PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

FTC Getting More Political, Radical and Unaccountable

By at 13 December, 2021, 8:44 pm

SMALL BUSINESS INSIDER

by Raymond J. Keating and Karen Kerrigan –

The Federal Trade Commission (FTC), headed up by its hyper-regulatory chair, Lina Khan, appears to have embarked on some fishing expeditions for President Biden. This activity coincides with the President’s drop in favorability and as the public is losing confidence in his leadership on assorted matters, including various troubles across our economy.

On November 29, the FTC announced that it was “ordering nine large retailers, wholesalers, and consumer good suppliers to provide detailed information that will help the FTC shed light on the causes behind ongoing supply chain disruptions and how these disruptions are causing serious and ongoing hardships for consumers and harming competition in the U.S. economy.”

Chair Khan was quoted, in part, saying that this “study” would “shed light on market conditions and business practices that may have worsened these disruptions or led to asymmetric effects.”

Among the targeted companies are Walmart and Amazon.com, two of the very largest U.S. companies and global leaders.

Kahn’s Big Business Bias

As we’ve known through Khan’s writings and work before entering her new stint at the FTC, she stands as an extreme opponent to large businesses, assuming that big is intrinsically bad, and a zealot in terms of using antitrust regulatory action to control much of the economy. SBE Council explained in an earlier analysis:

The dangers of antitrust policy coming completely unmoored, once again, from sound economics can be seen in, for example, appointments being made or considered as commissioners to the Federal Trade Commission (FTC). Consider a few points made in a recent Wall Street Journal report titled “Big Tech Adversary Poised to Take Assertive FTC Antitrust Role.” That article made quite clear the troubling shift underway. As the Journal noted:

“Lina Khan, a progressive champion nominated by President Biden for a key enforcement post, wants to transform antitrust policy into a bulwark against corporate power by blocking more mergers, attacking monopolistic practices and potentially breaking up some of America’s largest companies… She has risen to prominence—and gained bipartisan support—as Democrats and Republicans alike have said lax antitrust enforcement, especially in the tech sector, has allowed dominant firms to hobble rivals and stifle competition. Her targets have included not just Big Tech but also Big Chocolate and others.” (Um, “Big Chocolate”?)

Khan is a leading advocate for moving away from the consumer welfare standard, and replacing it with the neo-Brandeisian assumption that “big” in business is bad (never mind that the only way for a business to become “big” is to serve consumers well), and to favor a far more expansive regulatory effort coming under the umbrella of antitrust.

The Journal noted that Khan has been able “to forge common ground with some Republicans by arguing that concentrated corporate power is a threat to liberty,” with Senator Ted Cruz (R-TX) saying “at the hearing that the FTC ‘should be doing much more’ on Big Tech and that he looked forward to working with her.”

It also was noted that Khan is open to having government impose what lines of business technology companies can enter, as well as regulating technology companies as if they were old-style utilities.

For good measure, Khan would not be alone on the FTC. As the Journal reported:

“Democrat Rebecca Kelly Slaughter, the agency’s acting chairwoman, has staked out aggressive enforcement positions during her three years on the commission, urging a tougher stance on mergers and recently creating an internal group that could help implement first-ever regulations that prohibit certain kinds of business practices as unfair methods of competition. ‘Lina’s work has substantially advanced the public debate on competition, and I am not aware of any places she and I disagree,’ Ms. Slaughter said.”

The political drumbeat that “big” is bad is leading to attempts by lawmakers to use antitrust law and enforcement to hyper-regulate, for example, U.S. companies that have grown to be global leaders in the high tech arena.

Indeed, Khan advocates wielding antitrust law in an expansive way to attack large businesses. By doing so, of course, she ignores that in order to gain market share, businesses in the marketplace must serve consumers well. Market share is earned, not granted, for example, by some government decree.

This is a basic market reality that Khan chooses to ignore.

Even the largest of businesses in the U.S. must continue to innovate and perform well in order to maintain market share and profitability, especially given the dynamism of today’s high-tech, global economy. The idea that a monopoly exists, wielding unchecked power against smaller firms and consumers, is nothing but the overheated fantasy of those who see nothing but ill from businesses, and nothing but good in actions taken by politicians and government bureaucrats.

“Open Government” Shifts to Reverse

Under Khan’s leadership, the FTC has thrown out the consumer welfare standard, has not acted consistently regarding rule-of-law principles, and has closed off avenues for feedback from – and engagement with – the public and affected businesses. This is especially worrisome for small businesses, which often lack a seat at the table – and voice – when significant policies are being made that impact their viability and competitiveness. Such attacks on “big business” often have downstream effects and consequences for small businesses. As noted by USC law professor Jonathan Barnett in a recent Hill Op-Ed:

“FTC leadership has reversed decades-old elements of antitrust policy with little opportunity for public comment, little effort to engage impacted constituencies, and little factual inquiry that have been the hallmarks of modern antitrust policymaking.”

We are pleased that some commissioners are taking a stand against the worrisome shift in hyper-regulation, the inexplicable strategy to cut-off public input or make it more difficult to hear from the public on rulemakings or actions, and that this aggressive regulatory path may in fact be unlawful.  In her dissent on the FTC’s annual regulatory plan and semi-annual regulatory agenda, Commissioner Christine Wilson makes a sound case in expressing alarm at the FTC’s direction under Chairman Khan and major changes to how it will work. She notes:

“While the Annual Regulatory Plan and Semi-Regulatory Agenda characterize those changes to our Rules of Practice as ‘eliminating extra bureaucratic steps and unnecessary formalities,’ in reality those changes fast-track regulation at the expense of public input, objectivity, and a full evidentiary record.”

Commissioner Wilson touches on other critical issues as well, and if you are concerned about government gone wild her dissent is worth the read.

Using FTC Investigatory Powers to Shift or Cast Blame

As the economy struggles to emerge from a pandemic economy, including related shutdowns, we continue to be confronted with supply-chain problems and labor shortages. Biden administration policies are not helping to ease these challenges, in fact, its policies and threat of additional regulation, higher taxes and more spending are exacerbating the challenges and uncertainty. Small businesses especially are feeling the squeeze.

According to the most recent quarterly CNBC/Momentive Small Business Survey, “62% of small business owners say the Biden Administration has been ‘bad’ for small businesses and 64% say it’s been ‘bad’ for the economy.”

Broad public opinion has also turned on President Biden in many key areas. Efforts now appear to be underway to divert the blame. For example, a “study” by the FTC that points the finger at the private sector for supply chain woes might just serve to unearth actions or decisions that could be used against specific businesses and would prove quite handy politically for President Biden.

Never mind how ludicrous it is to think that politicians and their appointees would somehow be in a position to overrule the decisions made by private sector businesses facing unprecedented challenges, and seemingly countless factors and influences. But this is politics, so we see bizarre undertakings like fishing expeditions by the FTC.

We will add that this current FTC fishing expedition on supply chain issues follows another one where the President has shown vulnerability in the polls – high gas prices. On November 17, President Biden asked the FTC to investigate oil and gas companies to see if they are engaging in “potentially illegal conduct” regarding higher prices. As noted in a recent SBE Council analysis on the energy squeeze and Biden Administration policies, new taxes, regulations and mandates on the energy sector are making matters even worse. Regulatory signals via the Biden Administration and federal government are destabilizing the U.S. energy sector and harming the economy. Yet President Biden – working through the FTC – will try to prove otherwise.

Policies Need to Support America’s Business Sector 

Is it really unreasonable for our elected officials and their appointees to be trying to figure out ways to help entrepreneurs, businesses and investors who are trying to get Main Street and our economy back to full recovery, rather than using a crisis as an excuse to attack and undermine business? One would not think so.

Instead, not only are we getting fishing trips and unaccountable policy making out of the FTC, but the Biden administration has been unrelenting in pushing an overall policy agenda seemingly designed to undermine entrepreneurship, business and investment, including tax increases, more regulation, a vast expansion in government spending (which drains resources from the private sector via either taxes or borrowing), and increased tariffs.

One gets the feeling that Biden administration economic policies are being run by college students who haven’t taken any courses in sound economics and economic history. Unfortunately, many within the Administration are devoid of any experience in the private sector or are zealots against business (like Khan). Unless Congress or the courts find a way to rein in clear regulatory overreach by the FTC, the impact on our economy will be quite troubling.

Raymond J. Keating is chief economist and Karen Kerrigan is president & CEO of the Small Business & Entrepreneurship Council.

 

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