Much ink has been spilled lamenting the Federal Trade Commission’s (FTC) marked shift away from its long-standing consumer welfare standard and toward a populist approach of targeting big business, notably tech companies. Less studied is what this means for the agency’s ability to accomplish its core mission: protecting the public from deceptive or unfair business practices and unfair methods of competition.
Under the direction of Chair Lina Khan, the FTC has abandoned its decades-long adherence to the consumer welfare standard of antitrust enforcement under which mergers, acquisitions and other business behaviors are subject to intervention only when they are likely to harm consumers. This standard necessarily imposes a narrow range of considerations on which regulators can focus and has served well to protect consumers from unfair business practices. Khan’s FTC instead has expanded its range of considerations to cover size, industry concentration and other ancillary factors. In doing so, the agency is pushing the bounds of its congressionally mandated scope and authority.
This shift has led the agency to file a number of high-profile merger challenges, several targeting big tech companies. These tactics reflect the FTC’s desire to expand its power. The agency is attempting to push the bounds of its authority and, if it cannot do so, hopes that Congress comes to its rescue and fills in the gaps FTC leadership believes exist in current antitrust law. As Khan herself has said, “Even if it’s not a slam dunk case, even if there is a risk you might lose, there can be enormous benefits from taking the risk.”
This strategy has racked up a number of very avoidable losses in court for the FTC — and these losses have consequences for the agency. Bringing lawsuits with weak economic evidence and legal theories unsupported by modern case law risks setting new precedents that could hinder future cases in which actual consumer harm is significant. Moreover, continuing to bring such cases to trial endangers any deference courts would traditionally afford to the agency.
The FTC’s lack of success in following its “big is bad” theory of harm not only wastes valuable agency resources but jeopardizes its credibility, as well. Each time the FTC engages in a long-shot endeavor to expand the bounds of its authority or challenge a merger that lacks traditional economic rigor, the agency erodes its own credibility among the courts. Judges, over time, may become less likely to believe the agency is acting within its proper remit, and they may question its neglect of empirical economic reasoning focused on the consumer.
Notably, FTC leadership appears to be pursuing cases against the recommendations of its own staff. Last summer, the majority of commissioners reportedly voted to challenge a merger despite opposition from agency lawyers and economists. While rebuking internal staff recommendations is rare, such a move signals some of the commissioners’ desire to test the limits of the agency’s “big is bad” approach to antitrust.
The current FTC leadership’s reported tendency to ignore staff recommendations and input has led to a well-documented “brain drain” and an unprecedented level of dissatisfaction among agency staff. In the 2020 Office of Personnel Management’s Federal Employee Viewpoint Survey, nearly 89 percent of FTC respondents were either satisfied or strongly satisfied with the organization, the highest ranking among government agencies surveyed. By 2022, that number plummeted to around 60 percent. Details of the survey showed that respondents pointed to current leadership as a primary reason for their dissatisfaction.
The FTC’s shift towards a more populist agenda has and will continue to jeopardize the agency’s credibility, impeding its effectiveness in accomplishing its core mission. Refocusing antitrust enforcement on consumer welfare will help reestablish some of the credibility the agency has already lost.
Fred Ashton is the competition economics analyst at the American Action Forum.