For an Overreaching Federal Trade Commission, Sunlight Is the Best Disinfectant

Abuse of power. Document destruction. Ethics concerns. Hiring games. Staff mismanagement. Possible foreign collusion. These are serious accusations against a traditionally bipartisan federal agency that has seemingly lost its way. In early June, the U.S. House Committee on Oversight and Accountability announced an investigation into the Federal Trade Commission’s (FTC) leadership. The U.S. House Judiciary Committee, the FTC’s own Office of Inspector General, and others are already reviewing the agency. The FTC’s comprehensive mismanagement presents, as the saying goes, a target-rich environment.

As oversight begins in earnest, Congress should focus its investigation on the FTC activities that inflict the most damage on our economy, undermine the rule of law, and corrode the trust of the FTC as an institution. Most importantly, Congress should evaluate whether to use its budgetary authority to mitigate the FTC’s excesses. A short sample of the FTC’s overreaches include: 

• Economic Damage. Early on, the FTC signaled its disregard for regulatory costs. Whereas the agency had sought to enforce the law “without unduly burdening legitimate business activity,” the FTC’s new mission statement discarded that language. Instead, leadership touted its ambition to become “a public body whose work shapes the distribution of power and opportunity across our economy.” In response, minority commissioners warned of leadership’s “intention to embark on a sweeping campaign to replace the free market system with its own enlightened views of how companies should operate … with subjective and as-yet-unstated goals that are ripe for political manipulation.” True to its word, the FTC is now micromanaging private conduct even where there is no threat to consumers or competition. The FTC is bringing speculative vertical merger challenges in critical economic sectors, all of which hamper innovation. The Commission is seeking to ban non-compete clauses, upend the franchise model, and possibly invalidate the free ad-supported internet. Some are asking whether the FTC is undermining the nation’s global economic interests. 

• Abuse of power. Today’s FTC and its leadership regularly ignore legal constraints and basic principles of due process. The FTC has issued proposed rulemakings and policy documents that far exceed its congressional mandate or constitutional authority, such as a statement purporting to give the FTC virtually unlimited power to declare competitive practices illegal. Moreover, the FTC is using settlement agreements to bypass judicial constraints and unilaterally change consent decrees without legal cause.

• Document destruction. In mid-February, the House Judiciary Committee requested documents relating to the FTC’s non-compete rulemaking, including correspondence with third parties. Three months later, the FTC explained that it had “already deleted materials that are likely responsive to the Committee’s request.” The Committee, which is still investigating, noted that the FTC “may have violated federal record-keeping law by deleting these materials.”

• Ethics concerns. After FTC Chair Lina Khan declined to recuse herself from the agency’s review of the Meta-Within merger, then-commissioner Christine Wilson concluded that the chair’s involvement “would violate both due process principles and federal ethics standards.” Wilson resigned in protest, and the latest report indicates that the chair did, in fact, disregard advice from her own ethics office to avoid the appearance of bias.  

• Hiring games. The FTC’s own Office of Inspector General found that the agency used unpaid experts and consultants in ways that lacked transparency and comprehensive controls. The agency failed to ensure that these experts and consultants were not performing inherently governmental functions, introducing “operational, legal, compliance, security, and reputational risk” to the agency. 

• Staff mismanagement. Current leadership’s management practices have led to a record exodus of senior staff and plummeting morale. In a survey, 28.8 percent of respondents “disagree or strongly disagree” that the agency’s leadership “maintain high standards of honesty and integrity.” These concerns led a group of agency alumni to advise the FTC to consult with its staff, as had been the historical practice.

• Possible foreign collusion. Finally, the FTC is accused of “colluding with foreign governments” to scuttle mergers of American companies in ways that arguably violate principles of due process. Moreover, the FTC, along with the U.S. Department of Justice, apparently are helping foreign governments implement protectionist policies that directly harm American companies.

Congressional oversight should expose these and other troubling practices. Perhaps most importantly, effective oversight can help Congress evaluate whether to use its budgetary authority to substantially curtail the agency’s abuses. After the FTC overstepped its statutory authority in the 1970s, Congress responded with appropriations riders that constrained the FTC to operate within its traditional bounds.

An effective FTC benefits both consumers and the economy writ large. Vigorous congressional oversight should compel the FTC to operate with respect for due process, the rule of law, its own staff, and the role of the legislative branch of government.

Asheesh Agarwal is an advisor to the American Edge Project and an alumnus of both the Federal Trade Commission and the Department of Justice.