Lawmakers should rein in the runaway FTC

The Federal Trade Commission (FTC) has released a playbook for how the agency will expand its power over the American economy. 

FTC Chair Lina Khan has aggressively pursued a hyper-regulatory agenda since her bait-and-switch confirmation last summer. Lawmakers should conduct robust oversight hearings to determine just how far the agency has strayed from its statutory authority under Khan’s leadership. 

Late last week, the FTC released its updated strategic plan for FY 22-26 after months of deliberation. For decades, the FTC has pledged to police harmful business practices “without unduly burdening legitimate business activity.” That clause, present in every strategic plan since 2006 and originally articulated in 1997, is absent without explanation in Khan’s plan. The clause’s omission signals that Khan’s FTC will target legitimate business activity, a guilty-until-proven-innocent posture that will chill innovation. 

As a whole, the document moves the agency’s focus away from maximizing consumer welfare and towards other vague social goals that progressives believe antitrust law can solve. For the past half-century, business conduct is generally not considered an antitrust violation unless it demonstrably harms consumers, a legal test called the consumer welfare standard. The consumer welfare standard constrains the government from launching antitrust suits against companies for political reasons. 

In her dissent to Khan’s Strategic Plan, FTC Commissioner Christine Wilson concludes that Khan’s focus on arbitrary social goals instead of consumer welfare “will result in higher prices, suppressed production, fewer choices, and dampened innovation.” 

Scrutinizing the strategic plan is not an academic exercise, as Khan is currently pursuing cases that stretch the bounds of antitrust law. The FTC recently challenged Meta’s acquisition of Within, a virtual reality (VR) fitness app developer, in a case that is flimsy at best and meritless at worst. The FTC voted 3-2 along party lines to sue Meta, overruling career FTC staff that recommended against bringing the case.

The core of the FTC’s case is not that the acquisition would harm consumers. Rather, the agency asserts that Meta should not be able to buy Within because of its size, a radical departure from current antitrust tradition. Progressives believe that bureaucrats, not consumers, should decide how big a company is or what a market should look like. 

In the complaint, the FTC invents an artificially narrow market definition to depict Meta as attempting to monopolize the VR fitness market. The market definition conveniently excludes fitness-specific VR apps and broadband-connected fitness apps, intentionally ignoring the existence of competitors such as FitXR and Peloton. The FTC’s complaint fails to acknowledge the many other ways Americans can get up and move, like going to the gym, hiking, running outside or kickboxing. 

The business community at large is beginning to recognize the threat Khan’s mission creep poses to the economy. Walmart recently filed a motion to dismiss a lawsuit the agency launched in June, calling the suit an “egregious instance of agency overreach” and saying that the agency lacked “constitutionally valid authority to sue for money or injunctive relief.” Former FTC staffers have called the Walmart case “far-fetched.” 

Khan’s expansive agenda will likely lead to the FTC’s power being curtailed by other branches of government. The Supreme Court will hear FTC v. Axon this coming term, a case that examines the constitutionality of the FTC’s administrative trial process that has led to a 100 percent win rate for the agency over the past 25 years. 

There is no shortage of material for Congress to probe in oversight hearings. FTC staff morale has plummeted, with one staffer saying that under Khan’s leadership, the agency “[has] a willingness to just kind of ignore the law and the facts sometimes if it’s going to further the ideological mission.” 

The Senate antitrust subcommittee will hold an oversight hearing on Khan and Antitrust Division chief Jonathan Kanter in September. House Judiciary Ranking Member Jim Jordan (R-Ohio) recently sent a letter to Khan demanding information on the FTC’s reliance on unpaid “consultants” to perform core functions at the agency. 

Khan’s command and control agenda is a clear and present danger to the U.S. economy, but Congress doesn’t have to take it lying down. Instead of expanding the FTC’s power via misguided antitrust legislation, lawmakers should work to rein the runaway agency in. 

Tom Hebert is federal affairs manager for Americans for Tax Reform and executive director of the Open Competition Center.