Internal FTC Memo Announces Major Cuts Ahead of Tech Giant Action
Internal FTC Memo Announces Major Cuts Ahead of Tech Giant Action

FTC executive director David Robbins tells staff the agency will cut its case costs, freeze hiring, and lower IT spending as its resources dry up Alex Kantrowitz Nov 19, 2020·5 min read

Photo: Paul J. Richards/AFP/Getty Images

Late last month, David Robbins, executive director of the Federal Trade Commission, sent a sullen memo to all staff.

The agency is at the forefront of the U.S. government’s effort to check the tech giants’ imposing power. It’s examining how Amazon uses its marketplace to squeeze suppliers. And it’s poised to bring an antitrust lawsuit against Facebook any day now.

Yet Robbins wasn’t there to deliver pats on the back: He was announcing a wave of significant cost cuts that could harm the FTC’s ability to bring cases.

“None of the cuts listed below are going to be easy,” Robbins said. “And none are what we would choose if we had ample funding.”

The Robbins memo, obtained by Big Technology, listed six areas where the agency would cut costs. In its first bullet point, it declared the FTC would either bring fewer cases or cut crucial litigation resources, including experts and case transcripts.

“Everything you’ve just recited is a breathtaking constraint on capacity,” former FTC Chairman William Kovacic told Big Technology when asked about the memo. “It severely limits what the institution is going to do.”

In addition to decreasing case costs, the FTC will freeze hiring; decrease spending on consumer education, including call centers, which log complaints about fraudulent and unfair business practices; lower spending on services such as training; delay and possibly cancel staffers’ year-end bonuses; encourage leave without pay; and cut IT spending. The agency is doing just about everything it can to cut costs, outside of layoffs.

Congress has made a show of hauling big tech executives before their committees, but its members disdain the idea of funding the regulators who restrain the abuses they decry.

The FTC’s “belt-tightening,” as Robbins put it in the email, is a win for Facebook and Amazon. With a divided Congress uninterested in working together on legislation, regulators like the FTC are the government’s last meaningful check on tech giants’ power. The FTC’s annual budget is less than what these companies make in a few days — approximately $330 million a year vs. $18 billion in a quarter, in Facebook’s case alone — and its ability to stand up to anticompetitive behavior is slipping away with these new funding constraints. The agency imposed the cuts when it couldn’t keep up with minimal annual spending increases, like cost of living adjustments.

“If I were a prospective defendant I’d be heartened by this,” Kovacic said.

Congress has made a show of hauling big tech executives before their committees, but its members disdain the idea of funding the regulators who restrain the abuses they decry. When Kovacic floated the idea of tripling FTC funding to $1 billion per year in a hearing this September, Sen. Maria Cantwell mocked him.

Sen. Josh Hawley, one of tech’s most strident critics, was put off Tuesday by the suggestion he support more funding to the agency. “I’ve repeatedly said I will NOT vote to shovel more money at the FTC when it has utterly failed to hold tech accountable,” Hawley tweeted.

Those who’ve worked for the agency, however, argue you can’t expect it to hold the tech giants accountable if you don’t fund it appropriately. “I don’t see how you buy a Mercedes if you’re willing to pay for a Chevrolet,” Kovacic said.

Hawley further criticized FTC employees’ tendency to work for the tech giants after their time at the agency. “The FTC is a revolving door for tech,” he said. This is true, and the agency’s inability to pay anything close to the salaries offered by tech giants is a factor.

In a proposal to reform the FTC earlier this year, Hawley put forth some good ideas. He suggested, for instance, a two-year ban on FTC officials working for companies worth more than $30 billion after they leave. Proposals like this are worth debating, and a focus on the FTC is energy well spent. Beyond funding, further discussion of rulemaking is worthy as well. Debate in this area will do more to preserve competition than the Senate’s regular content moderation debates with tech giant CEOs.

The FTC isn’t perfect, of course. The agency has made a series of errors in handling the tech giants’ power, and their M&A in particular. Facebook’s acquisition of Instagram, for instance, breezed through as bright-eyed FTC lawyers felt honored to meet Instagram CEO Kevin Systrom and asked him fawning product questions (more on that in next week’s Big Technology Podcast with No Filter author Sarah Frier). The FTC also requested $801,000 less for 2021 than it did in 2020 — a head-scratcher. Without an appropriate level of funding, the government’s big talk about keeping the tech giants honest will go nowhere.

In reading the Robbins memo, it’s hard not to feel for the FTC’s employees. They take lower than market rate salaries, get heat from Congress, and press on diligently to keep markets running fairly. Now, they’ll go into the holiday season with no bonuses, an expectation they’ll take unpaid time off, and nearly impossible demands to restrain the biggest companies in the world. Reached via email, the FTC declined to comment.

“We have a long history of making every taxpayer dollar count, and that won’t stop now,” Robbins said. “Thank you for your commitment and flexibility as we tackle this next challenge together.”

This week on the Big Technology Podcast: Investor, activist Swati Mylavarapu says tech world must “get uncomfortable” with its impact on society

Swati Mylavarapu is a tech investor and activist who spent $2 million in the 2020 election cycle on Democratic causes, in partnership with her husband, Nest co-founder Matt Rogers. Mylavarapu isn’t your typical Silicon Valley investor. She’ll explicitly admit that the tech industry has some culpability in the hollowing out of the middle of our economy, delivering wealth to the few while leaving the rest in a tough spot. She also served as Pete Buttigieg’s national finance chair in the 2020 Democratic primaries, playing a key role in his surprising upstart campaign.

Mylavarapu joined the Big Technology Podcast fresh off a bout with Covid-19 to discuss the tech industry’s role in our society, and how it can be a force for good moving forward.

You can listen on Apple Podcasts, Spotify, and Overcast, and read the transcript on OneZero.
['Alex Kantrowitz']
['Big Technology', 'Business', 'Facebook', 'Technology', 'Silicon Valley']