Senior Vice President, International Regulatory Affairs & Antitrust, U.S. Chamber of Commerce
September 20, 2022
In a recent speech at Fordham University, Federal Trade Commissioner (FTC) Chair Lina Khan outlined an aggressive new approach to the agency’s competition policy. Under her leadership, she explained, the FTC will interpret “unfair methods of competition” broadly, block mergers that could reflect an “incipient” trend toward monopoly, reject efficiency defenses, and contend that “conglomerates” harm consumers, irrespective of economic evidence. In Khan’s view, her agenda is “fundamentally conservative” because it shows “respect for the rule of law” as reflected in congressional intent.
Khan’s speech hearkens back to George Orwell’s Ministry of Truth, where words apparently lose all meaning. Khan’s agenda rejects the rule of law in favor of a progressive policy agenda that grants the government total discretion to challenge any merger for any reason whatsoever, ignoring basic economics, history, and decades of precedent from the Supreme Court.
Most troubling is the fact that Khan’s agenda would allow the agency to challenge any private conduct that conflicts with progressive notions of fairness. Section 5 of the FTC Act directs the agency to combat “unfair methods of competition.” Historically, the agency has tied this authority to what’s in the consumers’ economic interest, which hews closely to the other main antitrust statutes, namely the Sherman Act and Clayton Act. As a result, the FTC provided Section 5 with context, guardrails, and predictability, which are all integral to the rule of law.
Under the FTC’s new leadership, however, anything goes. The FTC’s new strategic plan condemns “unwarranted health, safety, and privacy risks” and seeks “equity for historically underserved communities.” These issues, while important, lie far outside the FTC’s statutory authority or competence. Yet under Chair Khan’s reading of Section 5, the FTC can do whatever it pleases. Without guardrails, for example, the FTC could condemn as “unfair” a merger that would result in job losses even if that merger would lower costs and lead to lower prices for consumers. Congress never envisioned the FTC to serve as the morality police over the market.
In fact, the last time the FTC embarked on a path of overreach of this scope was the 1970s. As a result, the Washington Post editorial board labeled the agency the “National Nanny” and Congress nearly eliminated the agency altogether. Similarly, Chair Khan’s approach conveniently sidesteps this period of tremendous overreach and willfully ignores the succeeding decades of precedent and economic learning. According to her, the amendments to Section 7 of the Clayton Act show that Congress was concerned with any trend toward mergers and that, therefore, the agencies and courts erred in accounting for the possibility that a merger might increase efficiency. Khan points to Supreme Court cases from the 1960s to support her position and, in fairness, she is correct that in an earlier time in our history mergers were reflexively viewed more skeptically – but that was prior to now decades of reliance on sound economic analysis that accompanies merger review.
Chair Khan, however, seeks to divorce economic analysis from antitrust law. In those intervening decades, economists came to understand that relatively few mergers actually threaten competition, whereas most mergers, particularly vertical mergers, have pro-competitive benefits such as improved capital flows and greater efficiency. Across political administrations, the antitrust agencies tailored their enforcement activities to target those mergers that posed a genuine risk to competition. Consistent with economic learning and experience, the Supreme Court interpreted the antitrust laws more permissively to allow the private sector more freedom to operate.
By returning to the worldview prevalent in the 1960s, Chair Khan’s FTC would seriously damage the economy’s dynamism. By blocking mergers that increase concentration only slightly, the FTC would prevent startups from obtaining the capital and technical expertise that they need to grow and thrive. By replacing Section 5’s guardrails with amorphous standards subject to the shifting winds of politics, the FTC would eliminate the certainty and predictability that businesses need to plan and invest. And by barring use of the efficiency defense, the FTC would force companies to incur more costs to produce the same products – costs that would be passed along to consumers.
For consumers, what could be more unfair and deceptive than that?