Last month, the Federal Trade Commission (FTC) requested over a 37 percent increase to its 2024 budget. If approved, this would mark one of the highest budget increases in the history of the FTC. Given FTC Chair Lina Khan's "big is bad" ideology, many observers expect this enlarged budget will lead to more investigations, lawsuits, and rule making from the agency that will target firms based on size without considering consumer welfare.
The proposal would bring the FTC's total budget for FY 2024 up to $590 million and allow for the hiring of 1,690 full-time staff. Many new staffers will focus on the FTC's stated interest in expanding its investigation and litigation capacities. This hiring boost means more lawsuits aimed at companies the FTC perceives as having anti-competitive conduct. In that litigious spirit, the FTC is willing to go after firms simply for being too big, threatening the four decades of consensus around the consumer welfare standard.
Khan has never hidden her belief that bigness is inherently anti-competitive. Before being sworn into office, she wrote vehemently against large business institutions, particularly Big Tech. In her Yale Law Journal essay "Amazon's Antitrust Paradox," she made the case that the size of a company is a determining factor in whether anti-competitive litigation is necessary. This antitrust philosophy, sometimes called "the Harvard school" or "Neo-Brandeisian," boils down to an intrinsic belief that the size of a company is a basis for pursuing legal action.
If a merger increases the welfare of consumers but also increases market concentration, how do FTC enforcers know whether to pursue action? The consumer welfare standard provides a clear guiding star: Pursue action if the consumer is harmed.
These conflicting standards are precisely why the FTC has seen multiple failures in targeting large companies, from its attempt to block Meta's acquisition of the virtual reality fitness app Supernatural to its complaint against Altria Group and Juul Labs, Inc. These failures have not deterred the FTC, however. Khan acknowledges that winning cases is not how she marks success for her agency. Instead, by pursuing anti-competitive complaints, she hopes to whittle away at existing precedents until the courts or Congress make official changes.
This acknowledgment makes what some Republican congressional critics of Khan's FTC had said crystal clear: The FTC has become an activist organization first and foremost. In her effort to eliminate the consumer welfare standard, Khan is willing to file as many complaints as she thinks necessary, substituting her sense of what the law ought to be for what it is. An increase in the FTC's budget will only give the agency more firepower for its current course. This means more investigations, more rule making, and more lawsuits, all pursued with little regard for what helps the consumer.
Lawsuits, complaints, and fear of entering mergers and acquisitions will all lead to unnecessary inefficiencies for some of the most important businesses enmeshed in American life. Consumers who simply want to use the cheapest product with the highest level of satisfaction will ultimately pay the bill for the FTC's overreach. Not only as taxpayers will Americans be called upon to provide for the FTC's $160 million budget increase, but as consumers, too. Companies will need to pay for more frequent and expensive litigation, potentially passing on those costs to the consumer in the form of higher prices.
Not only that, but fear related to the FTC's interference with merging with or acquiring another company may cause some firms to reconsider. Many mergers have a positive impact on innovation. With size being the determining factor for antitrust complaints, a decline in innovation could occur, meaning fewer new products, higher costs, and lower consumer satisfaction. Consumers and taxpayers thus ultimately pay for Khan's crusade against "bigness."
The post Don't Give the Federal Trade Commission a Big Budget Just To Punish Big Firms appeared first on Reason.com.
