As the organizer of this retrospective on Josh Wright’s tenure as FTC Commissioner, I have the (self-conferred) honor of closing out the symposium.

When Josh was confirmed I wrote that:

The FTC will benefit enormously from Josh’s expertise and his error cost approach to antitrust and consumer protection law will be a tremendous asset to the Commission — particularly as it delves further into the regulation of data and privacy. His work is rigorous, empirically grounded, and ever-mindful of the complexities of both business and regulation…. The Commissioners and staff at the FTC will surely… profit from his time there.

Whether others at the Commission have really learned from Josh is an open question, but there’s no doubt that Josh offered an enormous amount from which they could learn. As Tim Muris said, Josh “did not disappoint, having one of the most important and memorable tenures of any non-Chair” at the agency.

Within a month of his arrival at the Commission, in fact, Josh “laid down the cost-benefit-analysis gauntlet” in a little-noticed concurring statement regarding a proposed amendment to the Hart-Scott-Rodino Rules. The technical details of the proposed rule don’t matter for these purposes, but, as Josh noted in his statement, the situation intended to be avoided by the rule had never arisen:

The proposed rulemaking appears to be a solution in search of a problem. The Federal Register notice states that the proposed rules are necessary to prevent the FTC and DOJ from “expend[ing] scarce resources on hypothetical transactions.” Yet, I have not to date been presented with evidence that any of the over 68,000 transactions notified under the HSR rules have required Commission resources to be allocated to a truly hypothetical transaction.

What Josh asked for in his statement was not that the rule be scrapped, but simply that, before adopting the rule, the FTC weigh its costs and benefits.

As I noted at the time:

[I]t is the Commission’s responsibility to ensure that the rules it enacts will actually be beneficial (it is a consumer protection agency, after all). The staff, presumably, did a perfectly fine job writing the rule they were asked to write. Josh’s point is simply that it isn’t clear the rule should be adopted because it isn’t clear that the benefits of doing so would outweigh the costs.

As essentially everyone who has contributed to this symposium has noted, Josh was singularly focused on the rigorous application of the deceptively simple concept that the FTC should ensure that the benefits of any rule or enforcement action it adopts outweigh the costs. The rest, as they say, is commentary.

For Josh, this basic principle should permeate every aspect of the agency, and permeate the way it thinks about everything it does. Only an entirely new mindset can ensure that outcomes, from the most significant enforcement actions to the most trivial rule amendments, actually serve consumers.

While the FTC has a strong tradition of incorporating economic analysis in its antitrust decision-making, its record in using economics in other areas is decidedly mixed, as Berin points out. But even in competition policy, the Commission frequently uses economics — but it’s not clear it entirely understands economics. The approach that others have lauded Josh for is powerful, but it’s also subtle.

Inherent limitations on anyone’s knowledge about the future of technology, business and social norms caution skepticism, as regulators attempt to predict whether any given business conduct will, on net, improve or harm consumer welfare. In fact, a host of factors suggests that even the best-intentioned regulators tend toward overconfidence and the erroneous condemnation of novel conduct that benefits consumers in ways that are difficult for regulators to understand. Coase’s famous admonition in a 1972 paper has been quoted here before (frequently), but bears quoting again:

If an economist finds something – a business practice of one sort or another – that he does not understand, he looks for a monopoly explanation. And as in this field we are very ignorant, the number of ununderstandable practices tends to be very large, and the reliance on a monopoly explanation, frequent.

Simply “knowing” economics, and knowing that it is important to antitrust enforcement, aren’t enough. Reliance on economic formulae and theoretical models alone — to say nothing of “evidence-based” analysis that doesn’t or can’t differentiate between probative and prejudicial facts — doesn’t resolve the key limitations on regulatory decisionmaking that threaten consumer welfare, particularly when it comes to the modern, innovative economy.

As Josh and I have written:

[O]ur theoretical knowledge cannot yet confidently predict the direction of the impact of additional product market competition on innovation, much less the magnitude. Additionally, the multi-dimensional nature of competition implies that the magnitude of these impacts will be important as innovation and other forms of competition will frequently be inversely correlated as they relate to consumer welfare. Thus, weighing the magnitudes of opposing effects will be essential to most policy decisions relating to innovation. Again, at this stage, economic theory does not provide a reliable basis for predicting the conditions under which welfare gains associated with greater product market competition resulting from some regulatory intervention will outweigh losses associated with reduced innovation.

* * *

In sum, the theoretical and empirical literature reveals an undeniably complex interaction between product market competition, patent rules, innovation, and consumer welfare. While these complexities are well understood, in our view, their implications for the debate about the appropriate scale and form of regulation of innovation are not.

Along the most important dimensions, while our knowledge has expanded since 1972, the problem has not disappeared — and it may only have magnified. As Tim Muris noted in 2005,

[A] visitor from Mars who reads only the mathematical IO literature could mistakenly conclude that the U.S. economy is rife with monopoly power…. [Meanwhile, Section 2’s] history has mostly been one of mistaken enforcement.

It may not sound like much, but what is needed, what Josh brought to the agency, and what turns out to be absolutely essential to getting it right, is unflagging awareness of and attention to the institutional, political and microeconomic relationships that shape regulatory institutions and regulatory outcomes.

Regulators must do their best to constantly grapple with uncertainty, problems of operationalizing useful theory, and, perhaps most important, the social losses associated with error costs. It is not (just) technicians that the FTC needs; it’s regulators imbued with the “Economic Way of Thinking.” In short, what is needed, and what Josh brought to the Commission, is humility — the belief that, as Coase also wrote, sometimes the best answer is to “do nothing at all.”

The technocratic model of regulation is inconsistent with the regulatory humility required in the face of fast-changing, unexpected — and immeasurably valuable — technological advance. As Virginia Postrel warns in The Future and Its Enemies:

Technocrats are “for the future,” but only if someone is in charge of making it turn out according to plan. They greet every new idea with a “yes, but,” followed by legislation, regulation, and litigation…. By design, technocrats pick winners, establish standards, and impose a single set of values on the future.

For Josh, the first JD/Econ PhD appointed to the FTC,

economics provides a framework to organize the way I think about issues beyond analyzing the competitive effects in a particular case, including, for example, rulemaking, the various policy issues facing the Commission, and how I weigh evidence relative to the burdens of proof and production. Almost all the decisions I make as a Commissioner are made through the lens of economics and marginal analysis because that is the way I have been taught to think.

A representative example will serve to illuminate the distinction between merely using economics and evidence and understanding them — and their limitations.

In his Nielson/Arbitron dissent Josh wrote:

The Commission thus challenges the proposed transaction based upon what must be acknowledged as a novel theory—that is, that the merger will substantially lessen competition in a market that does not today exist.

[W]e… do not know how the market will evolve, what other potential competitors might exist, and whether and to what extent these competitors might impose competitive constraints upon the parties.

Josh’s straightforward statement of the basis for restraint stands in marked contrast to the majority’s decision to impose antitrust-based limits on economic activity that hasn’t even yet been contemplated. Such conduct is directly at odds with a sensible, evidence-based approach to enforcement, and the economic problems with it are considerable, as Josh also notes:

[I]t is an exceedingly difficult task to predict the competitive effects of a transaction where there is insufficient evidence to reliably answer the[] basic questions upon which proper merger analysis is based.

When the Commission’s antitrust analysis comes unmoored from such fact-based inquiry, tethered tightly to robust economic theory, there is a more significant risk that non-economic considerations, intuition, and policy preferences influence the outcome of cases.

Compare in this regard Josh’s words about Nielsen with Deborah Feinstein’s defense of the majority from such charges:

The Commission based its decision not on crystal-ball gazing about what might happen, but on evidence from the merging firms about what they were doing and from customers about their expectations of those development plans. From this fact-based analysis, the Commission concluded that each company could be considered a likely future entrant, and that the elimination of the future offering of one would likely result in a lessening of competition.

Instead of requiring rigorous economic analysis of the facts, couched in an acute awareness of our necessary ignorance about the future, for Feinstein the FTC fulfilled its obligation in Nielsen by considering the “facts” alone (not economic evidence, mind you, but customer statements and expressions of intent by the parties) and then, at best, casually applying to them the simplistic, outdated structural presumption – the conclusion that increased concentration would lead inexorably to anticompetitive harm. Her implicit claim is that all the Commission needed to know about the future was what the parties thought about what they were doing and what (hardy disinterested) customers thought they were doing. This shouldn’t be nearly enough.

Worst of all, Nielsen was “decided” with a consent order. As Josh wrote, strongly reflecting the essential awareness of the broader institutional environment that he brought to the Commission:

[w]here the Commission has endorsed by way of consent a willingness to challenge transactions where it might not be able to meet its burden of proving harm to competition, and which therefore at best are competitively innocuous, the Commission’s actions may alter private parties’ behavior in a manner that does not enhance consumer welfare.

Obviously in this regard his successful effort to get the Commission to adopt a UMC enforcement policy statement is a most welcome development.

In short, Josh is to be applauded not because he brought economics to the Commission, but because he brought the economic way of thinking. Such a thing is entirely too rare in the modern administrative state. Josh’s tenure at the FTC was relatively short, but he used every moment of it to assiduously advance his singular, and essential, mission. And, to paraphrase the last line of the movie The Right Stuff (it helps to have the rousing film score playing in the background as you read this): “for a brief moment, [Josh Wright] became the greatest [regulator] anyone had ever seen.”

I would like to extend my thanks to everyone who participated in this symposium. The contributions here will stand as a fitting and lasting tribute to Josh and his legacy at the Commission. And, of course, I’d also like to thank Josh for a tenure at the FTC very much worth honoring.

Filed under: antitrust, consumer protection, cost-benefit analysis, economics, error costs, federal trade commission, ftc, JDW Symposium, law and economics, merger guidelines, political economy, regulation Tagged: cost-benefit analysis, error costs, Federal Trade Commission, ftc, joshua wright, regulatory humility, Symposium

Imagine a world where competition and consumer protection authorities base their final decisions on scientific evidence of potential harm. Imagine a world where well-intentioned policymakers do not use “possibility theorems” to rationalize decisions that are, in reality, based on idiosyncratic biases or beliefs. Imagine a world where “harm” is measured using a scientific yardstick that accounts for the economic benefits and costs of attempting to remedy potentially harmful business practices.

Read the full piece here.

Alden Abbott and I recently co-authored an article, forthcoming in the Journal of Competition Law and Economics, in which we examined the degree to which the Supreme Court and the federal enforcement agencies have recognized the inherent limits of antitrust law. We concluded that the Roberts Court has admirably acknowledged those limits and has for the most part crafted liability rules that will maximize antitrust’s social value. The enforcement agencies, by contrast, have largely ignored antitrust’s intrinsic limits. In a number of areas, they have sought to expand antitrust’s reach in ways likely to reduce consumer welfare.

The bright spot in federal antitrust enforcement in the last few years has been Josh Wright. Time and again, he has bucked the antitrust establishment, reminding the mandarins that their goal should not be to stop every instance of anticompetitive behavior but instead to optimize antitrust by minimizing the sum of error costs (from both false negatives and false positives) and decision costs. As Judge Easterbrook famously explained, and as Josh Wright has emphasized more than anyone I know, inevitable mistakes (error costs) and heavy information requirements (decision costs) constrain what antitrust can do. Every liability rule, every defense, every immunity doctrine should be crafted with those limits in mind.

Josh will no doubt be remembered, and justifiably so, for spearheading the effort to provide guidance on how the Federal Trade Commission will exercise its amorphous authority to police “unfair methods of competition.” Several others have lauded Josh’s fine contribution on that matter (as have I), so I won’t gild that lily here. Instead, let me briefly highlight two other areas in which Josh has properly pushed for a recognition of antitrust’s inherent limits.

Vertical Restraints

Vertical restraints—both intrabrand restraints like resale price maintenance (RPM) and interbrand restraints like exclusive dealing—are a competitive mixed bag. Under certain conditions, such restraints may reduce overall market output, causing anticompetitive harm. Under other, more commonly occurring conditions, vertical restraints may enhance market output. Empirical evidence suggests that most vertical restraints are output-enhancing rather than output-reducing. Enforcers taking an optimizing, limits of antitrust approach will therefore exercise caution in condemning or discouraging vertical restraints.

That’s exactly what Josh Wright has done. In an early post-Leegin RPM order predating Josh’s tenure, the FTC endorsed a liability rule that placed an inappropriately heavy burden on RPM defendants. Josh later laid the groundwork for correcting that mistake, advocating a much more evidence-based (and defendant-friendly) RPM rule. In the McWane case, the Commission condemned an exclusive dealing arrangement that had been in place for long enough to cause anticompetitive harm but hadn’t done so. Josh rightly called out the majority for elevating theoretical harm over actual market evidence. (Adopting a highly deferential stance, the Eleventh Circuit affirmed the Commission majority, but Josh was right to criticize the majority’s implicit hostility toward exclusive dealing.) In settling the Graco case, the Commission again went beyond the evidence, requiring the defendant to cease exclusive dealing and to stop giving loyalty rebates even though there was no evidence that either sort of vertical restraint contributed to the anticompetitive harm giving rise to the action at issue. Josh rightly took the Commission to task for reflexively treating vertical restraints as suspect when they’re usually procompetitive and had an obvious procompetitive justification (avoidance of interbrand free-riding) in the case at hand.

Horizontal Mergers

Horizontal mergers, like vertical restraints, are competitive mixed bags. Any particular merger of competitors may impose some consumer harm by reducing the competition facing the merged firm. The same merger, though, may provide some consumer benefit by lowering the merged firm’s costs and thereby allowing it to compete more vigorously (most notably, by lowering its prices). A merger policy committed to minimizing the consumer welfare losses from unwarranted condemnations of net beneficial mergers and improper acquittals of net harmful ones would afford equal treatment to claims of anticompetitive harm and procompetitive benefit, requiring each to be established by the same quantum of proof.

The federal enforcement agencies’ new Horizontal Merger Guidelines, however, may put a thumb on the scale, tilting the balance toward a finding of anticompetitive harm. The Guidelines make it easier for the agencies to establish likely anticompetitive harm. Enforcers may now avoid defining a market if they point to adverse unilateral effects using the gross upward pricing pressure index (GUPPI). The merging parties, by contrast, bear a heavy burden when they seek to show that their contemplated merger will occasion efficiencies. They must: (1) prove that any claimed efficiencies are “merger-specific” (i.e., incapable of being achieved absent the merger); (2) “substantiate” asserted efficiencies; and (3) show that such efficiencies will result in the very markets in which the agencies have established likely anticompetitive effects.

In an important dissent (Ardagh), Josh observed that the agencies’ practice has evolved such that there are asymmetric burdens in establishing competitive effects, and he cautioned that this asymmetry will enhance error costs. (Geoff praised that dissent here.) In another dissent (Family Dollar/Dollar Tree), Josh acknowledged some potential problems with the promising but empirically unverified GUPPI, and he wisely advocated the creation of safe harbors for mergers generating very low GUPPI scores. (I praised that dissent here.)

I could go on and on, but these examples suffice to illustrate what has been, in my opinion, Josh’s most important contribution as an FTC commissioner: his constant effort to strengthen antitrust’s effectiveness by acknowledging its inevitable and inexorable limits. Coming on the heels of the FTC’s and DOJ’s rejection of the Section 2 Report—a document that was highly attuned to antitrust’s limits—Josh was just what antitrust needed.

Filed under: antitrust, Efficiencies, error costs, exclusive dealing, federal trade commission, JDW Symposium, merger guidelines, section 5, vertical restraints Tagged: Federal Trade Commission, ftc, joshua wright, Symposium

I join all the others in congratulating Professor Wright on his accomplishments at the FTC. As both an academic and government official myself, I’ve long benefited from Dr. Wright’s work in academia and in government. I’ve also greatly enjoyed a ring-side view of the his upbeat and thoughtful manner for constructively engaging the diverse perspectives offered by personnel across the government, academic, and private sectors.

Read the full piece here.

by Dan Crane, Associate Dean for Faculty and Research and Frederick Paul Furth, Sr. Professor of Law, University of Michigan Law School

The FTC was the brain child of Progressive Era technocrats who believed that markets could be made to run more effectively if distinguished experts in industry and economics were just put in charge. Alas, as former FTC Chair Bill Kovacic has chronicled, over the Commission’s first century precious few of the Commissioners have been distinguished economists or business leaders. Rather, the Commissioners have been largely drawn from the ranks of politically connected lawyers, often filling patronage appointments.

How refreshing it’s been to have Josh Wright, highly distinguished both as an economist and as a law professor, serve on the Commission. Much of the media attention to Josh has focused on his bold conservatism in antitrust and consumer protection matters. But Josh has made at least as much of a mark in advocating for the importance of economists and rigorous economic analysis at the Commission.

Josh has long proclaimed that his enforcement philosophy is evidence-based rather than a priori or ideological. He has argued that the Commission should bring enforcement actions when the economic facts show objective harm to consumers, and not bring actions when the facts don’t show harm to consumers. A good example of Josh’s perspective in action is his dissenting statement in the McWane case, where the Commission staff may have had a reasonable theory of foreclosure, but not enough economic evidence to back it up.

Among other things, Josh has eloquently advocated for the institutional importance of the economist’s role in FTC decision making. Just a few weeks ago, he issued a statement on the Bureau of Economics, Independence, and Agency Performance. Josh began with the astute observation that, in disputes within large bureaucratic organizations, the larger group usually wins. He then observed that the lopsided ratio of lawyers in the Bureau of Competition to economists in the Bureau of Economics has led to lawyers holding the whip hand within the organization. This structural bias toward legal rather than economic reasoning has important implications for the substance of Commission decisions. For example, Malcolm Coate and Andrew Heimert’s study of merger efficiencies claims at the FTC showed that economists in BE were far more likely than lawyers in BC to credit efficiencies claims. Josh’s focus on the institutional importance of economists deserves careful consideration in future budgetary and resource allocation discussions.

In considering Josh’s legacy, it’s also important to note that Josh’s prescriptions in favor of economic analysis were not uniformly “conservative” in the trite political or ideological sense. In 2013, Josh gave a speech arguing against the application of the cost-price test in loyalty discount cases. This surprised lots of people in the antitrust community, myself included. The gist of Josh’s argument was that a legalistic cost-price test would be insufficiently attentive to the economic facts of a particular case and potentially immunize exclusionary behavior. I disagreed (and still disagree) with Josh’s analysis and said so at the time. Nonetheless, it’s important to note that Josh was acting consistently with his evidence-based philosophy, asking for proof of economic facts rather than reliance on legal short-cuts. To his great credit, Josh followed his philosophy regardless of whether it supported more or less intervention.

In sum, though his service was relatively short, Josh has left an important mark on the Commission, founded in his distinctive perspective as an economist. It is to be hoped that his appointment and service will set a precedent for more economist Commissioners in the future.

Josh Wright will doubtless be remembered for transforming how FTC polices competition. Between finally defining Unfair Methods of Competition (UMC), and his twelve dissents and multiple speeches about competition matters, he re-grounded competition policy in the error-cost framework: weighing not only costs against benefits, but also the likelihood of getting it wrong against the likelihood of getting it right.

Yet Wright may be remembered as much for what he started as what he finished: reforming the Commission’s Unfair and Deceptive Acts and Practices (UDAP) work. His consumer protection work is relatively slender: four dissents on high tech matters plus four relatively brief concurrences and one dissent on more traditional advertising substantiation cases. But together, these offer all the building blocks of an economic, error-cost-based approach to consumer protection. All that remains is for another FTC Commissioner to pick up where Wright left off.

Read the full piece here.

I was saddened to learn that Commissioner Joshua Wright is resigning from the Federal Trade Commission. Commissioner Wright leaves the agency with a tremendous legacy. He brought to the FTC’s decision-making groundbreaking economic analysis, such as his opinion in Ardagh/St. Gobain that the government should evaluate possible merger efficiencies under a standard of proof similar to that applied to predicted anticompetitive effects. He proposed and reached across the aisle to accomplish major reforms, such as the FTC’s recent clarification of its Section 5 authority to police “unfair methods of competition” (something the agency had never done in its century-long existence).

Read the full piece here.

Much ink will be spilled at this site lauding Commissioner Joshua (Josh) Wright’s many contributions to the Federal Trade Commission (FTC), and justly so. I will focus narrowly on Josh Wright as a law and economics “provocateur,” who used his writings and speeches to “stir the pot” and subject the FTC’s actions to a law and economics spotlight. In particular, Josh highlighted the importance of decision theory, which teaches that bureaucratic agencies (such as the FTC) are inherently subject to error and high administrative costs, and should adopt procedures and rules of decision accordingly. Thus, to maximize welfare, an agency should adopt “optimal” rules, directed at minimizing the sum of false positives, false negatives, and administrative costs. In that regard, the FTC should pay particular attention to empirical evidence of actual harm, and not bring cases based on mere theoretical models of possible harm – models that are inherently likely to generate substantial false positives (predictions of consumer harm) and thereby run counter to a well-run decision-theoretical regime.

Josh became a Commissioner almost three years ago, so there are many of his writings to comment upon. Nevertheless, he is so prolific that a very good understanding of his law and economics approach may be gleaned merely by a perusal of his 2015 contributions. I will selectively focus upon a few representative examples of wisdom drawn from Josh Wright’s (hereinafter JW) 2015 writings, going in reverse chronological order. (A fuller and more detailed exposition of his approach over the years would warrant a long law review article.)

Earlier this month, in commenting on the importance of granting FTC economists (housed in the FTC’s Bureau of Economics (BE)) a greater public role in the framing of FTC decisions, JW honed in on the misuse of consent decrees to impose constraints on private sector behavior without hard evidence of consumer harm:

One [unfortunate] phenomenon is the so?called “compromise recommendation,” that is, a BE staff economist might recommend the FTC accept a consent decree rather than litigate or challenge a proposed merger when the underlying economic analysis reveals very little actual economic support for liability. In my experience, it is not uncommon for a BE staff analysis to convincingly demonstrate that competitive harm is possible but unlikely, but for BE staff to recommend against litigation on those grounds, but in favor of a consent order. The problem with this compromise approach is, of course, that a recommendation to enter into a consent order must also require economic evidence sufficient to give the Commission reason to believe that competitive harm is likely. . . . [What, then, is the solution?] Requiring BE to make public its economic rationale for supporting or rejecting a consent decree voted out by the Commission could offer a number of benefits at little cost. First, it offers BE a public avenue to communicate its findings to the public. Second, it reinforces the independent nature of the recommendation that BE offers. Third, it breaks the agency monopoly the FTC lawyers currently enjoy in terms of framing a particular matter to the public. The internal leverage BE gains by the ability to publish such a document may increase conflict between bureaus on the margin in close cases, but it will also provide BE a greater role in the consent process and a mechanism to discipline consents that are not supported by sound economics. I believe this would go a long ways towards minimizing the “compromise” recommendation that is most problematic in matters involving consent decrees.

In various writings, JW has cautioned that the FTC should apply an “evidence-based” approach to adjudication, and not lightly presume that particular conduct is anticompetitive – including in the area of patents. JW’s most recent pronouncement regarding an evidence-based approach is found in his July 2015 statement with fellow Commissioner Maureen Ohlhausen filed with the U.S. International Trade Commission (ITC), recommending that the ITC apply an “evidence-based” approach in deciding (on public interest grounds) whether to exclude imports that infringe “standard essential patents” (SEPs):

There is no empirical evidence to support the theory that patent holdup is a common problem in real world markets. The theory that patent holdup is prevalent predicts that the threat of injunction leads to higher prices, reduced output, and lower rates of innovation. These are all testable implications. Contrary to these predictions, the empirical evidence is not consistent with the theory that patent holdup has resulted in a reduction of competition. . . .  An evidence-based approach to the public interest inquiry, i.e., one that requires proof that holdup actually occurred in a particular case, protects incentives to participate in standard setting by allowing SEP holders to seek and obtain exclusion orders when permitted by the SSO agreement at issue and in the absence of a showing of any improper use. In contrast, any proposal that would require the ITC to presume the existence of holdup and shift the burden of proof to SEP holders to show unwillingness threatens to deter participation in standard setting, particularly if an accused infringer can prove willingness simply by agreeing to be bound by terms determined by neutral adjudication.

In such matters as Cephalon (May 2015) and Cardinal Health (April 2015), JW teamed up with Commissioner Ohlhausen to caution that disgorgement of profits as an FTC remedy in competition cases should not be lightly pursued, and indeed should be subject to a policy statement that limits FTC discretion, in order to reduce costly business uncertainty and enforcement error.

JW also brought to bear decision-theoretic insights on consumer protection matters. For example, in his April 2015 dissent in Nomi Technologies, he castigated the FTC for entering into a consent decree when the evidence of consumer harm was exceedingly weak (suggesting a high probability of a false positive, in decision-theoretic terms):

The Commission’s decision to issue a complaint and accept a consent order for public comment in this matter is problematic for both legal and policy reasons. Section 5(b) of the FTC Act requires us, before issuing any complaint, to establish “reason to believe that [a violation has occurred]” and that an enforcement action would “be to the interest of the public.” While the Act does not set forth a separate standard for accepting a consent decree, I believe that threshold should be at least as high as for bringing the initial complaint. The Commission has not met the relatively low “reason to believe” bar because its complaint does not meet the basic requirements of the Commission’s 1983 Deception Policy Statement. Further, the complaint and proposed settlement risk significant harm to consumers by deterring industry participants from adopting business practices that benefit consumers.

Consistent with public choice insights, JW stated in an April 2015 speech that greater emphasis should be placed on public advocacy efforts aimed at opposing government-imposed restraints of trade, which have a greater potential for harm than purely private restraints. Thus, welfare would be enhanced by a reallocation of agency resources toward greater advocacy and less private enforcement:

[P]ublic restraints are especially pernicious for consumers and an especially worthy target for antitrust agencies. I am quite confident that a significant shift of agency resources away from enforcement efforts aimed at taming private restraints of trade and instead toward fighting public restraints would improve consumer welfare.

In March 2015 congressional testimony, JW explained his opposition to Federal Communications Commission (FCC) net neutrality regulation, honing in on the low likelihood of harm from private conduct (and thus implicitly the high risk of costly error and unwarranted regulatory costs) in this area:

Today I will discuss my belief that the FCC’s newest regulation does not make sense from an economic perspective. By this I mean that the FCC’s decision to regulate broadband providers as common carriers under Title II of the Communications Act of 1934 will make consumers of broadband internet service worse off, rather than better off. Central to my conclusion that the FCC’s attempts to regulate so-called “net neutrality” in the broadband industry will ultimately do more harm than good for consumers is that the FCC and commentators have failed to identify a problem worthy of regulation, much less cumbersome public-utility-style regulation under Title II.

At the same time, JW’s testimony also explained that in the face of hard evidence of actual consumer harm, the FTC could take – and indeed has taken on several instances – case-specific enforcement action.

Also in March 2015, in his dissent in Par Petroleum, JW further developed the theme that the FTC should not enter into a consent decree unless it has hard evidence of competitive harm – a mere theory does not suffice:

Prior to entering into a consent agreement with the merging parties, the Commission must first find reason to believe that a merger likely will substantially lessen competition under Section 7 of the Clayton Act. The fact that the Commission believes the proposed consent order is costless is not relevant to this determination. A plausible theory may be sufficient to establish the mere possibility of competitive harm, but that theory must be supported by record evidence to establish reason to believe its likelihood. Modern economic analysis supplies a variety of tools to assess rigorously the likelihood of competitive harm. These tools are particularly important where, as here, the conduct underlying the theory of harm – that is, vertical integration – is empirically established to be procompetitive more often than not. Here, to the extent those tools were used, they uncovered evidence that, consistent with the record as a whole, is insufficient to support a reason to believe the proposed transaction is likely to harm competition. Thus, I respectfully dissent and believe the Commission should close the investigation and allow the parties to complete the merger without imposing a remedy.

In a February 2015 speech on the need for greater clarity with respect to “unfair methods of competition” under Section 5 of the FTC Act, JW emphasized the problem of uncertainty generated by the FTC’s failure to adequately define unfair methods of competition:

The lack of institutional commitment to a stable definition of what constitutes an “unfair method of competition” leads to two sources of problematic variation in the agency’s interpretation of Section 5. One is that the agency’s interpretation of the statute in different cases need not be consistent even when the individual Commissioners remain constant. Another is that as the members of the Commission change over time, so does the agency’s Section 5 enforcement policy, leading to wide variations in how the Commission prosecutes “unfair methods of competition” over time. In short, the scope of the Commission’s Section 5 authority today is as broad or as narrow as a majority of commissioners believes it is.

Focusing on the empirical record, JW offered a sharp critique of FTC administrative adjudication (and the value of the FTC’s non-adjudicative research function) in another February 2015 speech:

The data show three things with significant implications for those  important questions. The first is that, despite modest but important achievements in administrative adjudication, it can offer in its defense only a mediocre substantive record and a dubious one when it comes to process. The second is that the FTC can and does influence antitrust law and competition policy through its unique research-and-reporting function. The third is, as measured by appeal and reversal rates, generalist courts get a fairly bad wrap relative to the performance of expert agencies like the FTC.

In the same speech, JW endorsed proposed congressional reforms to the FTC’s exercise of jurisdiction over mergers, embodied in the draft “Standard Merger and Acquisition Reviews Through Equal Rules (SMARTER) Act.” Those reforms include harmonizing the FTC and Justice Department’s preliminary injunction standards, and divesting the FTC of its authority to initiate and pursue administrative challenges to unconsummated mergers, thus requiring the agency to challenge those deals in federal court.

Finally, JW dissented from the FTC’s publication of an FTC staff report (based on an FTC workshop) on the “Internet of Things,” in light of the report’s failure to impose a cost-benefit framework on the recommendations it set forth:

[T]he Commission and our staff must actually engage in a rigorous cost-benefit analysis prior to disseminating best practices or legislative recommendations, given the real world consequences for the consumers we are obligated to protect. Acknowledging in passing, as the Workshop Report does, that various courses of actions related to the Internet of Things may well have some potential costs and benefits does not come close to passing muster as cost-benefit analysis. The Workshop Report does not perform any actual analysis whatsoever to ensure that, or even to give a rough sense of the likelihood that the benefits of the staff’s various proposals exceed their attendant costs.  Instead, the Workshop Report merely relies upon its own assertions and various surveys that are not necessarily representative and, in any event, do not shed much light on actual consumer preferences as revealed by conduct in the marketplace. This is simply not good enough; there is too much at stake for consumers as the Digital Revolution begins to transform their homes, vehicles, and other aspects of daily life. Paying lip service to the obvious fact that the various best practices and proposals discussed in the Workshop Report might have both costs and benefits, without in fact performing such an analysis, does nothing to inform the recommendations made in the Workshop Report.

To conclude, FTC Commissioner Josh Wright went beyond merely emphasizing the application of economic theory to individual FTC cases, by explaining the need to focus economic thinking on FTC policy formulation – in other words, viewing FTC administrative processes and decision-making from an economics-based, decision-theoretical perspective, with hard facts (not mere theory) a key consideration. If the FTC is to be true to its goal of advancing consumer welfare, it should fully adopt such a perspective on a going-forward basis. One may only hope that current and future FTC Commissioners will heed this teaching.

There’s an old saying, “It’s better to light a single bipartisan candle than to curse the darkness caused by your opponents.” This might not be the way most people articulate this proverb, but in Washington D. C. anyone who, like Commissioner Joshua Wright, puts so much effort into finding, developing, and promoting bipartisan agreement is a rarity indeed.

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