CEI Hill event shows how the FTC is burdening small businesses

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Many have praised Lina Khan, chair of the Federal Trade Commission (FTC), for her commitment to regulate “big business.” Under her leadership, the FTC sued to block mergers by Meta and Microsoft, and the agency is expected to file an antitrust suit against Amazon next month. Khan has seen little success in her crusade, however.

Much of Khan’s efforts have been made with the stated purpose of helping small businesses and entrepreneurs as they attempt to navigate a fast-changing economy. Earlier this summer, during a webinar on franchising, Khan said that the FTC is tasked with “making sure that dominant firms are not using their power in unlawful ways that lock out small businesses and entrepreneurs.”

While Khan has devoted plenty of attention to the ways large corporations have purportedly harmed small businesses, she has paid less attention to the ways her own agency is actively hampering small businesses and burdening them with crippling compliance costs.

CEI hosted a Capitol Hill briefing this week, July 25, to discuss with congressional staff how the FTC is failing to uphold its promise. Entitled “Federal Trade Commission: Burdening Legitimate Small Business Activity,” the event featured policy experts and representatives of small businesses with Svetlana Gans, partner at the law firm of Gibson, Dunn & Crutcher, moderating the panel. The House Small Business Committee main room, located in the Rayburn House Office Building, was full.   

Rep. Beth Van Duyne (R-TX), representing Texas’s 24th Congressional District, was the keynote speaker for the event. Drawing on her past experience as a small business owner and a former regional administrator for the U.S. Department of Housing and Urban Development (HUD), she discussed the problems a large federal agency can pose to the survival of a small business. The congresswoman serves on the House Small Business Committee, where she chairs Oversight, Investigations, and Regulations Subcommittee, in addition to serving on the House Ways and Means Committee.

Paul D. Metrey, senior vice president of regulatory affairs for the National Automobile Dealers Association (NADA), joined the panel to discuss how the FTC’s proposed “Vehicle Shopping Rule” would harm both small businesses and consumers. The FTC has claimed the proposed rule would provide a $29.7 billion benefit to consumers. Metrey countered with a recent report by the Center for Automotive Research showing that the rule would instead cost consumers $38.1 billion.

James A. Paretti Jr., employment and labor relations attorney at Littler Mendelson, discussed the FTC’s proposed rule banning noncompete agreements in employment contracts. He explained that small businesses rely on noncompete agreements to retain skilled employees and keep intellectual property from being poached from larger, more established firms. He also expressed concern about FTC dipping its toes in labor and employment issues in the first place, since federal agencies already exist to address those areas of law, like the Department of Labor and the National Labor Relations Board. Finally, he noted that for hundreds of years, courts have done a good job of enforcing reasonable noncompete agreements while declining to enforce (or limit) those that are overbroad or unreasonable.

Caleb Kruckenberg, attorney for the Pacific Legal Foundation, rounded out the conversion with a discussion of the FTC’s enforcement practices. Kruckenberg explained how the FTC is continuing to pursue illegal disgorgement awards from small businesses, despite admonishment from the Supreme Court. In the 2021 case, AMG Capital Management, LLC v. FTC, the Court held that Section 13(b) of the FTC Act did not authorize the agency to seek such awards. Now, Khan’s FTC is attempting to use Section 19 of the FTC act to get around the decision.

The event concluded with a Q&A period, in which the panelists fielded questions from congressional staff and media members. This much was clear at the conclusion of the panel discussion: The FTC isn’t just coming after big business. The agency is coming after small businesses too.