A Consumer-Welfare-Centric Reform Agenda for the Federal Trade Commission

As we approach a presidential election year, it is time to begin developing a  comprehensive reform agenda for the Federal Trade Commission (FTC). In that spirit, this post proposes 12 reforms that could be implemented by new leadership, either through unilateral action by a new chair or (in some cases) majority votes of the commission.

It bears emphasizing that these 12 suggested reforms should not be viewed as partisan in nature. They are designed to move the FTC back toward the largely bipartisan approach that characterized decision making for more than 30 years, spawning the Janet D. Steiger, Robert Pitofsky, Timothy J. Muris, Deborah Platt Majoras, William Kovacic, Jon Leibowitz, Edith Ramirez, Maureen K. Ohlhausen (acting), and Joseph J. Simons chairmanships.

Over those three decades, both the FTC’s Democratic and Republican leaders consistently focused on advancing the interests of consumers as their guiding principle. Promoting consumer welfare was the recognized goal of antitrust enforcement, and combating harm to consumers the centerpiece of consumer-protection policy. Enforcement priorities changed on the margin, but consistently broad agreement on the nature of the commission’s general mission was retained from administration to administration.

In sharp contrast, under the Biden administration, FTC Chair Lina Khan has repudiated consumer-welfare enhancement as the guiding light of competition enforcement. She has signaled that other considerations—such as civil rights, labor, the environment, and equity—will also inform policy. Such a multi-factor approach leads to unpredictability and arbitrary decision making, at odds with the rule of law (see here and here, for examples). It repudiates more than three decades of rational consumer-oriented antitrust and consumer-protection enforcement, informed by sound economics. It is to be hoped that this “neo-Brandeisian” interlude is but a blip in time, and that new leadership will restore the FTC’s tried and true consumer-welfare-centric mission.

The reform recommendations set forth below are designed to spark a dialogue on FTC policy changes. The specifics are worthy of debate, in scholarly and political circles. Although many will disagree with some of my recommendations, I believe that they could establish the groundwork for a bipartisan dialogue and evaluation  of alternatives. My hope is that this dialogue may build support for specific reforms that merit swift implementation after new commission leadership takes office.

The 12 Reforms

Having set the stage, let me not leave you in suspense. My 12 recommended suggestions for FTC reform initiatives (to be undertaken by the new chair, or, if required, by a majority vote of the commission) follow. A more detailed description and justification for these reforms is set forth in my just-released Mercatus Center policy brief, Reforming the Federal Trade Commission.

1. Withdraw the November 2022 Unfair Methods of Competition Policy Statement and all FTC resolutions invoking that statement, and prepare a new unfair methods of competition policy statement. This would require a majority vote of the commission. The new statement should define an unfair method of competition as involving conduct that violates one of the two core antitrust statutes, the Sherman Act or the Clayton Act—no more, no less.
2. Withdraw the draft 2023 Merger Guidelines (or the finalized version of those guidelines, if it has been issued) and issue new merger guidelines, in conjunction with the U.S. Justice Department (DOJ). This would require a majority vote of the commission. The new merger guidelines should restore clarity to merger guidance and be informed by sound economics, as was the case with the 2010 Merger Guidelines and their predecessors. In particular (among other things), the new guidelines should: (1) explain that harm to consumer welfare is the overarching concern of merger enforcement; (2) emphasize the importance of efficiencies in merger analysis, including static, dynamic, and organizational efficiencies, which could produce savings through the better utilization of scarce resources; and (3) underscore the strong (though rebuttable) presumption that vertical mergers are efficient.
3. End inquiries into ESG (environmental, social, and corporate governance) issues in Hart-Scott-Rodino (HSR) pre-merger information requests. The director of the FTC Bureau of Competition should be directed by the new chair to implement this new policy. The new policy should be announced publicly by the new chair in conjunction with the new assistant U.S. attorney general for antitrust. Pre-merger inquiries into ESG considerations impose improper burdens on merging firms and are in tension with the rule of law. Those inquiries are not aimed at issue that fall within the purview of Section 7 of the Clayton Act, which is concerned with harm to competition, not the social bodies that are the subject of ESG inquiries.
4. With the concurrence of the new assistant attorney general for antitrust, rescind the finalized version of the major amendment to HSR rules proposed by the FTC in 2023 (and expected to be finalized soon), and review preexisting HSR rules, in order to reduce regulatory burdens. This would require a majority vote of the commission. The highly intrusive and burdensome new HSR rules are at odds with the original congressional and agency understanding that the HSR process was intended solely to obtain targeted information bearing on the likely competitive effects of a merger. As such, the new rules impose harms on the market for corporate control, on the free-market competitive process, and on the American economy. The FTC would be well-advised to draw on the economic expertise of the Bureau of Economics in weighing possible cost-beneficial changes to the preexisting HSR rules, in the process of voting to reinstate them.
5. Terminate the Biden-era policy of routinely requiring FTC review of future proposed mergers in all settlements of merger matters. The new chair can make this change through a public statement (to be implemented by the acting director of the Bureau of Competition). The Biden-era policy is an abuse of the FTC’s ability to settle mergers with remedies that expands its merger-review authority beyond the statutory scope authorized by Congress. This policy is part of an FTC “stealth tax” that places additional costs and investigatory risk on mergers that would otherwise be legal and would not require government approval.
6. Rescind all proposed or final rules on unfair methods of competition enacted pursuant to Section 6(g) of the FTC Act, and withdraw from any litigation related to such rules. Relatedly, the FTC should disavow any substantive rulemaking authority under Section 6(g). Rescission of competition rules and withdrawal from competition-rules-related litigation would require a vote of the full commission. This is important, because the enactment of unfair methods of competition rules turns the FTC into a regulator of competition in markets, a role antithetical to long-established American antitrust-law tradition.
7. Rescind the FTC’s July 2021 “streamlining” of Magnuson-Moss Act (Section 18 of the FTC Act) consumer-protection rulemaking procedures. A commission vote would be required to rescind the July 2021 procedural changes, which eliminated certain safeguards that help ensure due process in the promulgation of consumer-protection rules.
8. Perform a study of all proposed unfairness-based consumer-protection rules under Section 18 of the FTC Act. The new chair could authorize such a study to determine whether, applying economic analysis, proposed and any finalized rules clearly satisfy the cost-benefit analysis requirements of Section 5(n) of the FTC Act (which defines unfairness). This is important, because the Biden administration has proposed a relatively large number of consumer-protection rules, which could prove to have major and costly economic impacts (see here). Any actions to withdraw or amend Section 18 unfairness rules on the basis of cost-benefit analysis would require a majority vote of sitting commissioners.
9. Announce publicly that the FTC will not enforce the Robinson-Patman Act (RPA). This special-interest statute, dating back to the 1930s, harms consumers and reduces economic welfare by precluding a broad variety of efficient discounting practices. There has been a longstanding mainstream policy consensus that the RPA should be repealed. Nevertheless, under Chair Khan, the commission has indicated new interest in enforcing this execrable statute (see here). The new chair would announce publicly that the FTC, in the exercise of its prosecutorial discretion, would not enforce the RPA, because that law, if enforced, would tend to undermine consumer welfare. The chair would also direct the Bureau of Competition not to pursue any investigations or proposed prosecutions involving the RPA. Any ongoing RPA litigation authorized by a prior commission vote would have to be terminated by a majority vote of the commission.

10. Identify all consultants, special assistants, and other personnel who worked at the FTC at the direction of Chair Lina Khan. The new chair should direct the FTC executive director to provide a list of such personnel (which could highlight abuses of federal personnel law). In particular, the use of outside consultants under Chair Khan may have marginalized career staff at the agency, particularly in the Bureau of Economics, and in many cases may be an abuse of federal personnel law. Identifying and eliminating these outside hires is the first step to cleaning up the agency and improving employee morale.
11. Identify all FTC staff detailed to other agencies. The new chair should ask the FTC executive director for a list of staff detailed to other agencies. One of the hallmarks of Chair Khan’s tenure has been the FTC’s centralization of authority throughout the administrative state, acting as a vehicle for policy through the FTC’s ostensibly broad authority. This has been facilitated, in part, by personnel detailed to other agencies. Unwinding these assignments will help return the FTC to its lawful role.
12. Lay the groundwork for possibly obtaining limited statutory disgorgement authority (that is, a monetary remedy) to address consumer fraud. The new chair should make speeches pointing to the consumer benefit of such a new authority and should seek an FTC majority statement supporting narrowly tailored legislation, if requested by Congress. Legislation would be required in light of the Supreme Court’s unanimous 2021 opinion in AMG Capital Management, LLC v. Federal Trade Commission, which held that the FTC had no power to seek equitable monetary relief under Section 13(b), such as restitution or disgorgement. Authorizing narrow FTC disgorgement authority limited to cases of fraud would benefit consumers, while avoiding the overreach that characterized some of the FTC’s disgorgement actions, prior to 2021.

Conclusion

Under Chair Khan, the FTC initiated major procedural and substantive policy changes that may run counter to the rule of law and threaten to impose substantial harm on American businesses and consumers. These dramatic changes—many of them implemented at the direction of the chair and without appropriate consultation—are at odds with a decades-long bipartisan tradition of incremental changes at the FTC.

The 12 specific reforms identified in this brief could, if implemented, repair much of the damage stemming from Chair Khan’s program. New FTC leadership undoubtedly will want to closely scrutinize these and other possible reforms, as it determines the best course of action to restore the FTC as a respected deliberative body committed to economically sound, welfare-enhancing antitrust and consumer-protection enforcement.