Changes At The FTC Put Political Ideology Ahead Of Consumers And American Businesses
In recent months, the Federal Trade Commission (FTC) has entered a new era of politicization. Once lauded for its nonpartisan efforts to protect consumers, the new FTC is taking radical steps to empower itself and push forward a political antitrust agenda. Here’s what’s happening:
— The new FTC has discarded the objective economics-based consumer welfare standard, paving the way for political weaponization of the agency’s enforcement powers
— Recent changes ignore process and sideline staff to rush forward with political agendas
— The shift back toward increased rulemaking threatens a return to the “dark days” of excessive, ineffective regulation
The new FTC has discarded the objective economics-based consumer welfare standard, paving the way for political weaponization of the agency’s enforcement powers.
Moving away from the consumer welfare standard could give the agency room to enforce ideology at consumer expense, warns Jennifer Huddleston of the American Action Forum. “The withdrawal of the FTC’s statement is the latest signal that antitrust policy, particularly at the FTC, is shifting away from focusing on consumers and using the consumer welfare standard. Instead, there are now real concerns the FTC will enforce antitrust policy in a way that promotes competitors or ideology at consumers’ expense.
— Huddleston continues: “Most specifically, rejecting the consumer welfare standard signals the FTC may apply its enforcement power in more subjective ways based in changing political motives and policy preference, as was seen in earlier eras of antitrust enforcement.”
Recent FTC policy changes reduce clarity and unleash “unchecked regulatory authority,” explains FTC Commissioner Noah Phillips in his dissent to the July 1st meeting. “Reducing clarity in how the Commission will approach antitrust enforcement is bad enough, but it is particularly troubling in light of my colleagues’ publicly-stated desire to fashion antitrust regulations. Not only are they refusing to articulate limits to the Commission’s ability to declare conduct illegal after investigating it, they are also refusing to articulate limits on their view of what they can regulate. Today, in effect, the majority is asserting broad authority to regulate the economy. They mean, in other words, for just a handful of people to answer major policy questions with no intelligible principle from Congress to guide us.”
— Phillips continues: “I am deeply concerned that the Commission’s action today unleashes unchecked regulatory authority on businesses subject to Section 5 while keeping those businesses in the dark about which conduct is lawful and which is unlawful. And, we are undertaking it with virtually no input from the public. The need for certainty and predictability are basic tenets of good government. Today, I regret that the Commission came up short.”
Shifting away from the consumer welfare standard “is like removing the bumpers” from the FTC and there will “likely be major losses for consumers”, explains Mercatus Center’s Alden Abbott and Andrew Mercado. “Revoking that statement, then, is like removing the bumpers. It may lead to the same result as before, but if you aren’t careful, one wrong throw could break the pin-setting machine.”
— They continue: “[W]ithout the consumer-welfare standard and the rule of reason guiding the agency’s hand, there will likely be major losses for consumers — and for the competitive health of the American economy.”
Changes at the FTC are removing institutional guardrails and long-standing bipartisan agreements around consumer welfare, says Robert Bork Jr. of the Antitrust Education Project. “[A] Democratic majority of commissioners recently replaced the commission’s chief administrative-law judge with a political appointee. They also rescinded a bipartisan commitment to the consumer-welfare standard and changed the rules so that it no longer takes a majority of commissioners to launch the investigation of a company. Any commissioner can now decide to put a company and its executives in the crosshairs.”
Ahead of the FTC vote to rescind a 2015 policy statement on Section 5, Senator Mike Lee (R-UT) voiced his concern: “[I]t will replace clarity with ambiguity in the midst of a fragile economic recovery. Rescinding the statement would also signal that the commission rejects the idea that there are any limits to its power or regulatory reach, and that it intends to use Section 5 to address non-economic harms outside the agency’s purview or expertise.”
— Lee continued: “[B]ipartisan interest should result in bipartisan solutions. Revoking the bipartisan Section 5 Statement would undermine that effort, and potentially lead to antitrust enforcement that is divorced from the interests of consumers.”
The FTC is moving toward standards that “encroach on the domestic economy,” cautions National Review’s Sean-Michael Pigeon. “[L]ook at the actions of the FTC, which clearly indicate that the agency is willing to use the new standards to encroach on the domestic economy. A free market of companies and ideas is a goal worth pursuing, but this is not the way towards it.”
Without guardrails, the FTC is left at the subjective will of its leadership, notes Patrick Strite of the Competitive Enterprise Institute. “[T]he UMC statement shielded businesses and consumers from agency officials who think they know better.”
— If institutional safeguards are removed, Strite explains that: “[T]he unrestricted power of the FTC still remains for the next individual to come along and wield it irresponsibly. “
Recent changes ignore process and sideline staff to rush forward with political agendas.
New meeting processes limit dialogue between Commissioners and omit certain staff input—leaving “chaos instead of thoughtful process,” said FTC Commissioner Christine Wilson at this month’s first FTC meeting. “Unfortunately, the format the Chair has chosen for this meeting omits our knowledgeable staff and precludes a dialogue among the Commissioners. A bipartisan and collaborative approach has been the hallmark of the FTC for years and would be welcome today, particularly given the importance of the matters being considered. We have arrived at the consumer welfare standard, a rulemaking process that respects objectivity and public input, and an appreciation for our limited jurisdiction for very specific reasons. Those reasons are worth discussing, but that requires a thoughtful process. And when we have chaos instead of thoughtful process, it is the American consumer who will suffer.”
Process changes at the FTC have the potential to lead to a “gross abuse of power,” warns the U.S. Chamber of Commerce. “[T]he notion that a single commissioner can turn a staff-initiated investigation into a compulsory exercise holds the potential for a gross abuse of power.”
— The Chamber continued: “Strong enforcement does not need to be done in an abusive manner, but these efforts to ‘streamline’ investigations are highly questionable and undermine the confidence and legitimacy of the Commission.”
The shift in tone and direction at the agency has expert staffers looking for new jobs, says legal writer Bruce Love. “While some staff turnover in the wake of an administration change is routine, law firm leaders said the number of agency lawyers seeking out career options outside the FTC appears to be high now and they are anticipating more later in the year. They attribute that, at least in part, to agency lawyers who have different views.”
The shift back toward increased rulemaking threatens a return to the “dark days” of excessive, ineffective regulation.
FTC management is ignoring the “dark days of the agency’s history” by considering expanded rulemaking, warned FTC Commissioner Christine Wilson in her dissent at the July 1st FTC meeting. “Considering the backlash to this agency’s earlier era of unbounded rulemaking activity, I am gravely concerned about today’s proposals.”
— Wilson continued: “There are many at the FTC who lived through the 1970s and 1980s and experienced the public and Congressional backlash during those dark days of the agency’s history. There are many others who worked with and learned from those who lived through that period. Current management would be wise to seek their guidance.”
Political whims have dictated antitrust law before—and it didn’t go well, explains Competitive Enterprise Institute’s Ryan Young. “During the rule of reason era, a company could never be quite sure if it was violating the law or not. An acceptable practice one year might not be if power changes hands in the next election, or if a new judge rules differently on a case than his predecessor would have.”
Recent FTC changes are “indicative of a regulatory overreach” and ignore the “constraints of history,” says Former FTC Commissioner Joshua D. Wright. “Imagining the FTC as Icarus flying without the constraints of history, economics or law is a fun thought experiment, but we’ve been here before.”
— Wright continues: “[I]nitial steps are indicative of a regulatory overreach that will end with the FTC’s wings melting in the courts. This path does not lead to incremental, much less radical, change.”