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What the President's Order on Competition Means for Consumer Products

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On July 9, 2021, President Biden issued the Executive Order on Promoting Competition in the American Economy (“Competition EO” or “Order”). The Competition EO directs initiatives across several agencies, some of which are focused on areas of interest particularly for consumer products companies. Curiously from an antitrust perspective, much of the Order focuses on the benefits to interests such as organized labor rather than to consumers or the advancement of non-economic goals. In that regard, the Order is perhaps consistent with the current push by some in the antitrust community away from what has been the lodestar of antitrust analysis, i.e., the consumer welfare standard. Nonetheless, references to consumers throughout the Competition EO are not absent. The below summary highlights and provides thoughts on the Order’s directives which focus on consumer products. But before turning to these specific portions of the Competition EO, a few general observations are in order. While the Order is really remarkably focused on discrete aspects of the economy, the principles in the Order are likely to be applied more broadly.

First, while regulatory agencies are encouraged to do specific things, we expect that once engaged on market regulation, the agencies will find additional areas in which to act. Indeed, the Competition EO explicitly prescribes that as part of a “whole-of-government” approach, agencies should adopt “pro-competitive regulations.” We’ve already seen the tendency of this approach to expand the agencies’ mandate beyond what is explicitly captured in the Order. The Competition EO encourages the Federal Trade Commission (“FTC”), for example, to address “unfair anticompetitive restrictions on third-party repair or self-repair of items” and provides a business-to-business example (not a consumer products example) of such restrictions—it points to restraints on farmers repairing their own equipment. The FTC acted quickly to issue a broad Policy Statement announcing a campaign against repair restrictions. In it, the FTC called out practices such as limiting the availability of parts and tools, using exclusionary designs and product decisions that make independent repairs less safe, and making unlawfully overbroad assertions in patent and trademark rights. The broad and seemingly unfettered right to repair principle in the Policy Statement would affect a large range of consumer products. Importantly, the analytical approach advanced in the Policy Statement is not accompanied by any acknowledgement of competing considerations related to, for example, innovation incentives and product integrity concerns that are rooted in procompetitive enhancements of those products for consumers.

Second, for the areas it targets, the Competition EO relies on certain “solutions,” such as disseminating better information to consumers or eliminating contractual or other aspects of a market that make it harder for consumers to switch products. We expect that the mandates for more information disclosure and facilitating consumer switching will show up in additional regulatory efforts and, like the FTC’s right-to-repair Policy Statement, will give short shrift to competing considerations. Accordingly, while consumer products companies within the direct “kill zone” of the Order’s targets should, of course, pay close attention to the following consumer products components of the Order, companies should also consider these specific directives as merely illustrative of actions that regulatory agencies are likely to take in other consumer product industries. Consumer Products companies are well advised to consider where greater information disclosure or dampening of practices that create consumer stickiness might be targeted.

Telecommunications (Cable/Broadband): The Competition EO is concerned with consumer ability to switch between providers along with pricing and service transparency. The Order directs the Chair of the Federal Communications Commission (“FCC”) to consider rulemaking to, among other things, (1) prohibit “unjust or unreasonable early termination fees for end-user communications contracts;” (2) require “broadband service providers to display a broadband consumer label, . . . to give consumers clear, concise, and accurate information regarding provider prices and fees, performance, and network practices;” (3) require broadband providers to “regularly report broadband price and subscription rates” to the FCC so the FCC may provide this information to consumers “to improve price transparency and market functioning;” and (4) prohibit “landlords and Internet service providers from inhibiting tenants’ choices among providers.”

Airlines (Flight Information and Pricing): The Competition EO is also concerned with enhancing transparency and establishing safeguards to protect consumers and improve competition in the airline industry. To that end, the Order directs the Secretary of Transportation to, as appropriate, engage in rulemaking, issue guidance, or bring enforcement actions to (1) enhance consumer access to flight option information “including by new or lesser known airlines;” and (2) ensure that consumers are not presented with “advertising, marketing, pricing, and charging of ancillary fees that may constitute an unfair or deceptive practice or an unfair method of competition.” With respect to the latter, the Order also directs the Secretary of Transportation within 60 days of the Order to begin work on proposed amendments to the Department of Transportation’s definitions of “unfair” and “deceptive.” Further, the Order is concerned with airlines’ failure to provide timely refunds for flights canceled as a result of the pandemic, as well as baggage fees where luggage was “substantially” delayed and fees for ancillary services that were not provided. It also asks the Secretary of Transportation to consider rulemaking that would require clear ancillary fee information at the time of ticket purchase.

Healthcare and Prescription Drugs: The Competition EO directs the Secretary for Health and Human Services to support price transparency initiatives for healthcare providers and “implement standardized options” in the Health Insurance Marketplace to increase consumer choice including facilitating clearer comparison of plan offerings. With respect to prescription drugs, the Order includes directives to enhance consumer access to lower priced options including generics and biosimilars. For example, the Order directs the Commissioner of Food and Drugs to work with States and Indian Tribes on pharmaceutical importation programs from Canada. It also directs the Secretary of Health and Human Services to work with the Chair of the FTC to address “efforts to impede generic drug and biosimilar competition” including curbing false, misleading, or deceptive statements about the options’ safety or efficacy.

Hearing Aids: The Order aims to “promote the wide availability of low-cost hearing aids” and requires the Secretary of Health and Human Services within 120 days of the Order to publish a proposed rule on over-the-counter hearing-aids. As the Fact Sheet for the Order explains, the goal here is to drastically improve consumer access to and decrease pricing of hearing aids by allowing the devices to be sold over the counter. In one sense, the hearing aids instruction is the odd duck in the Competition EO in that it has a decidedly de-regulatory aspect to it.

Financial Services: The Director of the Consumer Financial Protection Bureau is directed to consider engaging in rulemaking aimed at “facilitat[ing] the portability of consumer financial transaction data so consumers can more easily switch financial institutions and use new, innovative financial products.” The Order also directs the Secretary of the Treasury to submit a report to the Chair of the White House Competition Council within 270 days of the Order, analyzing the effects on competition in the consumer finance markets of large technology and other non-banking companies’ entry. Relatedly, the U.S. Department of Justice Antitrust Division (“DOJ”) and the FTC recently submitted letters in support of the Federal Reserve Board’s (“Fed”) proposal to clarify a rule that requires two independent card networks be available for routing all debit card transactions—even for e-commerce transactions or when cards are not present. Though geared towards facilitating access to merchants for smaller debit networks, thereby increasing competition in the space, DOJ highlighted the proposal would likely serve to save consumers money as merchants could reduce their costs. DOJ also took the opportunity of commenting to encourage the Fed to broaden its proposed rule’s applicability. Noting the Competition EO, DOJ observed that it looked “forward to working with the [Fed] on this and other efforts to foster competition.”

Ultimately, the Competition EO’s consumer efforts target market structures and practices that may inhibit adequate competition and result in higher prices for Americans. Some directives, such as any right-to-repair rulemaking, could result in effects that apply more broadly than the industry contemplated in the Order. Additionally, as noted, some of these initiatives direct various agencies to submit to the Chair of the White House Competition Council reports with either an overview of competitive conditions in certain industries or plans and/or recommendations for enhancing competition in those industries. The FTC could follow this lead and launch 6(b) Studies or other investigations of additional consumer products focused industries—and has been called on to do so previously, for example, with respect to grocery/retailer and manufacturer/supplier practices. As the various agencies begin carrying out their directives, we caution those in the consumer products industries to keep an eye on any developments for broader implications.

 

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