The Changing Regulatory Landscape: A New Generation Takes Control Part 1

    Clay Brewer is an associate attorney at Thompson Burton PLLC. His practice area focuses primarily on serving young, direct selling companies. He assists Kevin Thompson in providing exceptional legal support for companies ranging from early-stage startups to well-established entities.

    We have discussed in many of our previous articles the ever-changing regulatory strategy of federal agencies and the virtual impossibility of reading regulator’s minds, especially the Federal Trade Commission (“FTC”), but we have never truly dove into the minutiae of what may be causing this constant shifting of the goal posts. Is it really a shift or was there ever even a goal to begin with? Why has the American ideal of economic prosperity shifted to a means justify the ends approach if a single consumer is somehow economically injured? The answer may be as simple as the times they are a-changin’. But there can also be an underlying current bringing forth a new wave of impenetrable idealism, a change that is catalyzed by a youth movement that marches to the drum of “we’re all in this together,” globally not nationally. Part 1 of this article series will introduce you to a few trends that are becoming more evident and then future articles will break down these trends into how to perceive what we may witness in the near future as opposed to constantly looking back.  

                On Monday, March 22, 2021, President Biden announced his intent to nominate Professor Lina Khan as a commissioner to the five-person FTC. Nothing out of the ordinary with a newly elected president nominating members to his administration, right? Generally, yes. However, Khan does not fit the traditional mold of political establishment. She is a 32-year-old, nearly fresh out of law school, with minimal “real-world” experience, let alone having the “credentials” to be one of five seats on a regulatory commission seeking to realign the enforcement toolbox. This article is not an indictment of Khan nor is it an advocation, it is simply presenting a fact. I recently graduated law school as well and continue to navigate my way through this regulatory landscape. Khan has made great waves through her navigation. People are taking notice.

                The way many have discussed the functionality of American markets has been somewhat stagnant for decades with certain ebbs and flows of calls for drastic change with very minimal substance. The shift in attitude of this new generation could bring significant changes in the future that are likely here to stay. Specifically for purposes of this article, we are addressing the ideas within the consumer protection space in how regulators may use antitrust intonations in their future assessments of network marketing models. Now, when we say generational shift and youth, we not only are referring to Khan and myself, but also an evolving way of thinking in addressing how things “have always been.”

                For better or for worse, we see a regulatory change coming that not only adopts the Machiavellian ends justify the means approach, but also flips the traditional lower prices benefits consumers mantra to the idea that even when consumers may knowingly choose something, they are being misled and deceived by entrepreneurs of all stripes. Has the mantra now shifted from the consumer is always right to now the consumer is always right, unless the government knows better? In 2017, Khan presented in the Yale Law Review a new way of assessing markets “that gaug[es] real competition in the twenty-first century marketplace–especially in the case of online platforms–requires analyzing the underlying structure and dynamics of markets. Rather than pegging competition to a narrow set of outcomes, this approach would examine the competitive process itself.” In essence, there are many tools in the toolbox so let’s step back and expand the extended options that are present within the regulatory repertoire. To further illustrate that the new generation of thinking is not age-dependent, FTC Commissioner Rohit Chopra, now Biden-nominee to head the Consumer Financial Protection Bureau (“CFPB”), argued for a similar transition in FTC regulatory thought in anticipation of the Supreme Court’s decision to restrict the FTC’s favored 13(b) enforcement provision (the Supreme Court has done just that as we discussed here). Another example of the youthful generational shift in regulatory thinking is evident in Biden naming Tim Wu to the National Economic Council to be special assistant to the president for technology and competition. Wu is known for his stance on Big Tech and his belief that now “The antitrust winter is over.” Wu is also a former regulatory advisor to the FTC and his scholarship is often seen as the framework for which many of the FTC’s actions originated. In sum, the regulatory shift is upon us with those who have theorized in remodeling the regulatory model are now in the positions to not only influence but to take action. 

                Whether or not the toolbox is actually returning the FTC back to its original purpose or restructuring the whole model, this shift in approach will undoubtedly have massive repercussions for the network marketing industry. For now, the FTC has lost its treasured tool of 13(b), but they won’t stay silent for long.  Although the individuals specifically mentioned within this article have strong partiality to the topic of antitrust and Big Tech, it is our belief that the analysis is transcendent and will be applied throughout the FTC’s jurisdiction. The economic reality of a given case will be replaced by a structural approach to what may cause harm or what may be viewed as “improper” by those who wield the power yet frame their standards according to the wave of public opinion, a wave that appears to be strongly dominated by the minority who manifest the blue-checkmark brigade. Network marketing is not going to be the sexy target that this regulatory shift will dial in on, leave that to the Amazons, Facebooks, and Googles. However, the network marketing space will 100% feel the repercussions and could also fall victim to a new model that is meant to solve one problem while resulting in many potential unintended consequences outside of that problem. But that won’t matter, regulators are not very sensitive to our corner of the economy.

      Clay Brewer is an associate attorney at Thompson Burton PLLC. His practice area focuses primarily on serving young, direct selling companies. He assists Kevin Thompson in providing exceptional legal support for companies ranging from early-stage startups to well-established entities.