FTC commissioner Christine Wilson made the most of her resignation announcement in the pages of the Wall Street Journal. Her thoughtful dissents at the agency will be missed, but hopefully her self-described “noisy exit” will bring attention to a Federal Trade Commission that is mismanaged, is exceeding its statutory authority and, most importantly, threatens harm to large swaths of the U.S. economy.
There are quite a few troubling questions about the way that the FTC is currently being run. So far, Lina Khan’s tenure as chairman has featured “zombie votes” by departed commissioners, the muzzling of staff, the majority’s politically motivated redactions in Wilson’s dissents, a concentration of power in the chairman’s office, and transparency concerns around using unpaid outside experts. It’s easy to suspect this since the results of a recent survey among FTC employees revealed that only 49 percent agreed that senior agency officials maintain high standards of honesty and integrity, down from 87 percent in 2020. Something is rotten at the FTC.
The agency is also likely overstepping its statutory authority (or trying to) in its rulemaking and enforcement. Despite the FTC’s assertion to the contrary, the agency does not possess the authority to make rules out of whole cloth and enforce them as if they are law without the express direction of Congress. To think otherwise is completely at odds with the U.S. Constitution and would anoint the independent agency as a second Congress. The FTC has initiated rulemaking on digital privacy, so-called “junk fees,” and non-compete agreements. None of this is at Congress’s direction.
But perhaps most significantly, the policies the agency are now advancing are seriously flawed on the merits. When the Commission withdrew the 2015 bipartisan Statement of Enforcement Principles Regarding “Unfair Methods of Competition” Under the FTC Act, it also threw out decades of agreement on the importance of economic analysis and prioritizing consumers’ interests in antitrust-law enforcement. In describing how the FTC would pursue competition cases, that older statement embraced the “rule of reason,” the process by which business decisions under scrutiny are evaluated for both their potential harms and benefits to consumers. This is the approach that has governed U.S. competition law over the past 40 years, and it has worked well. Unfortunately, the FTC’s current leadership has replaced this with a statement that Wilson correctly summarized as, “I know it [objectionable conduct] when I see it” in her dissent.
That sort of legal uncertainty will surely chill economic progress. If an entrepreneur has a novel idea or arrangement that will increase efficiency or create a new benefit, they might hesitate to proceed with it due to the fear that their innovation will be viewed by regulators as “unfair” to competitors or deemed unacceptable in some other way. Essentially subjective tests may be the regulator’s friend, but they stand in the way of the rational decision-making by businesses that are essential in any smoothly functioning economy.
Read the full article on the National Review.