Q & A: FTC Commissioner Terrell McSweeny

Terrell McSweeny is an attorney and a commissioner of the Federal Trade Commission. McSweeny is visiting the Wilson School for two days as part of the Leadership Through Mentorship Program. The 'Prince' sat down with her for an interview about her work and the issues she tackles as an FTC Commissioner.

The Daily Princetonian: Tell us a little bit about yourself – your background, your education, your career path, and how you came to be an FTC Commissioner.

Terrell McSweeny: I’m an attorney by training. I went to law school after college and have always been very interested in public policy and government work and politics. I was fortunate enough after law school to land a job working for Joe Biden, who was then a senator, in his senate office and on the Judiciary Committee of the Senate. From there, I went on to join him in the Obama administration where I worked during the first four years as a deputy assistant to the president and the vice president’s domestic policy adviser for domestic policy issues. Then, I decided to stay in government for the last four years of the Obama administration, but I moved over to the Department of Justice’s Antitrust Division, and from there got the appointment to be an FTC Commissioner. The Federal Trade Commission, where I currently work, focuses on antitrust and consumer protection, so my background was very connected to those two areas.

DP: What are some of the specific issues that you focused on under President Obama and also as a commissioner for the FTC?

TM: I’ve worked on a wide range of different policy areas, from criminal justice reform and violence against women to healthcare, civil rights, and higher education policy, but I think all of those policy areas are very connected and are fundamentally policies that are about making sure we protect opportunity in the marketplace. The mission we have at the Federal Trade Commission is very connected to that. We protect consumers from unfair, deceptive acts and practices and protect competition in the markets, both of which are vitally important to make sure that people are able to freely pursue their own pathway.

DP: So when there’s a business merger, that’s something the FTC approves?

TM: It is. In the United States the way our merger review is structured is [that] both the Department of Justice Antitrust Division, where I used to work, and the Federal Trade Commission have jurisdiction to review mergers. We don’t both look at the same mergers all the time; either they’re divided by industry and expertise or we just go back and forth between which agency is looking at the merger. At any given point, both agencies are reviewing mergers.

DP: How does either agency decide whether or not a merger should be approved?

TM: We have a very nice set of laws on this point, and we also have our own guidelines that we follow. Suffice it to say, the basic idea is if a market is already relatively concentrated, we try to look at if there is harm to competition that will occur from the merger going forward. We consider whether there are corresponding justifications and efficiencies that might offset that harm. If there really aren’t, then under our law and guidelines, we can move forward with trying to block the merger. Typically, the way this looks is we might look for if prices of products are going to go up afterwards because the firms, which are competitors, are getting together, or whether there’s going to be a harm because innovative products won’t be entering the marketplace, or whether quality of services might go down.

DP: Recently, there was a deal between Rite Aid and Walgreens where Walgreens wanted to buy about 2,000 of Rite Aid’s regional locations, and you issued a statement advising against it. A modified version of the deal ultimately went through; why do you think that deal was approved?

TM: What I was concerned about there was the fact that prior to this transaction going through, we had three major pharmacy retail chains in the United States: CVS, Walgreens, and Rite Aid. Because of this transaction, Rite Aid’s size is substantially reduced, so it’ll no longer be a nationwide retail pharmacy chain. It will be more of a regional player. My concern was over the competition that’s lost by having just two remaining nationwide retail pharmacy chains. The transaction was allowed to go through because the way our agency works and the way the structure is, having one commissioner disagree is not enough to carry the day.

DP: So the other commissioners who were involved in this approval process thought that the deal was okay to proceed?

Get the best of ‘the Prince’ delivered straight to your inbox. Subscribe now »

TM: Right now, the other confusing thing about our agency is [that] there are supposed to be five commissioners, but there’s only two of us. So the other commissioner, who put out her own statement, felt comfortable after the staff had reviewed the transaction that the situation in the market was sufficient to make sure the consumers wouldn’t be hurt. I disagreed, but in absence of our agreement, the transaction was allowed to go forward.

DP: Moving on to the topic of pyramid schemes and multi-level marketing (MLMs), you contributed an opinion to The Hill a couple months ago saying Congress should crack down more on pyramid schemes. What are some of the ways you think Congress can tackle these issues? How can regulators differentiate between a pyramid scheme and a legitimate business where recruiting does play an important role in their business model?

TM: That’s a pretty interesting challenge. Under U.S. law, a straight-up pyramid scheme is illegal. A pyramid scheme is when there really is no retail opportunity for the people at the bottom. The entire amount of money is made by recruiting in your downline, and that makes the pyramid. We’ve had at the Federal Trade Commission some pretty straightforward cases of this. One that comes to mind that was on college campuses was selling shake drinks. You only were rewarded in this scheme for recruiting more salespeople. You had to buy a certain amount of supply in order to be in the pyramid to begin with, but you didn’t get any discount on it, so you were buying something for $20 and selling it for $20, so you’re not making any money off of whatever you bought. The only way you would make money is by recruiting other people, so we said ‘look, that’s a pyramid scheme, you can’t do that,’ so we brought a case against that, and that’s a very straightforward thing. What gets more confusing is when you get into MLMs where the issue can be that there are a variety of different ways people can make money, and the question then centers on if there’s a legitimate retail opportunity for people who are entering into the scheme. That’s where it becomes a more complicated question. One of my concerns, and what Congress is considering, is that they would like us to not investigate any companies unless they’re pyramid schemes. The problem with the way they want to limit our authority is unless you investigate, you can’t tell if something’s a pyramid scheme. If you don’t have the authority to spend money to investigate something, then you can’t figure out if it’s actually over that line or not. One of the real issues with the MLM business is that many are legitimate, with a legitimate business opportunity and compensation based on how you recruit in your downline. But some of them have compensation schemes that are byzantine, very hard to figure out, pretty exploitive of people who can’t figure them out, and cause people to buy a lot of stuff that they think they’re going to be able to resell, but they’re stuck with and can’t resell.

DP: Do you think education and awareness could play any role in preventing people from being sucked into these schemes?

TM: I do think education and awareness can be very helpful. Again, there are legitimate opportunities, and we’re not trying to foreclose any of those or judge people for participating in multi-level marketing businesses that are legitimate. But I think people need to be really mindful, if they’re getting into that kind of structure, of what they’re getting into, and if they understand how it can be profitable for them. Very often, if it’s too confusing to figure out, then it’s probably pretty hard to be profitable in it.

DP: On a different topic, a couple months ago you gave a talk at a conference called Black Hat in Vegas, about marketing information security products, and this has become a huge topic since the Equifax hack and their mismanagement afterwards. What are some ways that the FTC or Congress can work to prevent issues like these from occurring in the future or mitigate their risk?

TM: I’m very concerned about our general data and identity insecurity in the United States. We have one set of tools at the Federal Trade Commission that we do use, which is our ability to bring cases when companies are not taking reasonable measures to secure the sensitive customer and consumer information that they know. We do bring those cases, I think that’s important. But I think it would be better if Congress passed stronger laws that provided consumers with more rights, and frankly provided the regulators like the FTC with more authority to penalize companies if they aren’t adequately securing very sensitive information that they have. I firmly believe we need stronger data security protections, stronger privacy protections, stronger rights around our own data as consumers in the digital age.

DP: Before we wrap up, is there anything else you’d like to say or any advice you’d like to give students interested in politics or regulation?

TM: I would encourage students that are interested in government or public policy to take some time in their career to actually work in the government. It is an incredibly rewarding experience. There are a variety of ways to serve in government, from local government to state government to federal government. It [government work] is incredibly enriching, especially if you’re interested in public policy. I think this is a fascinating time because there’s some really important questions that we are debating in the country. It’s an important time to be engaged in the political process and in the policy conversation. I’m incredibly heartened by all of the energy and enthusiasm around these topics here on campus. It’s great to meet so many talented and engaged students that are doing fantastic work already in their career.