relating

01:13:27to investigations and inside section 6 is a rule section 6g that says that we

01:13:32can classify corporations or make rules in furtherance of the provisions of this

01:13:38act. So that is where that the source of authority, the non-compete claims to have

01:13:44that authority. But the question is you have to look at the entire text and

01:13:48structure of the act. Does that little provision, that ancillary

01:13:52provision in section 6g, what kind of rules does that allow? Does it allow

01:13:56procedural rules, internal operating rules or legislative rules which is what

01:14:01the non-compete alleges it does. And to understand that we need we look at

01:14:06the entire text and structure. Section 5 has absolutely no mention of rulemaking.

01:14:10It talks again as I mentioned adjudication but not even any sort of

01:14:15adjudication of prescribed rules. So looking at the text and structure

01:14:19together there is, I believe and as I explained in my consent, that

01:14:25no reviewing court would find that there is rulemaking authority under section 6

01:14:30and section 5 together for unfair methods of competition. And that is what

01:14:33the court held. The court, as Chair Kahn mentioned, is a preliminary injunction

01:14:37but the standard for a preliminary injunction is likelihood of success on

01:14:41the merits. So that is what the court held. Thank you. My time has expired. I

01:14:46yield back. Gentleman yields back. Now recognize Ms. Kelly. Five minutes. Thank

01:14:56you Chair and Ranking Member for holding this important hearing this

01:15:00morning. I also want to thank the Commissioners for their testimony.

01:15:05Artificial intelligence will lead to positive advancements. However, we also

01:15:09know that there are real concerns especially as fraudsters and scammers

01:15:13are using AI tools to impersonate individuals causing Americans to lose

01:15:18thousands of dollars. In fact, the FTC estimates that impersonation scams cost

01:15:23consumers more than a billion dollars over the course of just last year. You

01:15:28must ensure that Americans are equipped with the necessary information to

01:15:31identify these scams and our government agencies, like the Federal Trade

01:15:35Commission, have the necessary tools and resources. That is why I recently

01:15:40introduced the Protecting Seniors from Emergency Scams Act, which will help

01:15:44older adults identify scams before it's too late.

01:15:47Similarly, I am pleased that the FTC finalized the government and business

01:15:52impersonation rule, which gives the agency stronger tools to combat scammers

01:15:57who impersonate businesses or government agencies, and I appreciate that you have

01:16:02issued a supplemental notice on prohibiting individual impersonation

01:16:06because of rapid improvements on AI. Chair Kahn, may you please discuss the

01:16:11genesis of the government and business impersonation rule and explain how it

01:16:15will help empower the FTC to handle such scams and also tell us what the next

01:16:21steps are for the individual impersonation rulemaking? Happy to. So

01:16:26unfortunately, despite vigorous enforcement by the FTC, these types of

01:16:31imposter scams remain quite prevalent. It's actually one of the biggest sources

01:16:35of fraud that we get reported from the public, and so you'll have, for example,

01:16:40somebody pretending to be an IRS agent and call up an unsuspecting victim, you

01:16:46know, tell them that they owe thousands of dollars and risk arrest if they don't

01:16:50pay up. I mean, these are really awful scams that fall on people, and so we

01:16:55proposed a rule that would basically allow us to get money back for people

01:17:01who are defrauded from those scams. It would also unlock civil penalties, and I

01:17:06know there's been a lot of discussion about, you know, should we just do

01:17:09lawsuits? Should we also do rulemaking? These things are actually deeply

01:17:13connected because after the AMG decision, we are not able to get money back for

01:17:18people who are defrauded by these imposter scams, and so because we've done

01:17:23the rulemaking, now if we allege a rule violation, we will be able to get that

01:17:27money back. We'll also be able to levy civil penalties, which is incredibly

01:17:32important for deterrence. You need to make sure that the scammers can't profit

01:17:36from scamming, and that's what these rules will help us do. Thanks so much.

01:17:40Commissioner Slaughter, would you like to add anything as it relates to the

01:17:43agency's work on mitigating scams? Sure. I think it's a really important topic. I

01:17:50would note that in this rulemaking, we had very widespread support from the

01:17:56business community because businesses suffer when they are

01:18:00impersonated to perpetrate fraud, and so it's an example of a rule that helps us

01:18:08utilize the statutory tools that we have. As Chair Kahn said, we have a long

01:18:12enforcement record behind it, and what we had found is that case-by-case

01:18:16enforcement was not sending enough clarity to the markets about what

01:18:20conduct was illegal and was not putting enough deterrent thumb on the scale to

01:18:25prohibit that conduct. So again, we can't go beyond practices that are unfair or

01:18:32deceptive, so barred by the FTC Act, and we can only address by rule those

01:18:36practices that were prevalent in the economy, and we had to do that

01:18:41after a very extensive, engaged public participatory record process, but we're

01:18:47really proud of this rule and excited to make sure that we continue to adapt our

01:18:52enforcement efforts to the patterns that we're actually seeing in the marketplace.

01:18:56Thank you so much. I'm also concerned about the American

01:18:59workforce, largely due to the emergence of AI, but also because industries are

01:19:04still recovering from the COVID pandemic. Simply put, we need to ensure our job

01:19:08market is strong and that both future employees and employers have the

01:19:12necessary resources to find the right fit. For the last couple of decades that

01:19:17we've all witnessed the emergence of the Internet, companies have revolutionized

01:19:20the recruitment industry by making user-generated resumes and professional

01:19:24profiles publicly accessible, creating an invaluable resource for employers and

01:19:29job seekers alike. Yet it is my understanding that companies are now

01:19:33taking aggressive actions to dominate the digital recruiting industry by

01:19:37putting these public professional profiles behind paywalls. I'm concerned

01:19:42that the consumers are seeking jobs and choose the option of making their

01:19:45information public would be surprised to learn that not all would-be employers

01:19:49can view their profiles and that this would move, and that this move could also

01:19:53reduce competition in the recruitment industry and therefore have a negative

01:19:57impact on hiring activities across the country. Commissioner Kahn, is this an

01:20:01issue that you and your staff are aware of, and is this something you can look

01:20:06further into? As a general matter, we're very aware of how digital markets in

01:20:12particular can tip and result in more dominance and monopolization in ways

01:20:17that can harm competition. Happy to be in touch about the specific issue you raise.

01:20:21Thank you, and I yield back. Thank you, thank you, I appreciate it. Now, Ms. Lesko

01:20:26from the great state of Arizona, you're recognized for your five minutes of

01:20:30questioning. Thank you, Mr. Chair. Chair Kahn, how many employees or consultants

01:20:37has the FTC hired from the Open Markets Institute, American Economic Liberties

01:20:43Project, and Capital Forum? Congresswoman, we've been really fortunate to be able to

01:20:50recruit top talent from across all sorts of workplaces and all sorts of forms of

01:20:56expertise, including private sector, including public sector, including

01:21:01non-profits. Do you know the number from those particular organizations that

01:21:05you've hired? Not off the top, but can you look into it? Well, can you send it to me

01:21:10and the committee, please, once you check into it? We're happy to look into it and

01:21:16be in touch over overriding. Okay, so you're going to give me the answer,

01:21:21correct? I don't know if there are kind of HR rules that we would be running

01:21:25afoul of, but assuming we are able to share that information in accordance

01:21:30with agency policy, we'd be happy to be able to share what we can. Thank you. Chair Kahn, I'm

01:21:34hearing that there are significant leaks coming out of the FTC, especially to

01:21:39left-wing news organizations, including Capital Forum and the New York Times. The

01:21:44House Judiciary Report concluded that the FTC's explanation of the leaks was

01:21:50implausible. What have you instructed Commission staff concerning these

01:21:55continued leaks, and has anyone at the FTC leaked stories to the press during your

01:22:00tenure ahead of public announcements? So I couldn't agree more that ensuring the

01:22:05integrity and security of non-public law enforcement information is absolutely

01:22:11paramount. Before I arrived at the FTC, the Inspector General actually did a

01:22:16survey and identified some vulnerabilities, and so since I've joined,

01:22:20we've been taking steps to put those safeguards in place. Of course, we

01:22:24continue to remind our staff of the importance... Excuse me, just because I'm

01:22:29running out of time. Have you instructed Commission staff concerning these

01:22:33continued leaks? Have you talked to the staff about it? As a general matter, I

01:22:37believe our General Counsel has reminded everybody of the importance of

01:22:42maintaining the security and integrity of law enforcement information. And do

01:22:47you know personally if anyone at the FTC leaked stories to the press during your

01:22:51tenure? No, I don't know that. Okay. I'll say as a general matter, one pattern we

01:22:56often detect is once we are interviewing third parties as part of our

01:23:01investigation, that ends up being a moment at which some of this information

01:23:04also can become public. So we'll do everything we can to keep non-public

01:23:09information non-public, but sometimes other actors have this information as

01:23:13well. Thank you. Chair Kahn, the national debt is approaching $35 trillion. I

01:23:20believe this year our interest payment on the debt will exceed the entire

01:23:26budget of the Department of Defense. With that in mind, can you provide

01:23:30justification for the 25% increase in the FTC's budget request for fiscal year

01:23:3625? Yeah, I'd be happy to. So a significant amount of this would

01:23:42actually cover unfunded pay increases. 70% of our budget goes to our

01:23:48covers FTEs, and so when there are 5.2% statutory increases in how

01:23:55much we have to pay, but we're not getting money for that, that really

01:23:58pinches us. In that budget request also is included funding for critical upgrades

01:24:04to our IT infrastructure. As we are doing more of these investigations in AI and

01:24:11looking at monopolies and digital markets, we end up having to analyze a

01:24:15lot of big data, reams and reams of data, and so we need to make sure we actually

01:24:19have the capacity and the infrastructure to do that analysis. Beyond that, there

01:24:25are non-pay related cost increases that we are running up against, and so that's

01:24:31what this would cover as well, but the vast majority, 70%, would cover employees.

01:24:36And Chair Kahn, can you expand on why you would give pay increases if you

01:24:42don't have the budget? So we don't, we can't unilaterally decide to pay

01:24:47employees more. That's something that Congress has done. Congress, through

01:24:52statute, said these employees need to be given increases in pay, and so we are

01:24:57following what Congress has told us to do. As a general matter, you know, I fully

01:25:03understand being concerned about spending, but I'll just underscore, for

01:25:07every $1 the FTC receives, we return $14 back to the public. You know, we just, we

01:25:15always talk about the debt, and I'm really concerned about our debt and the

01:25:20amount of interest that is accumulating when it exceeds the Department of

01:25:26Defense budget. That's a national security risk, and so I guess, you know, in

01:25:30my personal budget, if I go over budget, I would probably have to, you know, say,

01:25:36okay, maybe we can't employ that as many people and that type of thing, so that we

01:25:42have to start addressing our national budget or everything's going to be a

01:25:47problem, and with that, I yield back. I tell you what, we're gonna miss you,

01:25:51Representative Lesko, that's for sure. Now, I'll recognize my colleague from the

01:25:58great state of Florida, Ms. Castor, fellow caller from the Tampa Bay Area,

01:26:03you're recognized for your five minutes of questioning. Well, thank you, Chair

01:26:07Bilirakis and Ranking Member Schakowsky, and welcome to our FTC commissioners.

01:26:12Thank you for all that you do, standing up to scam artists and fraudsters. Our

01:26:18neighbors back home really need you. We need the cops on the beat of the FTC

01:26:25rising up against the folks who are trying to deceive our neighbors and use

01:26:30unfair, deceptive trade practices, so I want to associate myself with the

01:26:35remarks of Ranking Member Schakowsky. This is not the time to take the cops

01:26:40off the beat. The scam artists aren't taking a vacation, the fraudsters aren't

01:26:44saying, oh, okay, if you're going to cut the budget, we'll take a vacation.

01:26:50They're not. They're going to double down if we take FTC cops off the beat, so

01:26:55thank you, Ranking Member Schakowsky, for that, and hopefully we can fend off

01:27:00harmful cuts. The last time you all were here, we had a larger discussion on

01:27:06comprehensive data privacy. It's good to see that this hearing is also focused in

01:27:12on how we protect Americans from just the incessant surveillance,

01:27:20tracking, collection of our personal private data, and then the sale of it.

01:27:24Commissioner Holyoak, you framed it as big tech corporations versus

01:27:29individual liberty, and I think when Rep Dingell talks about the average person

01:27:35does not understand how they are being constantly turned into a product and

01:27:40their personal data is being sold. That example of smart cars gathering the

01:27:47data and that your data being sold to insurance companies does help tell the

01:27:51story. We have been focused, especially I have, on the impact on kids. That's why I

01:27:59introduced the bipartisan COPPA 2.0 with Vice Chair Wahlberg. COPPA

01:28:05passed more than two decades ago, but think about the evolution in

01:28:09technology and the ability of big tech to track and deceive children, and

01:28:15parents just feel like they're over the barrel right now.

01:28:19COPPA 2.0 still has not been marked up in the full committee, but thankfully the

01:28:26FTC has been undergoing rulemaking under the authority that you currently

01:28:31have. I understand your proposed rule. It requires opt-in consent for third-party

01:28:39behavioral advertising. It strengthens retention limitations and data

01:28:43minimization requirements. It codifies current guidance on ed tech, strengthens

01:28:48transparency and accountability for safe harbor programs, but Chair Kahn, now that

01:28:52the commission has undergone rulemaking and a comment period, can you

01:28:57share some of your findings and what is the outlook? Well, first let me just

01:29:01say thank you for your leadership on this key issue, and I couldn't agree more

01:29:04that kids need to be able to play and learn online without being endlessly

01:29:09tracked and surveilled by companies that are selling their data for profit. We

01:29:14were really glad to be able to propose an update to COPPA that would strengthen

01:29:18the rule in the ways that you mentioned. Our folks have been digesting the

01:29:22thousands of comments that have come in, and so we're not quite ready to kind of

01:29:26share what the final rule will look like, but we're moving forward on this

01:29:32work steadily. We're also continuing with our law enforcement, and so just over the

01:29:37last year we secured a record-breaking COPPA penalty with Epic Games, which we

01:29:43found had been, you know, collecting data on kids without getting parents' consent.

01:29:48We also brought a case against Amazon's Alexa, which we found had been storing

01:29:53kids' sensitive geolocation and voice data and not allowing parents to delete

01:30:00that data as they're supposed to be able to under COPPA. One principle that we're

01:30:04making clear, as you know, COPPA has a limit on indefinite retention on data.

01:30:10And one thing we are increasingly hearing from companies is that in this

01:30:14age of AI, they have a business reason to endlessly hoard data because they want

01:30:20to continuously refine their model. And so we've made clear, including through

01:30:24that Alexa matter, that there is no AI exemption to the COPPA limitation on

01:30:29indefinite retention. So that's another area where we're continuing to push.

01:30:33That's good. Commissioner Slaughter, you've been very active and outspoken on this topic.

01:30:37What's your view?

01:30:39Yeah, I think that's right. We're going to do whatever we can with the tools that we have,

01:30:43but I think this is an area where it's really critically important for Congress to act.

01:30:47COPPA was groundbreaking and revolutionary and changed the landscape,

01:30:52but I think it's past time to update it. We can't do everything that you can do.

01:30:58As we've said a couple of times, we can implement the COPPA law that was passed in the past.

01:31:04We can do new rules that address unfair, deceptive acts and practices,

01:31:08but you can go much further than that with clarity and specificity to market.

01:31:13So we stand ready to help and support in those efforts, and we're really grateful for them.

01:31:18Thank you very much. I yield back.

01:31:20General Lee yields back. Now I recognize the next governor for the state of North Dakota,

01:31:27Mr. Armstrong.

01:31:29I actually had a whole line of questioning on something, but something Ms. Caster just said.

01:31:34I may ask all five of you this question because I think it's fairly important.

01:31:41You just said there's no indefinite retention on AI, and we're not going to exclude that, correct,

01:31:46Chairman Kahn?

01:31:48Under COPPA, so for certain entities in certain contexts.

01:31:52So my question is, once information is generated into AI, how is it not retained permanently?

01:32:01So you mean basically how can you require unlearning from the model?

01:32:05Yeah.

01:32:06I think that's a great question. As far as we know, it's not possible,

01:32:09and that's why timely action is incredibly important and making sure firms are not,

01:32:14in the first instance, able to use unlawfully collected data to train their AI.

01:32:20But also your point raises another issue, which is business could face an incentive

01:32:25to actually play fast and loose with the rules because their monetary gain from that

01:32:31and the value they'll generate from training their AI could be so important.

01:32:35And so for all of these reasons, kind of stronger rules of the road are going to be critical.

01:32:40I'm going to ask the two new commissioners one at a time their thoughts on this

01:32:43because I think this is the next big conversation.

01:32:45Anybody's heard me talk about this, whether it's government-related,

01:32:49privately-related, if you have a 16-year-old daughter and a 14-year-old son,

01:32:53privacy in the 21st century is going to be the conversation we have

01:32:59and how we monetize all of these things.

01:33:01So what tools do you need from us?

01:33:05Well, and to your question on what do you do once that data is captured,

01:33:10it's an interesting question.

01:33:11I'd say, I mean, these emerging technologies,

01:33:13we don't fully understand exactly what they're capable of.

01:33:17But I think what's interesting is I think there will be more technologies that may help us

01:33:22in terms of fighting some of these issues.

01:33:24The FTC's work on the voice cloning challenge is a great example of where we're concerned

01:33:29about voice cloning, the use of AI where you have fraudsters calling up grandmas

01:33:35and saying this is your grandson using a voice clone and worried about that.

01:33:41So the agency, we just had a voice cloning challenge where we had companies come in

01:33:45and say what can we do to fight this?

01:33:47And they provided different technologies that could help assess that.

01:33:50And I think the same is possible with these types of issues where you're going to have,

01:33:55we're going to see these types of problems arise in the markets.

01:34:00I think we'll also see solutions arise too.

01:34:02And I think we can let the markets develop and understand where those,

01:34:06with constantly assessing where the markets are,

01:34:10remaining vigilant, using the tools that we have to address the concerns that they have

01:34:15when there are unfair and deceptive trade practices

01:34:18and or if there's competition issues as well.

01:34:20And I know when we talked, coming in we talked about the Ticket Act

01:34:23and one of the things that concerns me about AI is somehow it's the enforcement, right?

01:34:29If you use five other songs to create a song, you have to pay royalties for it.

01:34:32We all know if you don't, you get sued and if you can prove it,

01:34:36you end up losing on a royalty case.

01:34:38There's famous ones.

01:34:39My concern is we don't know the five inputs

01:34:42and there's this fight between open source and non-open source.

01:34:46And so I don't want to live in a world where every musician is created by AI.

01:34:51I don't think you get Nirvana in 1991 off of Motley Crue in 1987.

01:34:56I think AI is pretty smart.

01:34:58I don't think it's smart enough to do that.

01:35:00I also think by the time we get around to regulating it or legislating on it in a meaningful way,

01:35:05the technology is going to be so far past us that we're –

01:35:08I mean there's very few times that I can say that up here

01:35:11because the Music Modernization Act became law before I got here

01:35:15and it's actually worked.

01:35:17It's not perfect in the new environment,

01:35:19but it was originally started to be written under Napster and LimeWire

01:35:23and all of those things and it still exists.

01:35:25But I mean what different enforcement challenges do you see moving forward

01:35:30in this space, Mr. Ferguson?

01:35:33So the commission's got its suite of statutes that it enforces

01:35:36and most of them are relatively old and they're very old compared to AI.

01:35:40And the stuff that you're talking about involves these massive tradeoffs

01:35:44between promoting the innovation –

01:35:46I mean look, AI will be a super important tool for new challengers

01:35:50to come and challenge big tech incumbency.

01:35:53And we don't want regulators sort of strangling that in the cradle early on.

01:35:57At the same time, tremendous risks are associated with AI.

01:36:00These are like huge political sort of national economic tradeoffs

01:36:03that Congress needs to make afresh.

01:36:06It can't be that the agencies take these statutes from the 1910s and 1930s

01:36:10and tries to sort of fit AI into that system.

01:36:14Congress has to tell us or whichever agencies they're going to empower

01:36:17to do this enforcing how to do these tradeoffs.

01:36:20Well, and I think one of the first questions we have to answer,

01:36:22which is really actually hard, is how do we define open source?

01:36:26Open source is very different now than it was five years ago.

01:36:29I mean if you can get a song online and feed it into an AI generator,

01:36:33I can't play that song at my business without paying royalties.

01:36:37But once I put it into an AI generator, I don't know.

01:36:40And I mean so I understand the regulatory side of it.

01:36:42I'm very concerned about how we actually – you all do it and we do it,

01:36:48how you actually figure out a mechanism to enforce it.

01:36:50Because stealing something and making something not original your own is –

01:36:55I mean we have the rules in place.

01:36:57We just don't – I don't know if we're –

01:36:59I think we're massively inadequately prepared to enforce it.

01:37:02And with that, I yield back.

01:37:04Okay.

01:37:05All right, now I recognize Ms. Clark from the State of New York.

01:37:08You're recognized for your five minutes of questioning.

01:37:11Thank you very much, Mr. Chairman,

01:37:12and I thank our Ranking Member Czajkowski for holding this hearing today.

01:37:16I'd also like to thank our commissioners for being here to testify.

01:37:20In our increasing complex society,

01:37:23the FTC provides clarity for businesses and consumers alike,

01:37:27protecting the American public from deceptive or unfair business practices

01:37:35and methods of competition.

01:37:37Under the leadership of Chair Kahn,

01:37:39the FTC has taken important steps to combat unsolicited robocalls,

01:37:43scams turbocharged by AI tools, junk fees, dark patterns, and much, much more.

01:37:49And while I am concerned about our lack of federal data privacy standard

01:37:53and the ability for unchecked automated critical decision-making processes

01:37:57like algorithms to produce biased or discriminatory outcomes,

01:38:02I'm confident that the FTC, once properly empowered by Congress,

01:38:07can rise to meet the challenges presented by rapid advances in intellectual intelligence –

01:38:12excuse me, artificial intelligence.

01:38:15Though in this Congress we have thus far been unable to move through

01:38:19the full committee comprehensive federal data privacy legislation

01:38:22that appropriately centers algorithmic accountability,

01:38:25the FTC has taken important steps to addressing potential algorithmic discrimination,

01:38:31including through its commercial surveillance rulemaking.

01:38:35Chair Kahn, what do you see as the commission's current role

01:38:39in addressing algorithmic discrimination,

01:38:41and what kind of authority might the commission need in the future

01:38:45to stay ahead of advancements in technology?

01:38:48Thanks, Congresswoman, and, of course,

01:38:50any new statute that Congress passes directing the FTC to take specific action here,

01:38:56we will follow.

01:38:57As a general matter, in the commercial surveillance rulemaking,

01:39:00we have issued an advance notice of proposed rulemaking that primarily asks questions.

01:39:05We got thousands of comments that our team has been digesting.

01:39:09The FTC also a decade ago launched something called the Every Community Initiative,

01:39:14where we specifically look at how particular communities

01:39:17might have been especially targeted by certain types of fraud,

01:39:21certain types of underserved communities, and so that work still continues.

01:39:26We also are charged specifically by Congress under the Equal Credit Opportunity Act

01:39:32to enforce that law and its prohibition on discrimination,

01:39:35and so through all of these statutory tools and authorities, we can act where we can,

01:39:41but I think this in particular is an area where greater clarity

01:39:45and direction from Congress is going to be key.

01:39:48Very well, because I was going to ask whether you felt that that was sufficient.

01:39:51Let me thank you.

01:39:52Algorithmic discrimination can rear its ugly head in a multitude of settings

01:39:56beyond just automated critical decision-making processes,

01:40:00which impact consumer access to essential services, programs, or opportunities.

01:40:06Facial recognition technology is yet another tool powered by artificial intelligence,

01:40:12which has the serious potential for harm and bias, particularly for communities of color.

01:40:17The collection and use of biometric information in any instance,

01:40:21but particularly with respect to AI tools, is fraught with the potential for harmful outcomes

01:40:26and must be subject to rigorous oversight.

01:40:29The FTC's recent action against Rite Aid perfectly encapsulates these concerns.

01:40:35For years, Rite Aid used facial recognition technology to identify customers it deemed likely

01:40:42to engage in shoplifting and alerted store employees to their presence,

01:40:46subjecting customers to additional surveillance and unwanted searches.

01:40:51While though we all know these systems often fail to accurately identify people of varied gender,

01:40:59age, and racial backgrounds, Rite Aid never actually tested their system for accuracy.

01:41:05As a result, many black, Asian, and Latino customers face unnecessary additional surveillance

01:41:11and harassment from employees.

01:41:13While I was pleased to see that the FTC took action to defend shoppers from this kind of discrimination,

01:41:20I'm worried.

01:41:21I'm worried about the ongoing potential for harm from this kind of technology.

01:41:25Chair Kahn, what can Congress and the FTC do moving forward to prevent this kind of discriminatory behavior

01:41:32in the future, and what can be learned from the Rite Aid case?

01:41:36Thanks, Congresswoman.

01:41:37So as you noted, that was a case involving the use of facial recognition surveillance tools.

01:41:43There were very reckless practices that resulted in really horrible outcomes for underserved communities

01:41:49and for certain customers.

01:41:51As a general matter, I think you're right that as these algorithms and AI tools are being used to automate

01:41:57decision making, there's a tremendous amount of opacity.

01:42:01We basically have these black box algorithms.

01:42:03We don't know what's going in them, and they're spitting out decisions that can be enormously consequential

01:42:09for people and determine who's getting access to housing, who's getting access to credit.

01:42:15Commissioner Holyoke earlier mentioned debanking or deplatforming.

01:42:20And these decisions about who's getting access to these essential services is going to be critical,

01:42:25and it can harm people on all sorts of dimensions.

01:42:28I mean, companies can discriminate against you because of your race.

01:42:32They can discriminate against you because you're a gun owner, because you go to church.

01:42:36The dimensions on which companies can discriminate could be quite significant,

01:42:40and I think it's something that we all need to wrap our heads around.

01:42:44Again, I think this is a particular area that the more Congress is able to legislate

01:42:49and give direction, be it to the FTC or others, that will be essential,

01:42:54and we'll continue to use our tools as we can.

01:42:56Very good, and I, again, thank you all for your service.

01:42:59With that, Mr. Chairman, I yield back.

01:43:01Thank you.

01:43:02I thank the General Lady.

01:43:03Now I'll recognize Ms. Harshberger from the State of Tennessee.

01:43:08You're recognized for your five minutes of questioning.

01:43:10Thank you, Mr. Chairman, and thank you to the witnesses for being here,

01:43:13and welcome to the new commissioners.

01:43:16We're glad to have you.

01:43:17You should have been here two years ago.

01:43:19We've had a lot of fun since then.

01:43:22Chair Cahn, you know, I scanned the PBM interim report, and, you know,

01:43:28PBMs have failed to reimburse pharmacies adequately for years.

01:43:32I've been one of them for over 30 years, and it's led to pharmacy deserts.

01:43:38People can't find a pharmacy because they put the independents out of business.

01:43:43Inadequate reimbursement leads to another problem.

01:43:46Patients that have a nearby pharmacy are still unable to get their medications

01:43:51because certain PBM requirements on the drug

01:43:54or reimbursement on the drug is so low they can't afford to keep the drug in stock,

01:43:59and so therefore they can't dispense it because they lose medicine.

01:44:02My question to you is,

01:44:03is the FTC investigating these PBM practices that keep patients away from the drugs they need?

01:44:09Thanks for the question, and I couldn't agree more.

01:44:11I mean, I've had the chance to hear from community pharmacists in Philadelphia, in Kansas City.

01:44:16They all share a version of what you just said,

01:44:18which is that there are a whole set of practices that are squeezing them.

01:44:22Top of the list is this underreimbursement issue.

01:44:24I mean, I've had pharmacists say, I'm basically auctioning off, you know,

01:44:28customers I've had for decades because I can no longer make money.

01:44:32I know my colleague Commissioner Bedoya has also heard from pharmacists across the country.

01:44:36So we recognize this is a major, major issue,

01:44:39especially for rural communities that depend on these pharmacies for essential health care,

01:44:45and so we were pleased to be able to share some of our interim findings

01:44:49from the orders we sent a couple of years ago,

01:44:52and we're going to continue to proceed with this inquiry.

01:44:55I should also note that our authority to conduct market studies is not, you know,

01:45:01mutually exclusive with our ability to also conduct law enforcement,

01:45:05and so if in the course of this work we identify practices that we believe violate the law,

01:45:11I will be supportive.

01:45:12Well, that's my next question.

01:45:14You know, independent pharmacists and their patients, they're hurting,

01:45:17and that was my question.

01:45:19Will the FTC promptly begin enforcement action if it uncovers illegal practices

01:45:24waiting for a final 6B study to be issued?

01:45:27So that's a yes.

01:45:30Commissioner Holyoke, I understand what you're saying.

01:45:33It's not comprehensive enough.

01:45:34I think the other two commissioners that resigned did not, the study wasn't comprehensive enough.

01:45:41We talked to Commissioner, I mean, to Chair Kahn about helping her on the front end.

01:45:48Let us give you the questions.

01:45:49This is our area of expertise, mine and Representative Carter.

01:45:53We've dealt with this our whole lives, so we understand this issue.

01:45:57And Commissioner Bedoya, you talked to the AG in Tennessee and community pharmacists.

01:46:04This is a huge issue.

01:46:06I can help you in any way you want because I have the information.

01:46:08I've been asking somebody to look at them for over 25 years, and I understand what you're saying.

01:46:16I hope that it goes in depth.

01:46:19When you continue this, I can give you plenty of questions to ask.

01:46:24But Commissioner Bedoya, we talked a little bit a while ago in the interim report,

01:46:32our previous conversation, you said there was a lot more left to do.

01:46:35And I want you to expand on what's left to study,

01:46:40and have you created new questions or concerns from what you've already found?

01:46:45You know, they're pretty resistant about giving information.

01:46:48Am I correct in my assumption?

01:46:50Thank you for that.

01:46:51Yeah.

01:46:52Thank you for that question, Congresswoman.

01:46:53Indeed, the report mentions on page one about the noncompliance with the orders

01:46:58that our staff is facing from these PBMs.

01:47:01And I'll note quickly, you know, I personally am looking forward to it.

01:47:05Let me actually take a step back.

01:47:07I could not be more proud of this interim report.

01:47:11It marries rigorous quantitative analysis with actual documents we've obtained

01:47:17from these PBMs or pharmacists that, for example,

01:47:21completely change the terms of a pharmacy's agreement through a fax.

01:47:27And that fax, this is 2023, says,

01:47:30if you do not reply via fax to this fax expressing your objections,

01:47:36you will be auto-enrolled in these massive changes to your agreement.

01:47:40Fax, that's the fax.

01:47:42And so I think we're going to see more qualitative evidence,

01:47:48even more quantitative evidence,

01:47:50and I know our staff is going to press these entities to comply with the law.

01:47:54Well, how are you going to force them to?

01:47:56Look, how resistant have they been about giving you information?

01:48:03I'll put it this way.

01:48:05It's not every day that on page one of an FTC report it says these entities have

01:48:10failed to comply fully with this market study.

01:48:14I wonder why.

01:48:18Well, talk to me later.

01:48:22No, I understand, you know,

01:48:24and when you talk to community pharmacists and they get two contracts,

01:48:28one says, well, this is your rate if we're continuing to do, for example,

01:48:33the 340B program and this is your rate if that goes away.

01:48:37Do you think that's a problem, anybody?

01:48:40Anybody can answer that.

01:48:42I'll tell you the answer.

01:48:44It sounds like a problem, yes.

01:48:46Yes, it's the correct answer.

01:48:48It is a problem.

01:48:50I guess, well, let me just change gears.

01:48:53I've got 40, no, no, I'm over time.

01:48:56Well, Gus, you just let me go on.

01:48:58Thank you, sir.

01:48:59I yield back.

01:49:00I know better.

01:49:01I'm not going to cut you off, that's for sure.

01:49:03Okay.

01:49:05We'll recognize Ms. Trahan for her five minutes of questioning.

01:49:09Thank you, Chair Barakas and Ranking Member Schakowsky,

01:49:12and thank you for the full slate of FTC commissioners for being here today.

01:49:16While I'm glad that this committee is continuing to work hard to protect

01:49:21consumers' privacy,

01:49:22I am shocked once again that Republican appropriators are suggesting that we

01:49:26hamstring the FTC by slashing its budget.

01:49:29It's important to remember that while Congress fails to pass legislation to

01:49:32rein in bad actors,

01:49:34regulators like the FTC are making a meaningful difference protecting

01:49:38consumers from harm.

01:49:40In the past year alone,

01:49:41the FTC has taken major actions against big techs, privacy abuses,

01:49:45online scammers, data brokers, junk fees,

01:49:48and pharmaceutical price gouging.

01:49:50Every dollar that Congress appropriates for the commission results in $14 of

01:49:56benefits to our constituents by driving down inflationary prices and

01:49:59penalizing bad actors for breaking the law.

01:50:02And given the commission's track record of delivering for the American

01:50:05consumer,

01:50:06it's embarrassing that we're even debating adequately funding the agency.

01:50:10Commissioner Bedoya,

01:50:11we are considering numerous proposals to protect children's privacy and

01:50:15safety online,

01:50:16an issue that I know you've worked exceptionally hard on.

01:50:19It's great that the FTC is updating the COPPA rule,

01:50:22and I support your proposals to require opt-ins to targeted advertising,

01:50:26stop platforms from retaliating against minors who exercise their privacy

01:50:30rights,

01:50:31and limit the use of minors' data to drive addictive features and

01:50:36notifications.

01:50:37Given the Supreme Court's recent decisions in Net Choice,

01:50:40Commissioner Bedoya,

01:50:41how do you believe that Congress and the commission can best act to further

01:50:45protect children's safety and privacy online?

01:50:48Additionally,

01:50:49do you believe that greater research,

01:50:51transparency,

01:50:52and accountability into the content moderation and algorithmic

01:50:55amplification decisions made by online platforms would be helpful in that

01:51:00goal?

01:51:01Thank you,

01:51:02Congresswoman.

01:51:03Thank you for your leadership on this.

01:51:04To answer that last question,

01:51:05absolutely yes.

01:51:06Let me offer two other thoughts.

01:51:08First,

01:51:09Net Choice is fundamentally about content moderation,

01:51:11and I think what we cannot forget is that if you look at the allegations of

01:51:15mental health harm against teens,

01:51:17that is just one source.

01:51:18You also have research suggesting that the sleep deprivation and anxiety that

01:51:23comes from extended use,

01:51:25quote,

01:51:26unquote designs that many people consider promoting addiction in the

01:51:29technology,

01:51:30that is another source.

01:51:31And then a final source is harassment that is made possible online.

01:51:35And I'm really proud that the commission has voted out cases from our staff

01:51:40shutting down,

01:51:41making sure that there is a maximum of privacy settings that prevent

01:51:45strangers from harassing our teens.

01:51:46Commissioner Holyoke mentioned a terrific case came out today where teens were

01:51:50being falsely told that their peers wanted to know,

01:51:53have you had any surgeries?

01:51:55Are you straight?

01:51:56When in reality,

01:51:57it was the company that would then charge those teens money to try to find

01:52:01out who that was.

01:52:02And so the commission feels strongly,

01:52:04I think I can say that these companies shouldn't profit off of harassing

01:52:07teens online.

01:52:08The second item is expertise expansion.

01:52:12You look at the rosters of these companies.

01:52:14They don't just have lawyers.

01:52:16They don't just have economists.

01:52:17They don't just have technologists.

01:52:18They have psychologists and brain experts.

01:52:20Last year,

01:52:21I talked to a law clerk.

01:52:22She looked at just one of these companies.

01:52:24They had 140 PhDs in psychology and brain science.

01:52:28And so one thing we're moving to do with chair con support is to expand our

01:52:32roster of in-house expertise to include pediatricians,

01:52:36psychologists,

01:52:37and I hope to have,

01:52:38that we're able to share more about that in the fall as we assemble this

01:52:41team.

01:52:42Well, thank you for that commissioner.

01:52:43But do I, as a mother of two young girls,

01:52:46I really appreciate the work chair con as the FTC has been the most

01:52:52aggressive agency in terms of regulating tech platforms and products.

01:52:56I'd like to ask you about the commission's effort to bring in tech

01:53:01technological expertise in house.

01:53:04We just heard about the expansion,

01:53:06but I do think the technological expertise is,

01:53:09is important in February,

01:53:102023 the commission stood up the office of technology,

01:53:13which according to your budget request now employs a wide range of experts

01:53:17who assist both the bureaus of competition and consumer protection and

01:53:21their law enforcement enforcement missions.

01:53:23Chair con,

01:53:24how was the office of technology helped the FTC hold technology companies

01:53:29accountable?

01:53:30And how does it work with the FTCs other branches to lend expertise to the

01:53:34agency's investigations and enforcement actions?

01:53:38Thank you.

01:53:39I've been so thrilled that we've been able to stand up this office.

01:53:41We'd had previously some technologists,

01:53:43but putting this office together and being able to hire has been a game

01:53:47changer.

01:53:48We had heard we might face challenges when looking to hire,

01:53:51because we can't compete with private sector salaries.

01:53:53But when we put out these postings just within a week,

01:53:57we actually got 600 applications.

01:53:59I mean,

01:54:00there's just enormous hunger among technologists to come serve the public and

01:54:05make sure that these technologies are not harming people,

01:54:09be it kids,

01:54:10be it facilitating fraud.

01:54:11And so these technologists are on board.

01:54:13They're embedded across our investigative teams.

01:54:16They're working side by side,

01:54:17looking at the documents,

01:54:19looking under the hood,

01:54:20trying to figure out how are these algorithms working and that's already

01:54:23paid off.

01:54:24I mean,

01:54:25it's making a difference in the lawsuits.

01:54:26We filed the counts were able to include,

01:54:28and it's just really fantastic to be able to continue to build that

01:54:31expertise.

01:54:32I also really appreciate commissioner Bedoya's encouragement for us to

01:54:36further think about other forms of expertise that are going to be needed as

01:54:40we continue this work.

01:54:41Thank you.

01:54:42Oh,

01:54:43yeah.

01:54:44Generally yields back.

01:54:45Now recognize my pleasure to recognize my good friend from the great state

01:54:50of Michigan,

01:54:51Mr.

01:54:52John James,

01:54:53you're recognized for five minutes.

01:54:54Thank you,

01:54:55I've only been in this town for about a year and a half.

01:54:57And I become convinced that a large proportion of this city's functions

01:55:04could be constitutionally and physically send back to the states or

01:55:09streamline with a good app or eliminated altogether.

01:55:13We've become far too used to accepting mediocrity from our federal

01:55:18government.

01:55:19Every industry come from the automotive industry.

01:55:22We're expected to get more efficient,

01:55:24better,

01:55:25safer,

01:55:26faster with less resources.

01:55:27Those things become more complex.

01:55:28Air travel has gotten more complex,

01:55:30but more safe.

01:55:32And over the past 40 years,

01:55:34our medicine,

01:55:35our phones,

01:55:36everything we expect to be better than it was in the past without an

01:55:41exponential increase in costs.

01:55:43What's embarrassing is the fact that the federal government is the only

01:55:46place that is not expected to get more efficient and better with less

01:55:51resources over time.

01:55:53Folks in America have not lost faith in America.

01:55:56Folks in America have lost faith in Washington,

01:55:59D.C.

01:56:00because we have failed to live under the same standards of excellence and

01:56:03efficiency that they have.

01:56:06And so for the private sector,

01:56:08those who do expect to get better over time,

01:56:12I just have a couple of questions based upon the feedback I've been getting

01:56:17from the innovators,

01:56:18the job creators,

01:56:19the business sector of how they have been experiencing the FTC.

01:56:24I'm hearing that your staff is engaged in the following activities.

01:56:27One, issued guidance to Section 5 of the FTA Act,

01:56:30which at times runs contrary with decisions that are made in court cases

01:56:34involving the FTC.

01:56:35Two, issued hundreds of warning letters regarding companies,

01:56:39products,

01:56:40or income claims and threatened civil penalties even in the absence of an

01:56:44administrative finding with respect to the companies.

01:56:47And three, used settlements and the threat of litigation to try to drive

01:56:52change in different industries.

01:56:53That sounds like bullying to me.

01:56:55That sounds like bullying the various sectors that are actually getting more

01:56:58efficient and doing more with less.

01:57:00Chairwoman Khan,

01:57:02after Chevron,

01:57:04will you commit to changing your practices or do you plan on continuing

01:57:10doing business as usual?

01:57:13Thanks, Congressman.

01:57:14Let me just say first of all,

01:57:16the FTC staff is second to none and I would disagree with any

01:57:19characterization or suggestion that they are mediocre.

01:57:22We are fortunate to have extraordinarily talented people who could be making

01:57:26multiple-

01:57:27I classify this town and its wasteful spending as mediocre and expecting to

01:57:32have the same amount of money or higher spending when every other industry in

01:57:36the private sector is expected to do more with less.

01:57:39What is your commitment to efficiency doing more with less rather than

01:57:43complaining that you don't have the resources that you need to execute your

01:57:46job?

01:57:47So we are day after day forced to be efficient.

01:57:49I mean, we have no choice.

01:57:50And one of the situations that we face-

01:57:52Well, that's great to hear.

01:57:53So will this be a commitment on the record to change your ways rather than

01:57:57targeting or bullying and establishing standards unilaterally and a

01:58:01presumption of guilt with letters like the notice of penalty offenses

01:58:05concerning deceptive and unfair conduct around endorsements from every

01:58:09organization from Abbott to Zulily.

01:58:11Would you back away after Chevron and maybe have a presumption of innocence

01:58:16for most of these companies as they try to do their business?

01:58:19So I don't believe that that Supreme Court decision affects the notice of

01:58:23penalty offense authority, which is really laid out in Section 5M1B of the

01:58:28FTC Act.

01:58:29And it's a very explicit authority that allows us to do this.

01:58:32As a general matter, of course, we're always going to do our work in

01:58:35accordance with any Supreme Court rulings that come down.

01:58:39One thing on your just efficiency point, our agency is smaller today than it

01:58:44was in the 1980s.

01:58:46The economy, meanwhile, has grown 16 times over.

01:58:49The mergers that are coming in the door are multiples of what they were

01:58:54decades ago.

01:58:55That's right.

01:58:56And decades ago, the company that I used to run, it was a echelon smaller

01:58:59and more complicated and grew larger.

01:59:01That is the expectation, Ms. Kahn, is that you have to do more with less of

01:59:06the American taxpayer's dollars while executing at a higher level.

01:59:09That is the expectation the American people have of themselves.

01:59:12That's the expectation they have of you.

01:59:14My next question.

01:59:16Shifting gears to something that I've heard of everyone, protecting our kids

01:59:20on social media.

01:59:22My West Point classmate, Pat Ryan, and I have a Protecting Kids on Social

01:59:25Media Act I introduced.

01:59:28Unfortunately, there are hardly any rules governing what can be done with

01:59:31information of a child once it's collected.

01:59:34Would you agree and would you support Congress's efforts to act on data

01:59:38privacy to protect our children?

01:59:40Yes, absolutely.

01:59:41Day after day, we see the real dangers of allowing companies to endlessly

01:59:46surveil kids, to harvest that data, to buy and sell it online.

01:59:51Through our enforcement track record, I think we've made clear that we will

01:59:55continue to be aggressive here.

01:59:57But, of course, additional authority from Congress, including for the reasons

02:00:00Commissioner Slaughter laid out, given some of the outdated features of

02:00:04COPPA, is going to be critical.

02:00:08Thank you, Mr. Chairman.

02:00:09I'm out of time.

02:00:10Appreciate it.

02:00:11Thank you.

02:00:12Thank you for yielding back.

02:00:13Mr. Soto, you're recognized for five minutes of your questioning.

02:00:19Thank you, Chairman, so much.

02:00:21You know, technology is emerging at an astounding rate.

02:00:25When you look at artificial intelligence and e-commerce online, you're

02:00:29charge to protect consumers is tougher than it ever has been.

02:00:34And you're doing that in the largest economy in the world.

02:00:37And, you know, I served in the state legislature for ten years, and we used

02:00:42to refer to it as the Tallahassee two-step, where an agency is underfunded

02:00:47and then attacked for not doing their jobs.

02:00:50This is a budget hearing.

02:00:51We need to get you all the money that you need to be able to protect the

02:00:54American consumer, and I appreciate the work that you're doing.

02:00:57We recently passed out of this committee, in a bipartisan fashion,

02:01:00the Consumer Safety Technology Act.

02:01:03It also passed out of the House.

02:01:05One of the key provisions is to have an artificial intelligence pilot program

02:01:12that would allow you to consult with stakeholders

02:01:16and use AI to track trends in injuries involving consumer products

02:01:21and identifying consumer product hazards,

02:01:24monitoring the sale of recalled consumer products,

02:01:27identifying consumer products that do not meet specified importation

02:01:31requirements related to safety, and then produce a report.

02:01:35Chair Khan, how do you think artificial intelligence is being used right now

02:01:40to help be the cops on the beat and how this bill may help you going forward?

02:01:46And how do you envision AI going forward and helping you do your job at the FTC?

02:01:50Yeah, it's a good question.

02:01:52I think there's no doubt that we are trying to closely track

02:01:55how these AI tools could actually make our jobs easier and better

02:02:00and try to figure out how might we be able to harness some of those advances

02:02:04from improving our doc review process to making sure that our investigations

02:02:10are able to be more thorough.

02:02:12I think there's a lot of open questions about how we could actually benefit

02:02:15from some of these tools.

02:02:17I wouldn't say that right now we are at the stage where we're fully able

02:02:20to harness that potential, and partly that's because we haven't been able

02:02:24to make the critical investments that we would need in things like data storage

02:02:29and having greater cloud capacity in-house rather than having to contract

02:02:34externally for those types of things.

02:02:36So I think there could be a world in which we're able to get there,

02:02:39but it will require upfront investments, and we can only make those investments

02:02:43with continued support from Congress.

02:02:46Commissioner Bedoya, what are your thoughts on the future of using AI

02:02:49to help protect consumers online and in the marketplace?

02:02:53I appreciate that question, Congressman.

02:02:55There's one example I'd love to highlight for you.

02:02:57So you come from Florida.

02:02:58A lot of folks in Florida speak Spanish as a first language.

02:03:01Up until recently, the commission could field complaints from consumers in English,

02:03:06sometimes in certain settings in Spanish, sometimes not.

02:03:10We recently acquired the ability through AI in part to automatically receive

02:03:15complaints in English translated from 13 languages,

02:03:18obviously including Spanish.

02:03:20And so that allows us to talk to 99% of the American population

02:03:24or at least receive complaints from them that our staff can read in English

02:03:28using the power of AI translation.

02:03:30Is it perfect?

02:03:31No.

02:03:32Does it help consumers speak to us so that we can take it from there?

02:03:34Yes.

02:03:35Thank you.

02:03:36Commissioner Slaughter, where do you envision artificial intelligence

02:03:39in the future helping the FTC to protect consumers?

02:03:42Yeah, I will associate myself with the remarks of Chair Khan

02:03:46and Commissioner Bedoya.

02:03:47I think our focus on AI has been very respectful of the incredible power

02:03:54that it can provide in terms of new tools, new innovation,

02:03:58not only in private markets but also for government players.

02:04:03And I think that, as Chair Khan noted,

02:04:06for us to really be able to utilize the benefits of the service,

02:04:10even as we police potential misuses or abuses in the market

02:04:14and are obviously vigilant about those ourselves,

02:04:17it's just really expensive is the short version.

02:04:21And I will tell you that I think our focus right now is covering the costs

02:04:26that we have to do our job every day,

02:04:29and I would love to be in a universe where we can envision extra spending

02:04:34on new innovative tools.

02:04:36But I think we're not quite anywhere close to that from a budgetary

02:04:40perspective yet.

02:04:42And, Chair Khan, if we got you the funding for this,

02:04:44do you think it could make the agency more efficient,

02:04:46be able to cover more ground with the use of AI to assist you?

02:04:51We're very keen to figure out how might we be able to deploy those tools,

02:04:55and we've been in touch with enforcers in other jurisdictions

02:04:59that are actually further ahead than we are

02:05:01in deploying technological expertise,

02:05:05not just in how they do their enforcement work but also internally

02:05:09to further develop their institutional capabilities and capacities.

02:05:13And so those conversations have been very fruitful in trying to horizon scan

02:05:18and figure out what might that look like.

02:05:21And so if we were in the fortunate position of having those resources,

02:05:25it's absolutely something that we would benefit from.

02:05:28Well, we know the crooks have AI, so we want to make sure the cops on the beat,

02:05:31all of you have those resources too.

02:05:33And I yield back.

02:05:34The gentleman yields back.

02:05:35I will recognize Mr. Fulcher for his five minutes of questioning.

02:05:39Thank you, Mr. Chairman.

02:05:40And, Chair Khan, my question is concerning the recently finalized CARS rule,

02:05:45and if this is a duplicate, please forgive us because we've got some of us

02:05:48have competing committees today, okay?

02:05:51The FTC's website states the primary purpose of the CARS rule is to add truth

02:05:58and transparency to the car buying and leasing process.

02:06:02However, it's my understanding that your contention that this rule

02:06:06also sweeps in regulation of heavy truck

02:06:09and heavy truck dealers who sell business to business.

02:06:14Heavy-duty truck dealers, retail cement mixers, garbage trucks, and the like,

02:06:18these vehicles cost hundreds of thousands of dollars

02:06:20and are not bought by consumers as they are not consumer products.

02:06:24So my question is, is it fair?

02:06:27Is that accurate?

02:06:28Is that your intention?

02:06:29Is it fair for heavy-duty truck dealers to bear the regulatory costs of the CARS rule?

02:06:36Thanks for the question.

02:06:37And I'll just note, you know, we pursued this rule after a decade of enforcement

02:06:42and finding that, unfortunately, all too often people were getting

02:06:45Well, it's there, and so I'm asking the question,

02:06:47and I don't have much time, so please.

02:06:50So as a general matter, you know, the CARS rule applies.

02:06:53We're happy to look into whether it applies to some of these

02:06:56more specific types of vehicles.

02:06:58But, you know, the bread and butter is really regular auto dealers that are selling cars.

02:07:02Okay.

02:07:03So you're not saying that this is absolutely going to encompass truck transactions?

02:07:08I'd want to double-check with our team before.

02:07:10Okay.

02:07:11Thank you.

02:07:12The website for the FTC states that the new requirements mandated by the CARS rule

02:07:15are already business as usual for honest dealers.

02:07:19You've also stated that the purpose of the CARS rule

02:07:21is merely to stop bait-and-switch tactics and junk fees.

02:07:24Aside from the fact that bait-and-switch tactics and fees for products

02:07:28that have no value are already illegal,

02:07:30I'm curious as to why the FTC never mentions the rest of the rule's numerous requirements.

02:07:36For example, record-keeping requirements that mandate a dealer capture and store

02:07:41for two years every text from every customer they sell a vehicle to,

02:07:45no matter how trivial or risk, being fined up to $51,744 per violation.

02:07:53And there's other things, but to save time,

02:07:56wouldn't it make more sense to focus on pursuing the bad actors

02:08:00instead of making these broad mandates?

02:08:04We've tried a strategy that just focused on the bad actors,

02:08:07and unfortunately it wasn't enough.

02:08:09Thousands and thousands of Americans complain to us every year

02:08:12about getting tricked at the auto dealer.

02:08:14As you know, this is one of the biggest purchases people make.

02:08:17On this record-keeping issue,

02:08:18the proposed rule had actually contemplated requiring auto dealers

02:08:23to actually maintain greater records.

02:08:26In the final rule, we've really slimmed it down

02:08:29to just focus on instances in which auto dealers would want to be able to verify.

02:08:35What we don't want is—

02:08:36So $24.1 billion and an additional 60 to 80 minutes to the car-buying process.

02:08:43Is that slimming it down?

02:08:45Compared to what initially was proposed,

02:08:47but just to be clear, ultimately we don't want auto dealers

02:08:51to be levied with an accusation

02:08:53and for them not to be able to substantiate their side of the story,

02:08:57and so the record-keeping requirements are focused on protecting the auto dealers

02:09:02to make sure that they're able to verify what their claims might be.

02:09:06Okay, I'm just going back.

02:09:07$24.1 billion is the estimate of the cost, 60 to 80 minutes to the car-buying process,

02:09:13and the mandate to store and capture two years of every text from a customer

02:09:21they sell a vehicle to no matter what.

02:09:25So as you know, a lot of rules both include costs but also benefits,

02:09:29and the benefits here we estimate would be $3.4 billion to the American public.

02:09:33Okay, well, that doesn't really match the $24.1 billion cost,

02:09:38so I might just point that out.

02:09:42You noted in last year's questions for the record

02:09:45that car prices have contributed significantly to inflation,

02:09:49but there is also an inflationary impact of the regulatory costs

02:09:53that government imposes on small business.

02:09:56For example, a car's rule acknowledges that it will cost over $1 billion.

02:10:00A study for the Center of Automotive Research points out the $24.1 billion cost.

02:10:05Every small business owner knows someone must pay for all the new disclosures,

02:10:10recordkeeping, and so on and so forth.

02:10:12So, Ms. Kahn, I'm out of time, but I would just encourage you to take a look at this.

02:10:19The cost and the imposition on the dealers is making this very, very difficult.

02:10:27With that, Mr. Chairman, I yield back.

02:10:28Thank you. Thank you.

02:10:29I appreciate it, Mr. Fulcher.

02:10:31Now I'll recognize Dr. Joyce from the great State of Pennsylvania,

02:10:34my fellow Pittsburgh Pirate fan.

02:10:38Thank you.

02:10:45Paul Deese here.

02:10:46Can you hear me?

02:10:47Thank you.

02:10:48Thank you, Chairman Bilirakis, for allowing me to wave on to today's hearing.

02:10:51And thank you, Chair Kahn and the commissioners for being with us here.

02:10:54As mentioned earlier in this hearing, Representative Duncan and I co-led a letter to the FTC,

02:11:00the OSTR, and DOJ on the decision to abandon decades-long bipartisan trade policies

02:11:09proposed by the World Trade Organization.

02:11:11By abandoning these established international standards,

02:11:15we are abdicating our lead on the world stage

02:11:18and risking cross-border data flows in each and every sector,

02:11:23all under false guise of regulating big tech.

02:11:27It is clear from a FOIA recent request by the U.S. Chamber of Commerce

02:11:32that USTR coordinated these actions with left-leaning organizations

02:11:37such as Open Markets Institute, which Chairman Kahn was previously the legal director.

02:11:43These questionable interactions are indicative of a type of closed-door dealings

02:11:48that are being used to pursue anti-digital trade policies throughout the Biden administration.

02:11:55Chair Kahn, we risk cutting off every sector in the economy,

02:11:59from agriculture to medical diagnostics, from the international market,

02:12:04by abandoning these trade policies.

02:12:07In fact, my district, Pennsylvania 13,

02:12:10had over $300 million in exports of digitally tradable services just in 2022 alone.

02:12:18Do you believe, Chair Kahn, that by abandoning these provisions of established international standards

02:12:24that there is potential of hurting American businesses and hurting my constituents?

02:12:30Congressman, thanks for the question.

02:12:32The FTC was not involved in that decision relating to WTO digital rules,

02:12:37and so I would defer to USTR.

02:12:39As a general matter, when other agencies seek our expertise on consumer protection or privacy or competition,

02:12:46we are happy to provide it.

02:12:48And especially when certain trade agreements are implicating those issues,

02:12:52we think it's important to be able to share that expertise.

02:12:55But the specific decision you mentioned, I would defer to USTR because we were not involved.

02:12:59So as I asked in my letter from January,

02:13:02is it appropriate for the FTC, along with USTR and DOJ,

02:13:06to conduct backroom deals on foreign trade policies without informing Congress?

02:13:12So that doesn't characterize how the FTC operates.

02:13:16If other agencies seek our expertise,

02:13:18given the tremendous expertise of our staff on consumer protection, privacy, antitrust,

02:13:24we readily provide it.

02:13:26As you know, a lot of the trade discussions are nonpublic,

02:13:29and so that necessarily doesn't happen out in the open.

02:13:33But I would defer to USTR on any specific questions around that.

02:13:37Well, did you, or to your knowledge, did USTR inform other government agencies,

02:13:42such as the State Department, that the U.S. was withdrawing from our proposed digital trade policies?

02:13:48I'm not aware. I would defer to USTR.

02:13:51Do you think that DOJ was made aware?

02:13:53I wouldn't want to speak for DOJ, so I would defer to USTR.

02:13:57So, in effect, these decisions appear to have been made in a vacuum.

02:14:01These decisions, as you said, are often under closed-door circumstances,

02:14:05and we in Congress are not made aware of how these decisions are made.

02:14:09This is quite concerning to me.

02:14:11Did you ask USTR to remove due process and consumer welfare safeguards from upcoming trade agreements?

02:14:20Congressman, we share our expertise with USTR, and so when they seek our input on documents,

02:14:27and we want to make sure that we're not embedding in trade agreements policies that would undermine FTC enforcement,

02:14:34our ability to stop abuses of Americans' privacy, to be able to stop fraud,

02:14:39to be able to make sure illegal big tech monopolies are not misusing their power.

02:14:44And if this involved removing due process?

02:14:47Congressman, we follow due process in all of the FTC's work as the FTC Act in accordance with the FTC Act,

02:14:54and we'll continue to do that.

02:14:56Chair Kahn, will you commit to disclosing all communications between antitrust division staff

02:15:01that were formerly employed by the American Economic Liberties Project

02:15:06or the Open Markets Institute and USTR staff that were formerly employed by either of these organizations?

02:15:13Congressman, we're happy to look at your request and be able to engage however we can.

02:15:19I think this is important information.

02:15:21I would really look forward to seeing your response to that.

02:15:24I think this information will allow us to have a better trustworthy relationship with you and with your commissions.

02:15:31I thank you, the Chair, for allowing me to wave on to this important hearing,

02:15:34and I look forward, Chair Kahn, to your response.

02:15:36Thank you, Mr. Chair, and I yield.

02:15:38The gentleman yields.

02:15:40The Chair now recognizes the gentlelady from Iowa, Dr. Milamix, for five minutes of questioning.

02:15:54We're going to try it again.

02:15:55There you go.

02:15:56Thank you, and I thank the Chair for allowing me to wave on to this committee hearing today.

02:16:00I was pleased to see the FTC launch an inquiry to investigate the role of vertically integrated PBMs back in June of 2022.

02:16:08I will also state that as a state senator in my first year in state senate in Iowa,

02:16:13I actually did my first bill on PBMs and transparency and rebates.

02:16:19The rebate part did not get through.

02:16:22I recognize the value of PBMs, but I think that we've been remiss in the vertical integration.

02:16:28You may be familiar with the graphic that is there,

02:16:32and what this is showing is the document that you have in request to the six largest PBMs.

02:16:43They control over 90% of prescriptions filled in the U.S. today.

02:16:47When I started Congress just in 2021, it was 70%, then it's 80%, and now it is over 90%.

02:16:55The FTC's interim report, which was just released this morning,

02:16:58highlights several concerning trends in the PBM space,

02:17:01including how this extremely concentrated market continues to allow middlemen to squeeze independent pharmacies

02:17:07and patients all at the expense of access and affordability.

02:17:11Independent pharmacies, as the report notes, are subject to unfair and arbitrary contracts,

02:17:16which continue to contribute to the closure of these vital providers.

02:17:21Mr. Bedoya, thank you for testifying before the subcommittee today.

02:17:25You stated in the interim report that dominant pharmacy benefit managers can hike the cost of drugs,

02:17:33including overcharging patients for cancer drugs,

02:17:36and that PBMs can squeeze independent pharmacies that many Americans,

02:17:40especially those in rural communities, depend on for essential care.

02:17:44I've had several of those independent pharmacies recently close in my district.

02:17:49It is further noted that the FTC will continue to use all tools and authority

02:17:54to scrutinize dominant players across health care markets

02:17:57and ensure that Americans can access affordable health care.

02:18:00Do you believe vertical integration in health care has benefited patients?

02:18:04Thank you, Congresswoman, for your concern.

02:18:07I share your concern.

02:18:09Of course, in certain circumstances it has.

02:18:11What has jumped out to me from conversations with pharmacists across the country

02:18:17is how sometimes it backfires terribly.

02:18:20Let me give you two examples quickly, if I could.

02:18:23I met with a group of pharmacists from Louisiana.

02:18:25A hurricane came through.

02:18:27Two parishes used to be served by roughly two dozen pharmacists.

02:18:31Suddenly that was five.

02:18:32Four independents, one Walmart.

02:18:34People were walking into the independents with prescriptions for insulin

02:18:40and were being told, no, you have to go down the street to the chain pharmacy,

02:18:44which was under several feet of water.

02:18:46Another example, a family walks into a pharmacy in West Virginia,

02:18:51prescription for cancer medicine for their child.

02:18:54Pharmacist is told, looks at their screen, says, sorry, you have to go home.

02:18:59The PBM is telling you, you have to go home and wait for your child's medicine.

02:19:03To be mailed.

02:19:04In the mail.

02:19:05Thankfully that pharmacist worked with the insurance commissioner.

02:19:07They figured it out.

02:19:08But sometimes steering hurts people horribly.

02:19:12I know that's something that staff spoke about in the report

02:19:17and something that I'm keenly concerned about.

02:19:19Do you believe it has lowered premiums, the cost of drugs,

02:19:21or the cost of care delivery?

02:19:23That is a critical question.

02:19:25That has economic stakes.

02:19:28Certainly I'm concerned that it has not.

02:19:32But I need the support of staff to give you a firm answer.

02:19:37In contrast to my experience in Iowa where they had a year to be transparent

02:19:41with the data that we had requested,

02:19:43and it was just aggregate data on administrative fees rebates

02:19:46and administrative fees that were not passed on to the insurance companies,

02:19:50have PBMs and GPOs been complying with requests from the commission?

02:19:54And if not, what enforcement steps are you taking?

02:19:58Page one of our interim report indicates that in many instances

02:20:02they have not fully complied.

02:20:04And I know this is of great concern to myself

02:20:06and something that we will be looking into.

02:20:10Have you seen further consolidation in health care markets

02:20:13since launching the inquiry two years ago?

02:20:17Certainly there have been attempts to consolidate.

02:20:21In my opening statement I mentioned a couple of them.

02:20:25And when those proposed mergers have threatened to raise prices on consumers,

02:20:31degrade services for them, FTC hasn't hesitated to step in.

02:20:36Well, I know that we're all very concerned about this.

02:20:38As I said, PBMs have a role

02:20:40and a valuable role that they play in prescription drugs,

02:20:43but there also is a lack of transparency and opaqueness

02:20:46and a lack of responsiveness by the PBMs to questions we would both ask

02:20:50at the state level and the federal level.

02:20:52And I would encourage you to continue into that

02:20:55and then hopefully respond to the vertical integration

02:20:57that's causing increased prices and less access.

02:21:00Thank you.

02:21:01With that, I yield back.

02:21:03The gentlelady yields back.

02:21:04We appreciate you.

02:21:06Next we'll have Ms. Kamik from the great state of Florida to ask questions.

02:21:12I didn't do that, Buddy, just because you're Georgia Bulldog.

02:21:15I didn't do that, and she's a gator.

02:21:18Hey, I'm just being fair.

02:21:20You're not on the committee.

02:21:26You're recognized for your five minutes of questioning, Ms. Kamik.

02:21:30And it is because we are gators.

02:21:33We are gators.

02:21:38Thank you, Chairman Bilirakis,

02:21:40and thank you to our witnesses who are appearing before us today.

02:21:44As you can see, we are ready for football season,

02:21:47despite it being 109 degrees here in Washington, D.C.

02:21:53Ms. Kahn, I'm going to start with you,

02:21:54and I apologize if these questions have been asked.

02:21:57I am in three competing hearings at the same time, so my apologies.

02:22:01Ms. Kahn, according to the Office of Personnel Management,

02:22:0787% of surveyed FTC employees agreed that senior agency officials

02:22:13maintained high standards of integrity and honesty.

02:22:17In 2021, this percentage plummeted to 53%

02:22:22and dropped further to 47% in 2022.

02:22:26This is all under your leadership.

02:22:28Why, under your leadership, has this number continued to decline?

02:22:34Thanks, Congresswoman, and let me just say it's such an honor

02:22:36to serve alongside the talented and dedicated staff of the FTC.

02:22:40Those numbers have actually increased.

02:22:42The FTC this past year was among the 10 best places to work

02:22:46among mid-sized government agencies,

02:22:48and we'll continue to identify additional ways that we can make sure

02:22:51we're able to recruit and maintain the best talent.

02:22:55One source of complaint that we hear a lot about is pay.

02:22:59We know that we can't compete with private sector pay,

02:23:02but increasingly we also can't compete with pay of other federal agencies

02:23:06like the Federal Reserve, the Consumer Financial Protection Bureau,

02:23:10the Securities and Exchange Commission.

02:23:12So one way that I think Congress could be really helpful

02:23:15is actually putting the FTC's pay scale on parity

02:23:19with the pay scale of the financial regulators.

02:23:22So in 2021 and then in 2022, it dropped in half, right?

02:23:28And then you say it's coming back up.

02:23:30Is that because those that have been dissatisfied with your leadership

02:23:33have since left rather than some radical turnaround

02:23:37happening at the agency?

02:23:39And I'll use that as a segue because in the same vein,

02:23:42your former colleague, Commissioner Christine Wilson,

02:23:46outlined concerns about your leadership

02:23:48in a 2023 Wall Street Journal editorial.

02:23:50And one example she used was the FTC challenge to Meta's acquisition

02:23:55of the virtual reality gaming company Within.

02:23:58Now, Ms. Wilson said, quote,

02:24:00consider the FTC's challenge to Meta's acquisition of Within,

02:24:03a virtual reality gaming company.

02:24:05Before joining the FTC, Ms. Kahn, you,

02:24:09argued that Meta should be blocked from making any future acquisitions

02:24:14and wrote a report on the same issues as a congressional staffer.

02:24:18She would now sit as a purportedly impartial judge

02:24:22and decide whether Meta can acquire Within.

02:24:26Spurning due process considerations and federal ethics obligations,

02:24:31my Democratic colleagues on the commission affirmed Ms. Kahn's decision

02:24:34not to recuse herself, end quote.

02:24:37Ms. Kahn, you investigated Meta as counsel

02:24:39for the House Judiciary Committee as a congressional staffer, correct?

02:24:42That's correct.

02:24:43Now, would your remarks towards Meta

02:24:46and your investigative history against the company

02:24:48not be grounds for recusal from the case?

02:24:51So the federal ethics laws require recusal

02:24:54if you have financial conflicts of interest.

02:24:57So if you own like huge amounts of Facebook stock, for example,

02:25:00or if you have close family ties to Facebook,

02:25:03I have neither of those.

02:25:05And so I followed the standard that was laid out

02:25:08that ultimately led me to conclude that I was not required to recuse.

02:25:14As a general matter, I think there's been a broad recognition

02:25:17that dominant technology companies have been able to get away

02:25:20with gobbling up a lot of their competitors

02:25:23and that we need to be more vigilant.

02:25:26And I've been really pleased at the FTC

02:25:28that we've been scrutinizing these dominant technology companies

02:25:32when they're making acquisitions that we have reason to believe

02:25:35might violate the law.

02:25:37But as you laid out, you said you followed that to the letter of the law, right?

02:25:42That the ethics guidelines say that as long as you don't have any stocks, right,

02:25:45or financial obligations or considerations with that company,

02:25:50that makes it okay despite the fact that you investigated them

02:25:53were critical, derogatory even, in your work against Meta previously

02:25:59and then now you're supposed to be impartial.

02:26:01I mean, by the standard of as long as you don't have financial obligations

02:26:07or an interest, I mean, heck, half of Congress.

02:26:10I mean, Speaker Pelosi, Speaker Emeritus Pelosi,

02:26:13has financial ties and stocks with all these companies

02:26:17and yet here we are making laws, which is why I think it should be prohibited

02:26:21that members of Congress own individual stocks of companies personally.

02:26:25But if you were faced with a similar case with a company

02:26:28that you had investigated as a staffer or made disparaging remarks about,

02:26:31in the future would you consider recusing yourself?

02:26:34Because the optics are pretty damning, don't you agree?

02:26:36Congressman, I would just disagree with that characterization.

02:26:39I had certain expertise in certain markets

02:26:41and I think that's what contributed to my being appointed in this role

02:26:44and I think it would be really dangerous if we allowed companies

02:26:48that accumulate a lot of economic and political power

02:26:51to start picking and choosing which enforcers get to oversee them

02:26:54and which enforcers don't.

02:26:56And so I followed to the letter the legal standard that says

02:26:59if you have made up your mind entirely about the facts and the law,

02:27:04then you should recuse yourself, but if not, there's no requirement.

02:27:08I think we need to keep the bigger picture in mind as well.

02:27:12And I know my time has expired, but just yes or no,

02:27:16do you believe that the current concentrated app marketplace

02:27:19is fair for consumers and developers? Yes or no?

02:27:23Congressman, certainly we've heard a lot of concerns about that concentration.

02:27:27There are lawsuits that have been filed,

02:27:29including by our colleagues at the Justice Department.

02:27:31Thank you. Thank you, Mr. Chairman.

02:27:34I'll recognize Mr. Obernolte for his five minutes of questioning.

02:27:38I'm sorry, buddy, I have to follow the rules. I apologize.

02:27:42This is a rare occurrence where I go before Buddy Carter.

02:27:47Thank you very much, Chair Kahn and the rest of the commissioners,

02:27:50for being here today. I've enjoyed the testimony.

02:27:53Chair Kahn, I want to thank you for some of the great work you're doing

02:27:56on trying to protect consumers from the malicious use of artificial intelligence.

02:28:01I'm the chair of the House Artificial Intelligence Task Force,

02:28:04and we have been working on putting in place a regulatory framework

02:28:07that will guard against some of those same harms.

02:28:09I know you and I have had a number of discussions on this topic,

02:28:12and I think some of the work you're doing is wonderful.

02:28:16I wonder, though, that sometimes we need to do a better job

02:28:21of educating the public about the fact that AI is largely regulated

02:28:26with respects to its malicious use.

02:28:29I mean, you make a great point in some of the testimony that you've given

02:28:33that AI is a tool and we regulate outcomes,

02:28:36and so that's why the FTC has the authority to regulate, for example,

02:28:43the impersonation of individuals and businesses,

02:28:46which is some of the actions you've taken recently.

02:28:50The use of AI to impersonate someone for the purpose of deception and theft

02:28:54is already illegal.

02:28:56It doesn't matter if you use AI or something else to do it,

02:28:58and that's why the FTC is empowered to stop it, and I'm glad you are.

02:29:02Recently there have been a string of Supreme Court decisions

02:29:05that have made it abundantly clear that the court is reining back

02:29:09the ability of agencies to exercise authority

02:29:12that wasn't expressly delegated to them by Congress,

02:29:15and I'm sure that this is going to become an issue in a larger sense in the future,

02:29:19particularly with respect to AI because it's so new.

02:29:22So can you tell me where do you think the FTC lacks authority

02:29:27to go after the malicious use of AI,

02:29:30and what more authority do you think you need?

02:29:32Thanks, Congressman.

02:29:33I mean, this is a critical issue, and I think it implicates the FTC

02:29:37but implicates a whole set of agencies

02:29:39since the way that AI is impacting the public is just so multidimensional.

02:29:44You're right that there have been a whole string of Supreme Court decisions

02:29:48that could limit the authority of agencies like the FTC,

02:29:52and so we're following all of that closely.

02:29:54I think as a general rule of thumb, the more Congress legislates

02:29:58and the more Congress legislates very clearly, the better things will be,

02:30:02and so we would encourage the continued efforts by this committee and others

02:30:07to make sure that that type of legislation,

02:30:10especially addressing some of these new technologies, are absolutely critical.

02:30:14The FTC Act does ban unfair methods of competition

02:30:18and unfair or deceptive acts or practices,

02:30:20and I've been very clear that I don't believe there is an AI exemption

02:30:24from those laws, and so if companies are using AI or algorithms

02:30:30to engage in price fixing, for example, or using AI to deceive the public,

02:30:35I believe our authorities would still cover that,

02:30:37but you're absolutely right that in the current environment,

02:30:40again, the more Congress is legislating

02:30:42and the more Congress is legislating supremely clearly,

02:30:45the better off we all will be.

02:30:47Right. Well, let me just encourage you, let's work together on this.

02:30:52I mean, I think we're all on the same team here in our efforts

02:30:56to try and protect consumers against the malicious use of AI,

02:31:00and I don't want that conversation to devolve into an argument

02:31:03about who has authority to do what.

02:31:06So to the extent that you want authority to do something

02:31:09that you might not have, please come and ask us.

02:31:11To the extent that you discover things that require congressional action

02:31:15or legislation, please come tell us and let's get that done together.

02:31:18It's ironic.

02:31:19This is the second time today I've had this discussion.

02:31:21Earlier today we had a hearing with FCC Chair Rosenworcel

02:31:25in which I had exactly the same discussion with her

02:31:27because there's this issue of the use of AI in political ads

02:31:30and no one can decide if it's the FCC that has authority or the FEC,

02:31:34and to everyone I say we're all on the same team here.

02:31:37Let's sit down and let's try and get the problem solved.

02:31:40I really appreciate that and look forward to working together on it.

02:31:43Excellent.

02:31:44A separate topic, a question for you, Chair Cahn.

02:31:48You're, I'm sure, familiar with the section of the Magnuson-Moss Act

02:31:52that requires the commission to provide Congress with a 30-day notice

02:31:57of proposed rulemaking to provide for congressional input,

02:32:00which I think is an important part of the open dialogue

02:32:03that we have between the branches of government.

02:32:06Do you have a notice of proposed rulemaking that you think will be coming up soon?

02:32:13Is the question are we planning to issue an ANPRM in the next 30 days?

02:32:17Well, in particularly the commercial surveillance rulemaking

02:32:20that you've been considering.

02:32:23So we're not able to publicly disclose non-public deliberative process,

02:32:27but we across the board will be very careful to follow to the T

02:32:32the requirements of Section 18 under the FTC Act.

02:32:35How many of those notice of proposed rulemakings has the commission issued?

02:32:39So under MAG-MOSS there have been a few rules that we've issued.

02:32:42One is the impersonator rule that you mentioned.

02:32:44There's another one that would take on this epidemic of fake reviews online,

02:32:49which can really pollute the online ecosystem

02:32:51and make it difficult for people to comparison shop.

02:32:54We have other rules that would be, you know,

02:32:57going after similar types of deceptive or unfair conduct online.

02:33:01So across the board we've been very careful

02:33:03to follow the special procedures laid out in Section 18.

02:33:06Okay.

02:33:07Well, I'm out of time, but I just want to encourage you.

02:33:09This is an important part of our partnership is giving us the notice

02:33:14when you're going to do something,

02:33:15which allows us some time for us to give you our input.

02:33:20So please be conscientious about that.

02:33:22Absolutely.

02:33:23All right.

02:33:24Thank you very much.

02:33:25Thank you.

02:33:26I appreciate it very much.

02:33:27Next we'll hear from a gentleman from Georgia, Mr. Buddy Carter,

02:33:33for his five minutes of questioning.

02:33:35Thank you, Mr. Chair, for allowing me to wave on this committee,

02:33:37and thank you all for being here,

02:33:38and thank you for the interim report that was released this morning about PBMs

02:33:42and the impact they have on independent pharmacies.

02:33:45I believe that's the focus of the report, and I appreciate it.

02:33:49I became a member of Congress nine and a half years ago.

02:33:51The first thing I did when I got here was to go to the FTC

02:33:54and ask them to look at the vertical integration that exists

02:33:57within the drug pricing chain.

02:33:59Two years ago you did that, and I want to thank you all for that.

02:34:02Now, Chair Kahn, can you share very quickly what the FTC has discovered

02:34:07with these PBMs practices and their impact on pharmacies, on doctors,

02:34:11on patients, on payers?

02:34:15Thanks, Congressman, and thanks so much for all of your encouragement

02:34:17and support of the FTC as we've endeavored to scrutinize what, as you know,

02:34:21is an extremely opaque part of the market.

02:34:25So the report lays out that there has been a continued trend of vertical

02:34:29integration as well as horizontal concentration,

02:34:33that the handful of larger PBMs have increased their share of the

02:34:39prescription drug market.

02:34:41We lay out in the report a lot of the concerns we've heard from independent

02:34:45pharmacies, which range from chronic under-reimbursement to steering

02:34:51to arbitrary auditing to all sorts of practices that I think at the end of

02:34:55the day to pharmacists make them feel like they can't get a fair shake.

02:34:59I mean, what I often hear from community pharmacists is they're serving

02:35:03their communities, their communities depend on them,

02:35:05but their ability to survive on the marketplace is subject to the whims

02:35:09of these actors that they increasingly find themselves competing with.

02:35:13And is it true, and I don't mean to interrupt you,

02:35:15but is it true that we're losing about one pharmacy every day now?

02:35:18We're on pace this year to lose one independent pharmacy every day.

02:35:22Yeah, we lay out in the report what some of those declines have looked like.

02:35:25Exactly. And I might point out that, you know,

02:35:27whether you're Republican or Democrat or independent, we all want the same thing.

02:35:30We want accessible, affordable, quality health care.

02:35:34Pharmacists are the most accessible health care professionals in America.

02:35:38If one pharmacy every day is closing,

02:35:41accessibility to health care is going to be impacted.

02:35:44Mr. Badoa, earlier we were talking about steering.

02:35:47I don't want to put words in your mouth,

02:35:49but did I understand you to say that there were some instances where steering

02:35:53was beneficial? Can you?

02:35:55No, sir. I was responding to the part of the question that was a broad question.

02:35:59Is vertical integration good in health care?

02:36:01And I said certainly in some instances it has been.

02:36:04I used to be part of a vertically integrated health care provider.

02:36:07I like that, right?

02:36:08I did not say I'm not aware of instances of steering that I have found

02:36:12beneficial, although obviously I haven't studied this as much.

02:36:15Okay. Chair Khan, have you seen instances of steering, of patient steering?

02:36:20So the report does lay out instances where we've seen that.

02:36:24There's also been research suggesting that not only is this steering happening,

02:36:30but the steering is actually inflating drug prices and drug costs.

02:36:35And, you know,

02:36:36two decades ago there was a view that this vertical integration could actually

02:36:40lower costs of drugs and health care overall.

02:36:43And I think two decades on we're having to take a clearer look and try to see

02:36:47was that assumption accurate or have things actually become more expensive

02:36:52through some of these conflicts of interest?

02:36:54And just for the record, in this committee,

02:36:56in the Energy and Commerce Committee, we have had a member meeting with the CBO,

02:37:00and I've asked them not only just in pharmacy but in health care in general,

02:37:04give me one example, one example,

02:37:07of where consolidation in health care has saved money.

02:37:10And they have not been able to give me one yet.

02:37:13I think that speaks for itself.

02:37:15Commissioner Holyoke, I wanted to ask you, I know that you and I have spoken,

02:37:19and I just want to ask you,

02:37:21are you supportive of the FTC 6B study into the inquiry into the PBMs?

02:37:27Absolutely.

02:37:28But I am supportive of a comprehensive study.

02:37:30I don't believe that this report does an adequate job of comprehensively looking

02:37:35at the industry, understanding the competitive markets here

02:37:40and all of the players in that system.

02:37:42I don't think it does an adequate job at all looking at any,

02:37:46it doesn't do any job at looking at the economics.

02:37:49So you voted against the release of the study?

02:37:52Correct.

02:37:53But I want to make sure we all understand that you're not in favor of PBMs

02:37:58and you're not saying, I'll let you explain.

02:38:01I'm in favor of a comprehensive.

02:38:02I'll let you explain your vote.

02:38:03Oh, absolutely.

02:38:04And I'll step back for a second and talk about when I was Solicitor General in Utah,

02:38:08I was in favor of a lawsuit that we brought against PBMs because I was very concerned,

02:38:13we were concerned about some of their practices and their pricing,

02:38:16and particularly whether they were, in that instance,

02:38:20whether they were misrepresenting prices and savings to payers.

02:38:23And so I think I'm very supportive of a study that actually looks at the business model,

02:38:27that uncovers what is happening here, that can shed some light into some of these practices.

02:38:34Again, and I'm running out of time, I don't want to put words in your mouth,

02:38:37but I just want to make sure we understand that your vote in no way indicates that you think

02:38:42that PBMs are helping the health care system.

02:38:45My vote is because I don't think this study is accurate.

02:38:50I am committed to a full, comprehensive study of PBMs so that we can fully,

02:38:55objectively evaluate this industry and understand their business models.

02:39:00And without that, without a comprehensive study, we can't take any of it.

02:39:04Okay.

02:39:05Well, I don't want us to let perfect get in the way of very good, and I want to thank you for this.

02:39:10This is the interim report.

02:39:12The final report hopefully will be forthcoming,

02:39:14and I hope that we can get a more comprehensive, if you will, report.

02:39:19I cannot stress to you how important this is.

02:39:21Folks, I was a pharmacist for 40 years.

02:39:24I'm the one who had to go to the counter and tell the patient how much the medication was.

02:39:28I'm the one who had to do that.

02:39:30People can't afford their medications.

02:39:32They're getting ripped off.

02:39:34This has got to be busted up.

02:39:36No insurance company should own a PBM.

02:39:38No PBM should own a pharmacy.

02:39:42Period.

02:39:43I share your concerns, Congressman, with better understanding of this.

02:39:48I am fully committed to ensuring that the commission continues its work here

02:39:52and provides a fully comprehensive study.

02:39:55Chair Cahn, any?

02:39:58I would just say, Congressman, to the extent that you have concerns about vertical integration,

02:40:02I mean that's something that antitrust enforcers may be able to address through litigation,

02:40:07but it takes a long time, and bills that are clearly decoupling in those ways

02:40:13could be the most efficient way to potentially.

02:40:16And I agree.

02:40:17We've got a big role to play in Congress, but when you say it takes time,

02:40:20one pharmacy every day is closing.

02:40:22Accessibility to health care is decreasing in this country.

02:40:25Yeah, I couldn't agree more.

02:40:27There is enormous urgency here, and that's why we thought better to provide the public

02:40:31with the information we have already today rather than, as you said, let the perfect be the enemy.

02:40:36I apologize, Mr. Chair.

02:40:37Thank you very much.

02:40:39Don't forget that I gave you that extra time.

02:40:41I won't.

02:40:42I appreciate it.

02:40:43You'll pay me back one day.

02:40:45I had a question, but I think we've gone long enough.

02:40:48I appreciate you all so very much for being here, and thanks for your patience.

02:40:53Thanks for the audience's patience as well.

02:40:55I thought it was a very productive hearing.

02:40:58So I ask unanimous consent to insert in the record the documents included on the staff hearing

02:41:05documents list without objection.

02:41:08That will be so ordered.

02:41:10I remind members that they have 10 legislative days to submit questions for the record.

02:41:15I ask the witnesses to respond to the questions promptly.

02:41:19Members should submit their questions by the close of business on July 23rd.

02:41:25Without objection, the subcommittee is adjourned.

FTC Chair Lina Khan Testifies Before The House Energy And Commerce Committee

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