The Unfairness of the FTC’s Policy Statement Regarding the Scope of Unfair Methods of Competition

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The latest in a stream of regulatory dark matter is the Federal Trade Commission’s (FTC) November 10, 2022 “Policy Statement Regarding the Scope of Unfair Methods of Competition Under Section 5 of the Federal Trade Commission Act” (Commission File No. P221202).

With this move, the FTC is playing its part in in fulfilling the Biden administration’s broader array of “Whole-of-Government” spending and regulatory schemes, of which “Competition Policy” is merely one aspect. In this, it joins together with the Justice Department and other agencies across in a White House “Competition Council” in escalating regulation of everything from agriculture to airlines.

The FTC Policy Statement (p. 2) reads:

The text, structure, and legislative history of Section 5 [of the FTC Act] show that its mandate extends beyond the Sherman and Clayton [Antitrust] Acts and reaches unfair conduct with a tendency to negatively affect competitive conditions.

FTC Chair Lina Khan issued the obligatory Twitter thread, claiming that “When Congress passed the FTC Act in 1914, it didn’t just create a new agency—it created a new law for that agency to enforce. Section 5 bans “unfair methods of competition.” Today we laid out how @FTC is reactivating this tool.” Who decides “unfair”? Well, the FTC, of course.

Invoking what the FTC regards as a “dormant” authority “to reach [business] practices that wouldn’t necessarily violate other antitrust laws,” the commissioners claim that “Congress passed Section 5 to ensure a level playing field for all competitors and to stop anticompetitive conduct in its incipiency—not to promote ‘efficiency.’” 

“Level playing field” tends to translate into the government wielding its power to help one competitor over others.

In a joint statement with the other two Democratic commissioners, Rebecca Kelly Slaughter and Alvaro Bedoya, Khan claims that “faithfully executing the full set of duties Congress tasked us with is critical for promoting the rule of law & ensuring the democratic legitimacy of our work.”

Invoking “rule of law and democratic legitimacy” is quite the claim. The Policy Statement is a unilateral decree, but that’s not a surprise in the light of the public interest origins of the Sherman Act.

The dissenting statement from Commissioner Christine S. Wilson calls for public comment instead, which makes sense if something is to have some semblance of democratic legitimacy. As Wilson notes, the Policy Statement abandons the rule of reason and consumer welfare standards and repudiates longstanding precedent requiring agency restraint. The Policy Statement does all this without providing clarity on what the agency regards as satisfactory compliance with the law, adopting instead an “I know it when I see it” approach.   

Like the unconstitutional abuses of power by other federal agencies such as the Consumer Financial Protection Bureau, the FTC’s internal tribunals need to be disciplined at some point.

Antitrust has always been a form of cronyism, costing the economy incalculable amounts of lost enterprise, infrastructure, wealth and human well-being. Many remarked this past week over Amazon being the first company to lose $1 trillion in value. By this point in American history, there are probably many companies that have lost—and gained—such amounts.

Antitrust authorities routinely neglect regulation’s role in causing problems such as the supply chain disruption and pricing non-transparency. Regulations crowd startups into less-regulated areas at the expense of vitality in others, as entrepreneur and investor John Chisholm notes:

There are hundreds of thousands of start-ups in mobile apps but relatively few in pharmaceuticals, aviation, construction, consumer banking, and medical devices. (Unleash Your Inner Company, p. 320)

The commissioners invoked congressional statutory intent as justification for their Policy Statement, but might reconsider that appeal to authority.

Antitrust is being positioned serve as a reenergized component of a slate of institutions protecting the federal government from private sector competition. In combination with the spending, contracting and purchasing power of which the federal government boasts, major economic undertakings today are morphing into “public/private partnerships” that are displacing free enterprise and competition—and will be immune from antitrust.

Merely reforming the FTC presents no threat to progressivism. Rather, classical liberals have a ripe target in the form of the federal government’s own monopoly and monopsony power. The agenda for classical liberals is to eliminate the Federal Trade Commission’s interference and major swaths of the Commission itself (if not the whole thing) and bring up the Sherman and Clayton Acts for repeal.

America needs vastly larger infrastructures and networks, from tap water to tech, than the stunted and government-directed ones we’re going to get pre-constrained by antitrust law, especially in the wake of the post-COVID legislative bonanza.

As CEI founder Fred L. Smith Jr. remarked, “The genius of the Progressives in the late 19th century was to preempt or push large sectors of the emerging future (the environment, schools, electromagnetic spectrum, infrastructure, welfare, the medical world) into the political world.”

If anything is a barrier to incipient competition, that would be the FTC itself. It is long past time to impose oversight and discipline on it and open a new path to abolish antitrust in order to protect supply chains, enterprise, and consumer well-being.