Thread by @leah_nylen

Onward. FTC's Open Meeting starts in 25 mins with a new health app privacy statement, rescinding the VMGs and a peek at the little deals by Big Tech. politico.com/newsletters/mo…

Link to the FTC's meeting: view.knowledgevision.com/presentation/a…

FTC Chair Lina Khan says some digital health apps "play fast and loose" with user's data.

The policy statement will clarify that the FTC's Health Breach Notification Rule applies to health data apps, Khan says. ftc.gov/enforcement/ru…

The FTC "should not hesitate to seek significant penalties against developers of health apps and other technologies that ignore" the notification rule, Khan says.

Republican FTC Commissioner Noah Phillips criticizes the agency for not taking public comments before determining the rule applies to health apps.

In May 2020, the FTC sought public comments on whether to amend the rule to apply to health apps. This policy statement is an "end-run" around the regular process, he says. ftc.gov/news-events/pr…

Democrat Rohit Chopra says the FTC has ignored Congress. "Commissioners coming before us have decided that our statutory responsibilities are optional, a concept I find deeply inappropriate"

Since 2010 when the Health Breach Notification Rule took effect, the FTC has only been notified 4 times.
"It is impossible that there have been only four covered incidents in our county," Chopra said.

Chopra says the FTC "created confusion" with its Flo decision by not making clear that it's sharing of sensitive data with Facebook and Google was a violation of the Health Breach Notification Rule. ftc.gov/news-events/pr…

Democrat Rebecca Kelly Slaughter notes that mental health apps have seen a particular growth during the pandemic. The new policy statement "sends a clear signal" to developers that they must comply with their legal obligations about breaches.

Slaughter: "If you are offering digital health services, the FTC will hold you accountable for accurate evidence-based claims and fully compliant data privacy practices."

Slaughter says the Health Breach Notification Rule may warrant updating, but the policy statement isn't an update and therefore doesn't need public comments.

Christine Wilson says the FTC has a "transparency paradox." "We're told that our new leadership values transparency and public input. Unfortunately, the majority repeatedly has chosen to undermine transparency and limits public input"

"I am sympathetic to the majority's goals of providing higher level of protection to sensitive consumer health data," Wilson says. To the extent the commission possess authority to address consumer health data provided to mobile apps through [the rule], I support employing that"

FTC votes 3-2 to approve policy statement.

Now on to the 6(b) on the little deals by Big Tech.

FTC staffer Liad Wagman is now giving a presentation on the trends and patterns.

There were 616 transactions reported.

The firms tended to acquire between 43 and 70ish per year, with more tending to happen after 2015

2/3 of the acquisitions were U.S.-based

More than 1/3 involved a transaction where the company took on debt from the small company (called it!)

And this is the most interesting slide: most involve deferred or contingent compensation to keep the founders and key employees. And 75% involve non-competes.

Khan says the finding should lead the FTC "to closely examine reporting requirements under HSR and to identify areas where the FTC may have created loopholes"

Khan also says the FTC needs to explore the use or misuse of non-competes in mergers as part of its broader look at these types of agreements.

Khan: "Even smaller transactions invite vigilance"

Republican Commissioner Christine Wilson says she hopes the FTC continues to scrutinize the data. "This is not the only industry that raises questions about" HSR. She calls on the FTC to do another study on non-reportable mergers in the healthcare industry.

Democrat Rebecca Kelly Slaughter says the FTC does not always know about the transactions it should. "The most significant contribution the study provides is the window into the overall pattern." Slaughter says she is particularly concerned about roll-ups, or Pac-Man acquisitions

Slaughter says she agrees with Wilson that the FTC should look at other industries where there might be large numbers of unreported deals.

Democrat Rohit Chopra says HSR should be amended to ensure the largest forms report more of their transactions. But the FTC needs to do better about "avoidance devices," ways companies deliberately try to get around the law.

He slams some of the FTC's informal interpretations as loopholes that allow companies to avoid filing their mergers. These interpretations aren't voted on by the commissioners, but signal to companies how to avoid the law.

Republican Noah Phillips says the study is useful for the public. But it was limited in scope, and it isn't clear if the data was representative of the industry or mergers more broadly.

Now on to a change to FTC procedures that would allow members of the public to petition the FTC to begin a rulemaking.

For background, people have frequently petitioned the FTC to make rules on various things, but there hasn't been a real process for what happens after that.

Khan says the new process would require the petition be made publicly available, put them out for public comment and notify the petition on any decision on the petition.

Republican Noah Phillips says he supports the proposal to make it more clear to the public about how to petition the FTC.

Democrat Rohit Chopra said the FTC in 2011 began using a "more secretive and less accountable" policy on petitions by not making public the petitions they received.

In 2019, Chopra says the FTC received a petition New Civil Liberties Alliance to pursue a rulemaking on procedures for defending agency guidance in court. Chopra said he was unsuccessful in persuading his colleagues to publish it and other petitions.

Instead the FTC did "what amounted to pretending we never received it at all. Even if we disagree, we shouldn't silence or pretend something doesn't exist," Chopra says.

Chopra: "We need to pursue initiatives like these to loosen the grip that large dominant firms have held at this agency to secretly influence and dictate our agenda."

This will help level the playing field, he says, since "small businesses and community groups can't hire high-priced FTC alumni with special access and connections to push their agenda"

Republican Christine Wilson says she supports transparency and efforts to include the public in business, but this will create "a petition machine"

Wilson says the FTC should require petitions to disclose who is funding the rulemaking petition. "I don't want the FTC unwittingly to be used as a weapon against rivals."

She notes that the FDA has had a problem branded drugmakers using citizen petitions to seek to delay generic drugs and says she's worried about similar "regulatory gamesmanship" at the FTC.

Wilson offers a topping motion that would delay the decision on publishing petitions until after the FTC's general counsel can create a rule on funding transparency.

Both Phillips and Slaughter say they support creating such a rule but won't second Wilson's motion.

The motion fails for lack of a second.

The new procedures on petition-making is adopted 4-1.

*are

And finally, the vertical merger guidelines withdrawal.

Khan says the vertical merger guidelines adopted last year have some problems, so the FTC wants to withdraw them to prevent "industry and judicial reliance" on them.

The FTC and DOJ will work on creating a new version, she says.

Republican Christine Wilson says the guidelines reflect "accepted economic analysis." The guidelines "do not shield vertical deals from antitrust enforcement" but recognize that in some cases vertical mergers can have pro-competitive benefits, she says.

"Vertical integration is common and less likely to harm consumers than horizontal deals," Wilson says.

Wilson makes a topping motion to instruct staff to continue investigating mergers as described in the guidelines until new ones are issued. Phillips seconds.

Fails 3-2.

Democrat Rebecca Kelly Slaughter says she has some hesitation with withdrawing these guidelines without a replacement. They aren't going back to the 1984 guidelines, she says.

Slaughter says she thinks the record created by the VMG process last year supports a broader draft. But given that DOJ/FTC will be reviewing both vertical and horizontal guidelines, she thinks they should consider one set that includes both.

Democrat Rohit Chopra says the FTC relied on a "series of unproven or disproven assumptions" in the guidelines it adopted. It gave a "blueprint to companies seeking to engage in an illegal vertical merger," and suggests they "may have been worse than doing nothing at all"

Resource shortages and supply chain problems are delaying the recovery from the Covid-19 pandemic, Chopra points out. Today's merger analysis overly focuses on efficiencies, which reduces capacity and resiliency, he says.

Republican Noah Phillips accuses the majority of "pulling the rug out from under honest businesses, the lawyers who wish to advise them and with no real explanation and no sound basis"

Phillips chastises the majority for withdrawing the guidelines without something to replace them, saying it will "sow uncertainty in the market"

Phillips makes a topping motion publish a Federal Register notice seeking a public comment on withdrawing the guidelines. Fails 3-2.

And now a vote on withdrawing the guidelines. It passes 3-2 on party lines.

And now we're done with business. On to the public comment portion where 17 people are going to give thoughts (and I'm going to drop off and write my stories)