The New FTC: Stepping On The Toes Of Congress
A flurry of recent activity at the Federal Trade Commision (FTC) makes clear that the Commission wants to become its own rulemaker and take over Congress’s role in regulating the economy. As all five FTC commissioners testify before Congress, keep in mind that the agency’s radical new agenda would:
– Enhance the FTC’s own rulemaking authority in a departure from statutory constraints and judicial oversight
– Make it harder for businesses to innovate, raising costs for consumers
– Harm the long-term credibility of the FTC by turning it into a political vehicle
The FTC’s radical new agenda would enhance its own rulemaking authority in a departure from its statutory constraints and judicial oversight.
Congress did not intend for the FTC to have the rulemaking authority it now claims to have, argues the American Bar Association. “The Commission’s [6(g)] rulemaking authority is buried within an enumerated list of investigative powers, such as the power to require reports from corporations and partnerships, for example. Furthermore, the [FTC] Act fails to provide any sanctions for violating any rule adopted pursuant to Section 6(g). These two features strongly suggest that Congress did not intend to give the agency substantive rulemaking powers when it passed the Federal Trade Commission Act.”
While the FTC has issued an array of rules on consumer protection, issuing competition rules would be at odds with the long tradition of focusing on case law, says Alden Abbott of the Mercatus Center. “The FTC has extensive experience in issuing consumer protection rules. FTC regulation of competition through rulemaking, however, would be at odds with a long American tradition of relying on case-by-case antitrust adjudication, rather than rulemaking, to deal with practices that harm the competitive process.”
The FTC is stepping into a role usually reserved for Congress, says Marianela Lopez-Galdos of CCIA. “[T]he agency’s rulemaking authority has been self-limited since the 80s in an effort to ensure the institution doesn’t overuse its capacity to adopt industry-wide regulations and raise concerns with those policy makers that are against the legislature deferring its core mandate to an independent agency that doesn’t represent the people. Traditionally the legislature has the constitutional mandate to create laws affecting different sectors of the economy. Whereas it is legally accepted to design independent agencies with constrained mandates to adopt regulations, such powers are not necessarily understood to construe independent agencies as substitutes for the legislature’s powers.”
The FTC’s radical new agenda would make it harder for businesses to innovate, raising costs for consumers.
The repeal of a bipartisan 1995 policy statement eliminating the need for “prior approval” requirements in mergers will create friction for companies looking to grow, slowing the pace of innovation, note Darren Tucker, Evan Miller, and Laura K. Muse of Vinson & Elkins. “At its July 21 open meeting, the Commission voted on party lines to rescind a bipartisan 1995 policy statement that generally eliminated ‘prior approval’ and ‘prior notice’ requirements in Commissioner orders resolving illegal mergers. As a result of yesterday’s change, we can expect that future FTC merger consent orders will require the respondent to seek the Commission’s prior approval for any future acquisition over a de minimis threshold within markets affected by the transaction.”
Shifting the burden of proof for all mergers will lead to higher costs for consumers, says FTC Commissioner Noah Joshua Phillips. “[A]ttempting to flip the burden of proof for all deals will also deter procompetitive and competitively neutral transactions. Like our (allegedly temporary) suspension of early termination, it amounts to a gratuitous tax on normal market operations. Ultimately, American consumers will have to pick up the cost.”
The repeal would “competitively handicap” companies that enter into merger consents, added FTC Commissioner Phillips. “A blanket policy of routinely requiring prior approval will impose significant costs on companies that enter into merger consents. The government would be competitively handicapping those companies for an undetermined duration, preventing them from competing on a level playing field against rivals. (For example, making Coke unable to do what Pepsi can.) A company under an FTC order may have to bid higher—for instance, diverting resources from research and development, incurring debt, or lowering salaries—to compensate the seller for the uncertainty and the longer lead time required to obtain prior approval.”
The FTC’s radical new agenda would harm the long-term credibility of the Commission by turning it into a political vehicle.
Moving away from a consumer welfare-centered enforcement approach will enable the FTC to act in ways “based on changing political motives and policy preference” says Jennifer Huddleston of the American Action Forum. “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. For example, if not focused on the consumer welfare standard, the FTC could act against some of the largest tech companies to break them up or prevent mergers even though consumers were not harmed—or were even helped—by these changes in the market.”
Recent FTC policy changes are “unsupported by any empirical analysis,” says FTC Commissioner Christine Wilson. “The Commission has not yet issued findings from its 6(b) study in the tech sector, and has not yet announced studies in other industries. When completed, these analyses may ultimately provide a basis for recommendations to Congress about changes to the [Hart-Scott-Rodino] framework, but the majority’s actions today are unsupported by any empirical analysis.”
If the FTC loses cases brought to further its radical new agenda, that would raise doubt whether the “agency is capable of executing its mandate efficiently,” says CCIA’s Lopez-Galdos. “In the mid and long term, if the FTC loses the big cases, the commitment to policy outcomes won’t be met. And then, it is unlikely that the question would be whether the antitrust norms are fit or not for today’s economy, but rather if the agency is capable of executing its mandate efficiently.”