FTC Chair Lina Khan Ignored Ethics Official's Advice About Meta Case, Then Said She Didn't

Bad news for Lina Khan. The Federal Trade Commission (FTC) chair ignored the advice of a top ethics official when she refused to recuse herself from decisions regarding Meta's acquisition of the virtual reality fitness app maker Within Unlimited. Khan then claimed at a House hearing that she had consistently followed the official's advice.

Taking on social media companies, especially Meta, has been a cornerstone of Khan's antitrust agenda at the FTC. But Khan's concern predates her tenure in the Biden administration. Before joining the agency, Khan was vocal about her belief that Meta should be blocked from any future acquisitions, and as a congressional staffer she wrote a report arguing as much.

This led Meta to argue that Khan should recuse herself from FTC decisions related to its attempted acquisition of Within Unlimited. But Khan refused, and in February the FTC denied Meta's petition to force her off the case.

The decision was part of what prompted Republican Commissioner Christine Wilson to resign from the FTC. Writing in The Wall Street Journal, Wilson scoffed at the idea that Khan could now "sit as a purportedly impartial judge and decide whether Meta can acquire Within." Wilson had dissented from Democratic colleagues' decision to let Khan be involved in the Meta acquisition decisions.

Khan's refusal to recuse went against the recommendations of the FTC's top ethics official.

"In my opinion, there is a reasonable appearance concern with her participation in this matter," Lorielle Pankey, the designated agency ethics official (DAEO) wrote in a memo last August, which has now been published by Bloomberg.

"From a federal ethics perspective, I have strong reservations with Chair Khan participating as an adjudicator in this proceeding where—fairly recently, before joining the Commission—she repeatedly called for the FTC to block any future acquisition by Facebook," wrote Pankey. "In my view, such statements would raise a question in the mind of a reasonable person about Chair Khan's impartiality as an adjudicator in the Commission's Meta/Within merger review. Accordingly, I recommend Chair Khan recuse to avoid an appearance of partiality concern."

But Pankey ultimately left the decision up to Khan, who apparently chose to ignore her advice—and then later claimed that she didn't. The Wall Street Journal reports:

Asked during a House hearing this spring if there were "any instances where you have not followed DEAO's advice," Ms. Khan replied "no" and that she had "taken actions that are consistent with the legal statements that the DEAO has made." That's clearly false.

Ms. Pankey's memo also raises questions about Ms. Khan's transparency in litigation. Meta had sought "all documents and communications concerning the participation of any Commissioner in the review of the merger" during legal discovery. But the FTC didn't hand over the Pankey memo, which was pertinent to Meta's defense since, as Ms. Pankey notes, a federal judge could still review Ms. Khan's participation.

"The ethics memo could have broader implications for Khan, who has come under fierce scrutiny by Republican lawmakers and faces similar calls by Amazon.com Inc. to step back from FTC probes of the online retail and cloud giant," notes Bloomberg:

While advice from the FTC's ethics official is non-binding, it has always been followed, said William Kovacic, a former Republican FTC chair who also served as the agency's general counsel. Kovacic said he wasn't aware of any situations where a commissioner disregarded official ethics advice.

"Doing that is playing with fire," said Kovacic, now a professor at George Washington University Law School.

A 2019 review by another federal agency found no recorded instances where a presidential appointee disregarded an agency ethics official's advice except for one controversial case during the Trump administration involving the National Labor Relations Board.

Since late 2020, the FTC has filed two antitrust lawsuits over Meta's activities. In both suits, the courts have rejected the FTC's arguments. Federal judges said that the agency could not prevent Meta from buying Within Unlimited and that it did not prove Facebook held a social media monopoly—though in the latter case, the court left the FTC the option of filing an amended complaint against Meta, which it did.

FREE MINDS

"I would like others to believe that they have the power…to be truth tellers." Daniel Ellsberg, famous for leaking documents that exposed uncomfortable truths about the Vietnam War, died last Friday at the age of 92. Those documents, known as the Pentagon Papers, "showed that top American officials, including President Lyndon Johnson, had lied constantly about the country's war in Vietnam," writes Reason's Eric Boehm:

By giving those 7,000 pages to The New York Times [in 1971], Ellsberg changed the course of a war and shifted the American public's view of the presidency. He may not have succeeded in the larger project of containing executive power, but he earned a place in the whistleblower hall of fame: one of a select few who, when entrusted with damning secrets, recognized that his patriotic duty was to tell the American people a difficult truth their leaders would rather have kept hidden.

Reason interviewed Ellsberg in 1973 and again in 2017. "I would like others to believe that they have the power—and the obligation, really—as patriots, as human beings, to reveal what they themselves know are unjustified dangers to human existence," he said in the latter interview. "And not simply, for reasons of career and promises to superiors, to conceal dangers of that nature. In other words, to be truth tellers."

FREE MARKETS

Thank Dutch merchants, not a strong state, for capitalism. Reviewing Pioneers of Capitalism: The Netherlands 1000–1800, by the economic historians Maarten Prak and Jan Luiten van Zanden, Edward Stringham calls it a "deeply researched" book that does "not have an obvious political agenda." Stringham writes:

Differentiating small-scale markets from capitalism, they argue that a capitalist economy features advanced specialization and trade, the widespread use of wage labor, and financial markets. This sort of economy, they show, was neither invented in 1776 nor inseparable from a strong state. It evolved, from the ground up, over centuries, and Dutch merchants were some of its most important pioneers.

A thousand years ago, a traveling monk, Alpert of Metz, was dismayed by the scale of state collapse around him. In his visit to the merchants of Tiel, he saw, in Prak and van Zanden's words, that "they enjoyed a certain degree of independence" and self-organized in various ways. They "used drinking societies to strengthen their mutual bonds, fostering trust and thus simplifying mutual trade." They "also maintained their own system of justice, which deviated from canonical law." In other words, order was coming from market participants through private governance, rather than being established by a strong state. (This irked Alpert, who was "annoyed by the customs of the merchants, with their own legal rules and pagan drinking societies.")

More here.

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