Khan’s FTC could harm America’s competitiveness abroad

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The Federal Trade Commission (FTC) threatens to put US global competitiveness at risk by pursuing stringent antitrust goals that target the largest American tech companies, according to a new report published by the Competitive Enterprise Institute today entitled “A Global Antitrust Paradox?: The FTC is harming America’s race with China.” Economist Joe Sullivan explains that despite FTC Chair Lina Khan’s best intentions, her antitrust pursuits could lead to dire and unintended consequences.

He points to a growing bipartisan consensus surrounding national security—that “both President Biden and President Trump identified competition with the [Chinese Communist Party] as America’s preeminent geopolitical challenge.” Sullivan highlights the important role that the technology sector will play in promoting US national interests. According to Sullivan,

The great importance of technological innovation to US national interests raises the stakes for the brave new direction that antitrust had taken under the Biden Administration. Under Biden, a clear target of the antitrust spear is the US technology sector.

The report addresses Chair Khan’s recent eagerness to regulate artificial intelligence (AI), an emerging technology that Sullivan emphasizes. “AI is likely to shape the future of US-China competition in commerce and even potentially on the battlefield itself,” he writes.

Khan authored an opinion piece for the New York Times in May 2023 entitled “We Must Regulate A.I. Here’s How,” dispelling any doubt about her intentions. Two months later, news broke that the FTC opened an investigation into OpenAI, a company Sullivan describes as “the crown jewel of the global AI universe that calls the United States home.” News of the investigation came about due to a leak, coincidently on the same day Khan testified before the House Judiciary Committee on her alleged mismanagement of the agency.  

Sullivan explains how overregulation of the tech sector could undermine future investment in AI, which would have both direct and downstream effects. 

If the FTC does ultimately undertake regulatory or enforcement action that causes Big Tech’s existing investments in AI to cease to be profitable, the costs would fall on a range of actors beyond Big Tech. That’s because such FTC action would have the effect of lowering the expected rate of return on future investments in AI. With a lower expected rate of return, there would be less investment the AI space, including for newer start-up firms.

That decrease in funds available for AI startups would, in turn, harm downstream businesses that benefit from innovation in AI as well as consumers. . . . The case against FTC enforcement that jeopardizes investment in AI, then, is not a case for Big Tech for Big Tech’s sake. It is a case for investment in AI for America’s sake.

Further, using data from the Competition Law Index and the World Bank, the report estimates that “America’s real GDP would shrink by half of a percentage point, or around $134 billion, if the FTC adopted competition policies like Canada’s.”

Because stricter antitrust harms real economic growth and raises inflation, even if it benefits some within a country, it ultimately causes the country as a whole to fall behind the rest of the world. In the race of the US versus China, that could have negative geopolitical implications as well.

Read the full report here.