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Good Morning and welcome to the Federal Trade Commission’s workshop on Protecting Consumer Interests in Class Actions.

I would like to extend a special welcome to our fellow enforcers in the states and also recognize our distinguished members of the judiciary who are with us today:

The Honorable Diane Wood, Circuit Court of Appeals Judge for the Seventh Circuit the Honorable Brock Hornby, U.S. District Court Judge for the District of Maine; the Honorable Vaughn Walker, U.S. District Court Judge for the Northern District of California; the Honorable Lee Rosenthal, U.S. District Court Judge for the Southern District of Texas; and the Honorable Ann C. Yahner, Administrative Law Judge, District of Columbia Office of Administrative Hearing.

We are grateful for your participation in our workshop.

I would also like to thank the Georgetown Journal of Legal Ethics for co-sponsoring the program and in particular, Jamie Kent, Editor of the Journal. The Journal will be publishing a transcript of these proceedings. Also, if you are inspired by our speakers to write, the Journal is accepting articles for publication related to the Workshop.

I am particularly pleased to open this workshop – my first as FTC Chairman. As most of you know, I am an antitrust lawyer and, as such, I have long understood that the goal of antitrust is to protect and improve consumer welfare. Since joining the FTC, I also have immersed myself in the FTC’s vital consumer protection mission, which has the same goal. As I have learned in my first month here, FTC should be the acronym for For The Consumer – which aptly summarizes the joint goal of both our consumer protection and competition missions.

In holding this workshop, we continue the FTC’s practice of hosting fora to discuss issues of concern to consumers. Private litigation in both the competition and consumer protection fields has always played a significant role in compensating injured consumers and deterring wrongful conduct. Managed appropriately, consumer class actions clearly can be an effective and efficient means of doing both. As consumer class actions have evolved over time, however, concerns have been raised about whether some of these actions – and especially some of the settlements agreed to – truly serve consumers’ interests by providing them appropriate benefits.
Under the leadership of my predecessor, former Chairman Tim Muris, the Commission sought to address these concerns by initiating the Class Action Fairness Project. The goal of the Project was simple: to ensure that when consumers have meritorious claims, they get meaningful, not illusory, relief. It is now time to evaluate the results of the Project, as well as to examine the benefits and shortcomings of the class action mechanism.

As my colleague, Commissioner Tom Leary, has noted, the FTC is a “very small agency with a very large mission.” As a result, we have never been shy about asking for help. To that end, we have enlisted an impressive array of experts – from the bench, the bar, and academia – to help us explore these complex issues. I know that the Commission will benefit from the expertise of our assembled panelists and their collective experience in the class action arena.

Since the FTC began the Class Action Fairness Project, many observers have asked why the FTC is involved in the consumer class action area at all. Contrary to what some may have concluded, the FTC is not opposed to class actions. Rather, the FTC is interested in consumer class actions – in particular, consumer class action settlements – because they raise issues that are at the core of the FTC’s consumer protection mission. In fact, in recent years, we have seen numerous consumer class actions related to FTC cases, including many filed after the FTC initiated its own cases. And, in some consumer class action cases, we work closely with class action attorneys to obtain effective relief for consumers.

Unfortunately, however, in some cases class actions may be an impediment to protecting consumer welfare. The Commission therefore has participated as an amicus in cases where it believed the interests of consumers were being inadequately represented or, in some instances, not represented at all. The FTC’s primary concern has been whether coupon and other non-pecuniary redress provide adequate relief to injured consumers. Such settlements are notoriously difficult to value, yet their “face” value is typically used as a basis for setting fees. This can pose two related problems: first, consumers may not get meaningful relief or the amount of relief claimed; and second, class counsel’s compensation may be inflated due to the overly optimistic value of the coupon settlement. Our first panel today will specifically address non-pecuniary relief and will provide an opportunity to discuss these issues in a broader context than is possible in a particular case.

Amicus briefs are not the only activity within the Class Action Fairness Project. As it has done with respect to a host of important issues, the Commission has used its educational platform to provide helpful information to consumers. Specifically, the Bureau of Consumer Protection has published a consumer education piece entitled “Need a Lawyer? Judge for Yourself.” The purpose of this piece is to ensure that consumers who need a lawyer are fully informed of their rights and options. Among other recommendations, the piece advises consumers to scrutinize opt-out notices and class action settlement terms carefully, particularly attorney fee awards that may reduce the total compensation available to class members. In addition to consumer education, the Commission also offered the consumer perspective on the proposed amendments to Rule 23 of the Federal Rules of Civil Procedure to the Federal Judicial Conference.

Our panels over the next two days will address the question of attorneys’ fees and how consumer class actions can fairly compensate lawyers while protecting consumers. Other panels will address equally important and challenging issues, such as special ethics concerns in consumer class action litigation, a particularly fitting topic given our co-sponsor, the Georgetown Journal of Legal Ethics.

Through this dialogue, we hope to gain insight on a full range of issues, including four specific issues relating to the Class Action Fairness Project:

First, we would like to explore strategies for making consumer class action settlement information available in a more systematic, and comprehensive, way. It may surprise you to learn that one of the greatest challenges for the Project has been identifying potentially troublesome class action settlements with sufficient lead time to permit agency action. In some instances, interested parties – including attorneys, objectors, and consumer advocacy groups – have brought particular settlements to our attention. More often, however, settlements have come to our attention by chance – for example, through an FTC staff member seeing the settlement notice in the newspaper or, as a potential class member, receiving it in the mail. Other interested parties may also find it difficult to obtain this information.

Second, we would like to solicit feedback on the amicus component of the Project. To date, the FTC’s settlement objections have focused primarily on two issues: coupon compensation and excessive attorneys’ fees. The Commission’s briefs also have raised, to a lesser degree, such issues as insufficiently clear notices, burdensome claims procedures, and so-called “piggyback” class actions. Are these the issues that raise the greatest potential consumer concerns? Are there other issues on which we should be focusing our attention?

Third, we would like to solicit input on the empirical research component of the Project. In addition to its capabilities in law enforcement, the Commission has substantial policy analysis and research capabilities. This capability is implemented not only through the agency’s attorneys, but through our Bureau of Economics – one of the world’s preeminent teams of industrial organization economists. The FTC strives not only to ensure that we improve the procedures directly under our own control but also works with other public bodies to promote the development of approaches that improve consumer welfare. We hope that this Workshop will provoke discussion about how the FTC can bring its research resources to bear on the questions being raised about consumer class actions. What do we need to know? How can we obtain the data? And, most importantly, how best can we use our research?

Finally, looking beyond the limited role of our own agency, we would like the panels to explore opportunities for more effective coordination among the multiple entities involved in the class action process. More participation, and especially parallel participation, by the states and private attorneys may be helpful in some cases. It is our hope that the workshop will provide an opportunity for all entities involved in the consumer class action process to discuss this fundamental issue of coordination.

Before concluding, I would like to acknowledge the FTC staff who worked so diligently to plan this workshop:

First, in the Bureau of Consumer Protection’s Enforcement Division,

  • Associate Director Elaine Kolish,
  • Assistant Director Robert Frisby,
  • Attorneys Pat Bak, Adam Fine and Angela Floyd, and
  • Paralegal Heather Thomas.

Second, in the Office of Policy Planning, Maureen Ohlhausen, Acting Director, and John Delcacourt, Chief Antitrust Counsel.

Third, in the Bureau of Economics, Joe Mulholland.

Finally, in BCP’s Office of Consumer and Business Education, Callie Ward and Erin Malick.
And now John Delacourt will kick off our first panel.

Thank you all for coming.