On February 12, Representative James Comer, Chair of the House Oversight and Accountability Committee, threw down the gauntlet to the Federal Trade Commission (FTC), demanding the Committee interview five of its leaders about the FTC’s audacious policies.
FTC leadership has a lot to answer for. It has consistently attacked the American entrepreneurial spirit by imposing costs, uncertainties, and legal intimidations that have stalled and constrained the ingenuity that America needs to remain the world’s economic leader.
For starters, the FTC has brazenly stymied mergers of entrepreneurial companies and squandered vast sums of taxpayer money in ill-advised lawsuits. It also aids and abets European regulators in taking down U.S. businesses to benefit Europe.
In a letter to FTC Chair Lina Khan, Representative Comer calls out the FTC for being out of step with previous administrations, both Democrat and Republican.
The FTC has not respected the Committee’s oversight role, only providing dribs and drabs of documents requested on June 1, 2023. The Committee is not backing down saying that it “is continuing to investigate the FTC regarding concerns the Commission is abusing its power, disregarding the rule of law, undermining due process, and ignoring federal ethics laws.”
Furthermore, the FTC is at odds with working Americans’ interests.
As the letter says, “The Commission should be working to ensure what is best for consumers is achieved, not intervening on behalf of favored competitors or pursuing ideological goals…We are concerned this is undermining consumers’ and others’ confidence in the Commission’s ability to ensure the integrity of the American marketplace.”
The FTC harms markets with fervent, ideological opposition to mergers and acquisitions. Such transactions are integral to a smooth functioning economy, and no more the exclusive purview of Wall Street titans than stock portfolios. Entrepreneurs typically build businesses to be bought out so that the enterprise will have the capital and marketing to reach unprecedented heights.
Yet, the FTC just does not like business combinations.
Jeffrey Sonnenfeld, with Yale University’s School of Management, said, “Khan and her defenders note that at least 19 deals were abandoned after the FTC filed challenges, which they have a habit of claiming as enforcement ‘victories.’ But even Khan has to agree that not every merger is, by definition, anticompetitive. In fact, some mergers are necessary to prevent companies from going under.”
Under Chair Khan, the FTC has all but eliminated companies’ ability to request early termination of FTC involvement in planned mergers and acquisitions that clearly pose no competitive concerns.
In a January 17 analysis, Fred Ashton with the American Action Forum found, “Over most of the past decade, between 73 and 81 percent of early termination requests were granted, but the latest data showed that only five out of 1,345 – or 0.4 percent – requests were approved in fiscal year 2022.”
For small and medium-sized businesses, the uncertainty that a transaction could be challenged, even if unmerited, imposes costs and disrupts business decisions and strategy.
New FTC and U.S. Department of Justice merger guidelines compound these chilling effects.
Commenting on the guidelines, on December 18, Karen Kerrigan, President and CEO of the Small Business & Entrepreneurship Council, said, “Unfortunately many startup entrepreneurs will no longer have M&A as an option for connecting them to the resources and capital needed to scale and compete with larger businesses. The guidelines will hinder the positive activity that serves as an innovative and competitive force for good in our economy.”
Furthermore, the FTC has collaborated with European Union (EU) regulators to halt mergers involving U.S. companies, while the EU also demands major changes from large U.S. tech companies by March 6. Otherwise, they could be fined over $150 billion. Any such fines will benefit Europe, not the U.S.
Left unchecked, the worst aspects of the FTC’s policies will metastasize in 2024 and beyond. Deals and prudent investments will be lost, innovators will sit on the sidelines, new technologies will be delayed, and EU bureaucrats will confiscate funds form American companies.
Against this backdrop, it is hard to overstate the importance of the investigation Representative Comer and the House Oversight and Accountability Committee are undertaking. Kudos to them for taking this tenacious and necessary stand against the audacious FTC.
