House Republicans continue to grill the FTC for its overreach

The House Judiciary Committee held a hearing on Thursday of last week entitled “Oversight of the Federal Trade Commission.” Lines of questioning were heated at times, with Committee members grilling FTC Chair Lina Khan on ethics concerns, personnel moral, and failed merger challenges. 

Chairman of the Committee, Representative Jim Jordan, opened the hearing with a scathing description of Chair Khan’s leadership at the FTC:

She’s trying to usher in a radical departure from the norms that made the American economy great to a system where her and her cronies have unchecked power over business practices in our country, untethered from any reasonable reading of precedent or statutory law.

Much has been said about the current FTC chair’s attempts to radically alter the state of antitrust. And many have called for oversight of the agency during the last year. As Grover Norquist, president of Americans for Tax Reform, argues in a recent Washington Times op-ed, Republicans should be commended for their oversight work on the FTC.

Here are some of the topics discussed during the oversight hearing:

Ethics

Rep. Harriet Hageman (R-WY) was quick to question Chair Khan on recent revelations that she declined to follow recommendations from the FTC’s top ethics official. Last month, Bloomberg released an unredacted memo from the Designated Agency Ethics Official (DAEO) recommending that Khan recuse herself from the FTC’s case challenging Meta’s purchase of the virtual reality developer Within.

While not finding a per se ethics violation, the DAEO found that statements made by Khan, before she was Chair, raised questions as to the appearance of bias and warranted recusal. Hageman also pointed to Khan’s delinquent status with the New York Bar, saying “I find this situation to be stunning and a reflection on your ethics.”

Losing merger trials

After the U.S. District Court for the Northern District of California handed the FTC its latest loss in challenging Microsoft’s acquisition of Activision, several lawmakers pressed Khan on her losing record in merger challenges. Rep. Kevin Kiley (R-CA) said,

You seem to be losing quite a bit, and I don’t say that to be disrespectful. But these are after all tax payer funds. You’re now 0 for 4 in merger trials. The average win rate for the FTC in the modern antitrust era is around 75 percent, so I have to ask. Why are you losing so much?

Since the hearing, the U.S. Appeals Court for the Ninth Circuit denied the FTC’s attempt to delay the deal.

Under Khan’s leadership, the FTC has shown a willingness to lose cases so long as the threat of litigation impacts market decisions. “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 that risk,” Khan told CNBC.

The FTC’s poor track record in merger challenges raises questions in light of a requested $160 million budget increase by the agency. The FTC shouldn’t be rewarded for losing cases. Rep. Ben Cline (R-VA) was sure to mention that actions have consequences. “The Appropriations Committee is marking up your budget as we speak, and they are seeking a 25 percent reduction in funding for the FTC,” said Rep Cline.  

Prescription drugs

Several Democratic members of the committee, Rep. Hank Johnson (D-GA), Rep. Madeleine Dean (D-PA), and Rep. Deborah Ross (D-NC), praised Khan for the FTC’s recent focus on pharmacy benefit mangers (PBMs). The FTC recently expanded its inquiry into PBMs, after launching an investigative study last year into the six largest PBMs. Further, the FTC is hosting an open meeting on July 20 in which the Commission will vote on whether to withdraw prior guidance and studies on the benefits of PBMs.

PBMs have been labeled as convoluted middlemen in the discussion of drug prices. “They operate behind the scenes. Consumers don’t really know what they’re all about. They’re a middleman in the drug market. . . . In this role, PBMs have the power to raise prices,” said Rep. Dean. Critics conveniently ignore the role of government in the rise of prescription drug prices. It’s hard to imagine that even more government intervention by the FTC will lower drug prices.

There’s an instinct to blame middlemen, according to Eric V. Schlecht, president of OnPoint Strategies, but PBMs ultimately provide value for insurers, unions, and employers. Much of the attention on PBMs, according to Schlecht, “is predicated on a fundamentally false assertion that PBMs are a primary cause of high prescription drug prices and that reducing PBMs ability to operate will magically reduce consumer costs.”

It’s not surprising that some would prefer the federal government to be the ultimate middleman in our healthcare system.