A new day at the FTC

The Topline:

• Trump fires Dem FTC commissioners

• SEC updates Marketing Rule guidance in the favor of fund managers

• Quick hits

Trump ousts Dem FTC Commissioners, expanding power over independent agencies 

“President Trump has the lawful authority to manage personnel within the executive branch…President Trump will continue to rid the federal government of bad actors unaligned with his common-sense agenda the American people decisively voted for.”

—White House spokesperson Taylor Rogers 

On March 18, President Trump fired the two Democratic commissioners at the Federal Trade Commission (FTC), Alvaro Bedoya and Rebecca Kelly Slaughter. With this action, the President is testing his legal authority and further eroding political norms; revamping the FTC and its policy agenda; and sending a signal that will reverberate across other independent federal agencies, including the SEC. 

Background: The FTC is charged with protecting customers from unfair or deceptive business practices and from unfair methods of competition. This description may sound innocuous and like that from your High School Student Council Advisory Board for Procedures on the Mock Court Club, but the reality is the FTC’s remit is powerful and far-reaching, touching everything from a company’s business practices and products, to privacy and data security, to mergers and acquisitions. 

FTC leadership: In theory, the FTC is led by five commissioners who are nominated by the President and confirmed by the Senate. The President chooses one Commissioner to serve as Chair, and no more than three Commissioners can be of the same political party. In practice, the political party that controls the White House has a 3-2 majority and designates the chair, but the President agrees to nominate two commissioners recommended by the opposition party. In reality, today there are two Republican-backed Commissioners: Melissa Holyoak and Chairman Andrew Ferguson (who also affirmed the President’s authority).

What does this mean? Personnel is policy. And with this action, President Trump is exerting even more control over personnel at even independent agencies—even if it is not clear he has the legal authority for such actions. 

• FTC policy agenda: On a policy level, expect an FTC agenda that brings an expansive antitrust authority and tech skepticism. It will be less aggressive than the Biden Administration, but still forceful. As Chairman Ferguson recently noted, this is not President Bush’s FTC. This move is unlikely to change this posture, so expect continued scrutiny on big tech and reviews on M&A where appropriate.

• Process → Policy: The process that leads to policy will be even more interesting. Historically, Commissioners would often work on a bipartisan basis on rulemakings and their implementation. This process requires compromise and has led to more policy stability and continuity between administrations. This posture has been shifting. Now it is increasingly common for agencies—whether the FTC or SEC or others—to drive partisan agendas implemented by partisan 3-2 votes. This recent posture enhances speed, but creates more divisive regulations. 

• So if the rulemaking is being done along party lines, those Commissioners could vote NO all day, but the rule would still pass. So what’s the big deal? This will lead to even more aggressively partisan rules that may be vulnerable to courts overturning them and later administrations reversing them. Why? First, there may have been areas where they could have found common ground. There is less of a pull to do so now. Second, even if an agency is advancing a partisan agenda, having a strong opposition that raises arguments sharpens the need to address and overcome those arguments. And finally, the legal standing of these rules may be undermined. The courts have previously upheld rules when an agency commission is not fully staffed, but this action may reflect a systemic shift in the operational capacity that deviates from congressional intent. The courts may decide this changes that posture, but we will know more on this front as they consider the legality of the President’s action to terminate Commissioners without cause.

• Legal authority: The question is whether the President has the authority to fire such Commissioners for anything short of cause. For context, the Supreme Court recognized the President has unrestricted power of removing executive officers who had been appointed by him and with the advice and consent of the Senate. But for independent agencies with quasi-legislative or quasi-judicial powers like the FTC or SEC, the Court has held the President could only fire such Commissioners for cause. The Trump Administration asserts that restriction no longer applies because the FTC exercises substantial executive power, and the President has the authority to fire Commissioners. Expect a lawsuit that will have implications on executive authority.

Broader administrative state: Operationally, the FTC looks a lot like, well, the SEC. If the President’s actions on the FTC stand, it will reaffirm his control over other agencies and their authority. We could see this reflected in an SEC agenda that has ramifications on a private markets agenda that although has areas of bipartisan support on expanding investor access and access to capital, may become more partisan and as a result less successful and permanent, particularly if the pendulum swings the other direction in 2028. 

Bottom line: The FTC’s antitrust agenda will be less aggressive than the Biden Administration, but still forceful. With that said, expect uncertainty around rulemaking and operations as courts consider the President’s power. And—especially if this action is upheld—expect an increasingly transitory policy framework that swings more rapidly between administrations given the increasing power held in the executive. 

SEC issues new Marketing Rule guidance 

The SEC updated its Marketing Rule guidance to address a major friction point for private fund managers with respect to extracted performance. Under the new guidance, funds are now permitted to use gross performance metrics at the investment level so long as:

• The performance is clearly identified as “gross” performance

• The gross and net performance of the entire fund is included in accordance with the rule’s requirements for a time period that covers the extracted performance 

• Fund gross/net performance is presented and presented in equal prominence and in a manner that facilitates comparison, which staff suggests would need to precede extracted performance

The updated guidance also clarified that certain non-performance investment characteristics can be shown on a gross basis so long as the nature of the metric is clearly labeled and gross and net performance of the entire portfolio is also displayed.

Why it matters: The new guidance is a welcome reprieve for fund managers. Previous staff guidance required private fund managers to show gross and net performance for extracted performance, which required private fund managers to devise strategies to assign portfolio-level fees at the individual investment level—a source of frustration for fund managers and confusion for investors. Many funds will likely adapt their marketing materials to show performance in accordance with the new guidance, but should take care to ensure they are meeting the other requirements of the rule.

Quick hits:

• SEC Chair confirmation hearing next week. Next week, Paul Atkins, President Trump’s nominee to lead the SEC, will appear before the Senate Banking Hearing next week, putting him on track to be in seat at the agency later in April. Republicans will likely focus on Atkins’ plans on digital assets and capital formation agenda, but expect tough questions from Democrats on issues like agency independence and DOGE.

• Crypto corner: Lots going on at the SEC…SEC staff issues guidance stating certain crypto mining activities fall outside of the agency’s purview; SEC drops suit against Ripple; SEC hosts inaugural crypto task force roundtable – more on this next week.

• Trump announces plans to shutter CDFI Fund. Last Friday night, President Trump issued an executive order to scale back a number of initiatives, including the Community Development Financial Institutions Fund. The move has drawn bipartisan criticism, as this program helps provide capital to small businesses in underserved areas.

• HFSC hearing on building entrepreneurial ecosystems. Next week, the House Financial Services Committee will hold a hearing on policies to bolster and grow innovation ecosystems outside of Silicon Valley. We will recap next week, but you can watch the hearing live on the Committee’s website at 10:00am ET on Tuesday, March 25.

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