The Media and the Regime: Joined at the Hip

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Leibowitz had
no special qualifications to sit on the FTC aside from his long
association with Kohl, a senior Democrat on the Judiciary Committee,
which oversees the Commission. Although the FTC has jurisdiction
over virtually all American business activities, Leibowitz himself
had never worked for a private business — his entire professional
life was inside Washington as part of the political system. Leibowitz
did not even have substantive experience practicing antitrust law,
the FTC’s primary reason for being.

Indeed, Leibowitz’s
appointment was a mere afterthought. Then-President George W. Bush
had two seats to fill on the FTC. The Commission’s authorizing statute
says no more than three of the five commissioners may belong to
the same political party, ensuring both halves of the nation’s political
duopoly are represented. Bush had named Deborah Majoras, a Republican
antitrust lawyer who previously served as the number-two official
at the FTC’s sister agency, the Justice Department’s Antitrust Division,
to the first seat (she would also be designated as chairman). Bush
needed a Democrat for the other seat, so Kohl and his Senate Democratic
colleagues recommended their former lackey, Leibowitz.

The Senate
conducted only a superficial review of the two nominees. The website
Tech Law Journal described the Majoras-Leibowitz confirmation hearing
in June 2004 thusly:

The hearing
did little to establish these nominees’ positions on technology
related maters within the jurisdiction of the FTC, or their qualifications
to be Commissioners. Rather, most of the hearing was taken up
by partisan election year posturing on issues largely unrelated
to matters that will be decided by the FTC.

Both nominations
were held up by Sen. Ron Wyden (D-Ore.), then facing a tough reelection
campaign, who delayed a confirmation vote on the grounds that Majoras
was too close to the oil industry — which Wyden felt the FTC should
regulate more harshly. Bush then gave Majoras and Leibowitz recess
appointments, and after the election, the Senate unanimously confirmed
both now-commissioners to full terms.

Years later,
Ruth Marcus would criticize President Barack Obama for using the
same type of recess appointment that put her husband on the FTC.
Last month Marcus attacked Obama’s recess appointment of Donald
Berwick as the regime’s new Medicare and Medicaid overlord as an
“outrageous” abuse of power. The Huffington Post later contacted
Marcus, who explained why she was not a hypocrite: “It boiled down
to her husband (a Democrat) being a different case because he had
a hearing and wasn’t controversial.”

It’s true that
Leibowitz was not controversial. He is an unremarkable man in every
sense of the word; someone who proves that it’s better to be lucky
then talented. He proved as much when Obama became president and
needed a new FTC chairman. Leibowitz was the only partisan Democrat
then serving — there was a Democrat masquerading as an “independent,”
but her term was expiring — so he got the promotion. Obama later
gave Leibowitz a Democratic majority, appointing Edith Ramirez,
an antitrust lawyer who just happened to be an old law school (and
law review) classmate of the Chosen One at Harvard; and Julie Brill,
a career deputy state attorney general and longtime friend of Senate
Judiciary Committee Chairman Patrick Leahy (D-Vt.). Neither nominee
faced so much as a disparaging word on the Senate floor.

This all brings
us to the events of August 4, 2010. It was a big day for Chairman
Leibowitz. He called a press conference to announce the Commission’s
“consent order” with Intel, the company that helped launch the personal-computer
revolution. Over the past decade there have been dramatic increases
in microprocessor performance —  and a related 70 percent decrease
in prices — but that was not good enough for Leibowitz. He demanded
even better performance and lower prices. Since he did not trust
Intel to do this himself, he ordered his staff to fabricate an antitrust
complaint against the company. Intel initially signaled it would
fight, but the company’s general counsel — another former number-two
at the DOJ’s Antitrust Division like Deborah Majoras (who is now
general counsel at Procter & Gamble) — quickly impressed upon
naïve executives the importance of working with federal antitrust
regulators rather then against them. The company abandoned litigation
before there was even a trial and signed an order giving, as Leibowitz
put it, 22 of the 26 demands proposed in the FTC’s complaint.

Intel’s concessions
effectively gave Leibowitz and the FTC unprecedented veto power
over the company’s future R&D and customer relations. Even some
antitrust enthusiasts were appalled. Joshua Wright, a George Mason
University law professor who worked at the FTC a few years back
as a “scholar-in-residence,” said “it is really hard to stomach”
a provision that requires FTC approval for any future “engineering
or design change” to designated Intel products. Wright also criticized
provisions that forbid Intel from offering price discounts that
are “unreasonable” — i.e., that Intel’s competitors cannot match
— and which allow the FTC “to oversee the discussions between Intel
and its customers” to see if the Commission’s wishes are obeyed.

Mainstream
news coverage, including that from Ruth Marcus’s Washington Post,
was uncritical, if not fawning, of Leibowitz’s actions and press
conference. The press conference itself was a departure from FTC
practice — Professor Wright called it “odd [and] self congratulatory”
— and its only purpose was to violate the very consent order
that the FTC and Intel had just signed. The whole point of Intel
“settling” was to avoid a legal finding of guilt, which would subject
the company to additional civil liability from outside law firms
“representing” Intel customers and competitors. The FTC also avoided
the (strong) possibility that its fabricated antitrust complaint
would not withstand eventual outside review by the federal courts.
Thus, the order itself clearly stated there was no admission of
liability by Intel or finding of guilt by the FTC. Leibowitz ignored
this at his press conference, using his bully pulpit to explain
to a compliant press corps that Intel really was an evil, greedy
company that was guilty of all charges. Fortunately, since the case
was “settled,” the FTC would never have to produce any evidence
to prove those charges, and the public would remain ignorant of
what really transpired behind closed doors.

Now, a few
hours before Leibowitz took his curtain call, I received an email
from Ruth Marcus. The day before I had sent her an email regarding
her latest column. She was discussing a recent ethics scandal that
had enveloped two Democratic House members, and she was placing
much of the blame on the congressional staff: “[T]here is something
in the congressional atmosphere of compliant aides and fawning courtiers
that enables and encourages their sense of ordinary-rules-don't-apply-to-me
entitlement.” Which I thought was hilarious given her husband’s
own back-story as a congressional-aide-turned-regulator and the
FTC’s overall culture of lawlessness. And I told Marcus as much.
She was not amused:

My husband
is a hard-working, dedicated public servant. He has spent all
but a few years of his career in the private sector because he
cares more about making good public policy than making big bucks.
In my public capacity, I do not write about or participate in
editorial discussions that touch on FTC-related matters. In my
private capacity, I could not be prouder of him and the work he
has done.

Is Marcus a
hypocrite or does she simply lack self-awareness? I suspect it is
the latter. Having spent their entire married lives — and most of
their pre-married lives, for that matter — inside the Washington
cocoon, it is understandable that Leibowitz and Marcus have no sense
of how what goes on inside the Imperial capitol is perceived in
the outlying provinces. Marcus’s email makes that crystal clear.

Let’s start
with this notion that Leibowitz is a “hard-working, dedicated public
servant” who “cares more about making good public policy than making
big bucks.” As an FTC commissioner, Leibowitz has an annual salary
of about $170,000 plus a lush benefits package. This alone puts
him in the top 5 percent of all U.S. wage earners (according to
the Census Bureau’s calculations). And that’s before we account
for his wife’s salary at the Post and the retirement benefits
he earned during his nearly two decades as a congressional aide
and lobbyist. Leibowitz and Marcus also own a home in the upscale
Washington suburb of Bethesda valued — by state tax collectors —
at just under one million dollars. This does not paint a picture
of a selfless public servant.

Marcus’s counter-argument
is that her husband could earn far more in the private sector. That
is debatable. For one thing, he’s never worked in the private sector
—  sorry, Ruth, lobbying doesn’t count — and the fact that
Leibowitz has spent his entire career in the political system suggests
he may actually be unable to find more lucrative work outside
the Beltway. Of course, that was before he lucked into the FTC seat.
Leibowitz’s term is set to expire in September 2010, and if he does
not seek or receive re-appointment, he will likely follow his predecessors
into one or more lucrative positions advising companies on how to
deal with the FTC. It is not unreasonable to project Leibowitz will
earn at least ten times his government salary in his next
job, which makes Marcus’s plea that “he’s not about the money” seem
even more hollow than it does today.

And this leads
to Marcus’s other claim, that her husband is all about “making good
policy.” Good for whom? The hallmark of Leibowitz’s FTC tenure
has been the same “sense of ordinary-rules-don’t-apply-to-me entitlement”
that Marcus found fault with in congressional Democrats. Leibowitz
has been a slave to his own staff, rubber-stamping almost every
crazy antitrust scheme hatched by the Orwellian-named “Bureau of
Competition.” Good policy for Jon Leibowitz means grabbing as much
power for the FTC as he can without stopping to consider the impact
on the market or individuals.

Consider the
fate of Prince William Hospital (PWH), a small nonprofit healthcare
facility in Manassas, Virginia. PWH’s board and CEO spent a year
looking for a larger nonprofit partner who could provide their hospital
with badly needed capital investment. Eventually, PWH reached a
deal with Inova Health System, a five-hospital chain also based
in northern Virginia. Inova pledged over $250 million in new investment
in PWH. It would have been a great deal — except that Jon Leibowitz
and his colleagues disapproved. They didn’t have anything personal
against Inova or PWH. But the FTC staff had done a poor job in the
past challenging hospital mergers, and they needed to stop one just
to prove it could be done. Inova and PWH proved a target of opportunity.

To guarantee
the FTC would succeed, Leibowitz rigged the Commission’s internal
procedures. Normally an FTC complaint is heard by administrative
law judge — a bureaucrat who works for the FTC as part of the career
civil service  — who issues an initial decision that can then
be reviewed by the commissioners on appeal. But the judges had recently
exhibited an independent streak, rejecting FTC staff complaints
in a handful of cases. This was unacceptable. So when the FTC issued
its complaint against PWH and Inova, it bypassed its two administrative
law judges — neither was hearing a case at the time — and appointed
one of its own members, Commissioner J. Thomas Rosch, to sit as
trial judge. There was no precedent for this. Leibowitz and his
colleagues claimed Rosch was simply the “best available candidate
to sit as a trier of fact in this case.” It was a straight-up lie.
Although Rosch was an experienced litigator, he had no experience
as a judge or arbitrator. Rosch himself later compounded the lie
by saying he had never discussed the circumstances of his appointment
with Leibowitz and the others. But a former FTC official later told
me, “I’m sure the idea came out of [Rosch’s] office, not at anybody
else’s request.” Indeed, I later obtained FTC documents that showed
Rosch actively supervised the investigation and prosecution of the
case. There was no chance he would be a fair, impartial trier of
fact —  which the hospitals acknowledged by abandoning their
deal, after a nearly two-year “review” by the FTC, without facing
Rosch at trial.

Among those
celebrating the Prince William-Inova outcome was Steven Pearlstein,
a columnist at the Washington Post and a colleague of Ruth
Marcus. Pearlstein had a personal vendetta against the two hospitals,
which was reflected in a series of columns and public statements
cheering on the FTC’s activities. Pearlstein claimed he had access
to information proving that there were better merger partners for
PWH than Inova, and that PWH’s board was simply less competent than
the FTC (and Pearlstein) in knowing what was best for the local
healthcare market in Manassas. Pearlstein never explained where
his information came from, but it’s a safe bet it came from the
FTC. Which makes you wonder what role Leibowitz or Marcus might
have played in facilitating the leak of supposedly confidential
FTC documents to an outside reporter. (It’s also curious that the
Wall Street Journal, normally a critic of the FTC, also ran
a glowing editorial about the Inova-PWH case.)

More curiously,
Pearlstein’s reporting omitted any mention of the irregular (and
illegal) appointment of Rosch as the trial judge — an action taken
on the direct motion of Leibowitz, according to FTC records. Pearlstein
told me in an email he thought it was an irrelevant detail, mere
“inside baseball” of no interest to the Post’s readers. Except that
it was the primary reason the hospitals abandoned their merger
and didn’t bother going to trial, according to an individual I spoke
with who had direct knowledge of the situation. It was also common
sense. Nobody would spend time and money pursuing a case where the
judge had a known bias against you.

Pearlstein
withheld this material information because (1) it would undermine
his own editorial position in favor of the FTC and (2) it would
implicate the husband of a co-worker in unethical and possibly illegal
activity. When I approached the Post’s “ombudsman” on all this,
I was given a polite kiss-off: Pearlstein is an editorial columnist,
not a news reporter, so he’s entitled to say what he wants — apparently
even if it implicates the Post as a co-conspirator in a campaign
to deprive individuals and companies of their constitutional and
civil rights.

Inova-PWH is
just the tip of an iceberg big enough to sink the Titanic fifty
times over. Another signature “accomplishment” of the Leibowitz
FTC was launching a China-like campaign to cleanse the Internet
of information the Chairman and his minions deemed unworthy of public
consumption. This principally involved materials about the use of
non-FDA-approved products for the purposes of improving one’s health.
The FTC  — which claims to protect competition — forbids competition
with its brethren at the Food and Drug Administration when it comes
to the potential healthcare benefits of any product, natural or
otherwise. The Leibowitz FTC has gone so far as to ban religious
organizations from making statements about the historical and
Biblical evidence supporting the medicinal use of herbs and natural
products. (Of course, the ban has only been applied to Christian
organizations, and Leibowitz and his wife are Jewish.)

More tellingly,
the Leibowitz censorship crusade has overwhelmingly targeted small
businesses that only incidentally rely on the Internet. Most of
these businesses are run by individuals whose net revenues are not
even half of Leibowitz’s annual FTC salary. In one case, Leibowitz’s
staff falsely prosecuted a man for making “false and misleading”
statements on a website he neither owned nor operated. FTC prosecutors,
carrying out their chairman’s wishes, deliberately refused to conduct
a proper investigation and failed to even call the web hosting service
to determine the website’s actual authors. While the charges were
eventually dropped, the FTC refused to compensate the defendant
— an 85-year-old retiree with limited income — for the $130,000
in legal bills he incurred. Leibowitz’s staff said it was the man’s
fault they falsely prosecuted him. No doubt Ruth Marcus is proud
of her husband for taking such a defiant stand.

These cases
obviously receive no attention from the Washington Post and
its dying compatriots in the mainstream press. This largely explains
why “traditional” newspapers are dying. Readers and advertisers
receive diminishing returns from expensive publications that provide
only a treacle of actual news, which is heavily filtered through
anonymous sources and the need to maintain good relations with the
government. There simply is not much of an audience anymore, at
least outside of Washington, for Ruth Marcus-type columnists to
recycle state propaganda as conventional wisdom. Which is why Jon
Leibowitz personally launched another FTC crusade last year — to
determine the “future of journalism.” While the FTC has yet to make
any formal proposals, Leibowitz’s staff has already discussed a
massive expansion of the government’s role in the press — including
special legal treatment for existing newspapers, new government
subsidies for journalists, and taxes on competing media platforms
like the iPad and the Internet.1 As media critic
Jeff Jarvis recently noted, “The FTC defines journalism as what
newspapers do and aligns itself with protecting the old power structure
of media.”

A cynic would
say Leibowitz is simply using his political influence to help his
wife’s employer and industry. But this is about more than Leibowitz
scoring points with his significant other. He recognizes the important
symbiosis between the state and the traditional press. One cannot
exist without the other. The FTC’s success in violating individual
rights depends heavily on a friendly media running interference
with the public that is getting screwed. As long as the FTC controls
the message, it does not have to worry about any serious external
threat — from Congress, the courts, or the public — to its authority.
Leibowitz (and his wife) is counting on that to carry him through
either a second term as FTC chairman or, more likely, a lucrative
paycheck from frightened private sector interests.

  1. See Federal
    Trade Commission, “Discussion
    Draft: Potential Policy Recommendations to Support the Reinvention
    of Journalism
    ,” June 15, 2010.

August
7, 2010

S.M.
Oliva [send him mail] is
a writer and paralegal living in Charlottesville, Virginia.

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