Fixing the FTC: Repealing the Section 5 Policy Statement for Free Markets

Sean Heather
Senior Vice President, International Regulatory Affairs & Antitrust, U.S. Chamber of Commerce

Published

October 27, 2025

The Biden administration’s Federal Trade Commission (FTC) led by Chair Lina Khan left behind a real policy mess for the Trump Administration and FTC Chair Andrew Ferguson to clean up. Course corrections are already underway.

First, we saw the lifting of Chair Khan’s blanket hostility toward mergers. Chair Ferguson indicated he’d be tough on those mergers that required scrutiny, but otherwise his goal was to get the “hell out of the way” of most transactions. Next, we saw President Trump withdraw the deeply misguided Biden-Harris Executive Order on competition. In response, FTC Chair Ferguson noted that the repeal “marks another break” from “the last Administration’s failed policies.”

And most recently, the Trump FTC abandoned its predecessor’s efforts to grant the agency the legal authority to write its own antitrust laws. Former Chair Khan’s misadventure in competition rulemaking was soundly defeated in court, something Chair Ferguson and Commission Holyoak foreshadowed last year, however, formal clean-up of that debacle was left to the current commission.

All of these changes are important and meaningful policy course corrections. Unfortunately, former Chair Khan broke an agency that once had a prized tradition of working on a bipartisan basis, so clean-up efforts remain. Next on the list should be revoking the Biden era FTC Section 5 policy statement that suggests the FTC has the power to micromanage the economy. The previous Section 5 policy had common sense guardrails, something that the Biden FTC statement lacks.

The Trump-Vance administration is building a record of repudiating top-down regulation of the economy and Chair Ferguson has prioritized a return to an era of FTC enforcement grounded in empirical evidence. One opportunity to get rid of the Section 5 policy statement and further put the emphasis on evidence-based enforcement has recently been presented before the agency.

In late August, pharmacy benefit managers (PBMs), as part of a still early proceeding around a flawed proceeding brought by Chair Khan, filed a motion to dismiss the case. Their reasoning: the case relies on FTC Khan’s Section 5 policy statement and that policy statement is not the law. The FTC should take this opportunity to repeal the policy statement and with it dismiss this case. The FTC is expected to complete a full study into PBM practices, and the completed study should be the basis for any enforcement action.

Understanding the Section 5 Policy Statement

Under former Chair Lina Khan, the FTC issued an expansive policy statement interpreting Section 5 of the FTC Act, which prohibits “unfair methods of competition.” The policy statement declared that the FTC had the power to deem many types of routine business conduct as “unfair” without any showing of harm to consumers or anticompetitive intent.

According to the FTC, for example, loyalty rebates, bundling, exclusive contracts, and certain acquisitions all may be “unfair.” As the Chamber explained at the time, the policy statement, both “breathtaking in scope and extreme in approach,” afforded the FTC almost complete discretion to declare illegal any competitive behavior that it disfavors.

By removing guardrails and ignoring decades of antitrust precedent, the FTC created an environment of uncertainty for businesses. The FTC’s policy statement eliminated virtually any constraints or defenses to the agency’s views. Per the FTC, the courts must defer to the agency: “Congress intended for the FTC to be entitled to deference from the courts as an independent, expert agency.”

The FTC need not show market power, market definition, or justify its analysis under a traditional “rule of reason” inquiry. The policy position was adopted in a 3-1 vote. None of the current sitting Commissioners were at the agency at that time. As a result, the policy statement’s overreach undermines the principle that a government agency must justify an intrusion into the free market with actual evidence of harm to competition.

Unpacking the PBM Case

The policy statement has become the foundation for several misguided actions, including the FTC’s politicized lawsuit against pharmacy benefit managers (PBMs). Indeed, the suit which is grounded in politics, is exactly the type of unchecked discretion enabled by the policy statement.

Led by Chair Khan, in February 2022 the agency attempted to launch a study that was designed to predetermine conclusions about PBMs rather than investigate them objectively. The FTC’s chief economist resigned in protest and the Republican commissioners called on the agency to develop a study with an “objective design and credible guarantees that an expert-driven process will produce a data-driven report.”

Ultimately the study was reworked and in June 2022 it was commissioned with bipartisan support. Rather than wait to complete that study, however, the agency rushed to release a highly unusual “interim report” that lacked proper empirical analysis and failed to connect its allegations to demonstratable antitrust harms. Commissioner Holyoak and then-Commissioner Ferguson both made clear the state of the study was far from complete, with Holyoak going so far as to object to its release.

Next, the FTC discarded decades of its own objective work by withdrawing its prior advocacy, which had been driven by empirical evidence rather than political objectives. Amazingly, the FTC then filed its PBM suit before completing an empirical study, perhaps not coincidentally less than two months before last fall’s elections.

Of note, the FTC’s case leans heavily on dated insulin pricing concerns. But in today’s market, insulin prices are no longer a significant barrier for patients, with most Americans now able to access insulin for $35 or less a month. Even potential new market entrants, such as Mark Cuban's Cost Plus Drug Company, have acknowledged the insulin market is highly competitive.

What’s next?

Now the PBMs have filed a motion to have the FTC case against them dismissed on the grounds that FTC Section 5 policy statement is legally flawed, giving the agency an opportunity to repeal the Section 5 guidance. With none of the current commissioners having been at the agency when the policy was adopted, and based on public remarks by all three commissioners, it is hard to see any of them being supportive of Chair Khan’s Section 5 policy. The FTC should vote to repeal the policy statement.

Along with its repeal, it would make logical sense to carefully reconsider this PBM case. The case rests on a shaky foundation: a faulty policy statement untethered from law, an incomplete study rushed to publication, and market allegations relating to insulin pricing that do not reflect today’s realities. Proceeding under these conditions risks undermining the FTC’s credibility.

The final, comprehensive PBM study is expected to be completed this fall. If the full study finds anticompetitive behavior worthy of supporting an investigation that leads to a new complaint the FTC will have developed a firmer basis grounded in sound facts and good law to bring a case. Repealing the Section 5 Policy statement along with dismissing this case, which is still in relatively early stages, would be another sound step to cleaning up the mess that was left in the wake of Chair Khan’s departure.