Thumbing Their Noses
Corbin K. Barthold, City Journal
Under Lina Khan’s leadership, the Federal Trade Commission is openly subverting all three branches of government.
The Federal Trade Commission is an irregularity. Though the agency is nominally part of the executive branch, its five commissioners do not answer directly to the president. They are independent. The Constitution, with its three-branch structure, does not contemplate the existence of such an entity. You might think that such an agency, this “fourth branch” anomaly, would strive to show respect for Congress, the federal courts, and the president—as a matter of self-preservation, if nothing else. But under the leadership of Lina Khan, the FTC is defying, sidestepping, and subverting all three.
Start with the FTC’s disdain for Congress. Past is prologue in understanding the agency’s latest bout of defiance. The FTC is expected to root out unfair or deceptive conduct (i.e., to protect consumers) and to police unfair methods of competition (i.e., to prosecute antitrust violations). In 1975, Congress granted the FTC rulemaking power, but only for the consumer-protection category, and subject to extensive procedural restraints. The agency embarked on a rulemaking spree, attempting, among other things, to ban all television advertising directed at children. The Washington Post dubbed the FTC the “National Nanny,” and Congress limited its rulemaking authority yet further.
All federal agencies are supposed to proceed with care when crafting rules that will have the force of law. The special restrictions that Congress placed on the FTC require extra care—more notice, more public input, more justification. Nonetheless, last year, the agency announced a sweeping plan to enact rules governing what it dubs “commercial surveillance.” What rules, exactly, did the agency propose? Who can say? Then-commissioner Noah Phillips objected that the announcement, which calls for public comment on more than 90 mostly open-ended questions, “provides no notice whatsoever.” Will the rules the agency ultimately produces be well-considered and narrowly tailored? Don’t count on it. As Phillips observed, the proposal “recast[s] the Commission as a legislature, with virtually limitless rulemaking authority where personal data are concerned.”
It gets worse. Earlier this year, the FTC declared its intention to ban most employee noncompete agreements. It wants to do this by issuing a rule under its competition authority. Congress has never granted the agency the power to make competition rules. And even if the FTC could make such rules, it still could not make this rule, which is not a competition rule but a labor regulation. The agency is trying to dictate relations between workers and employers throughout the economy.
The FTC is also thumbing its nose at the judiciary. In West Virginia v. EPA(2022), the Supreme Court told (or reminded) federal agencies that they need clear statutory authority from Congress to resolve policy questions of “vast economic or political significance.” The FTC’s plan to ban noncompete clauses plainly violates this “major questions” principle: the agency wants to use a competition law (and a vague one at that) to alter some 30 million labor contracts. Maybe striking most noncompete clauses is a good move, and maybe not. Either way, it’s certainly a major move. The FTC is flouting the Supreme Court’s command to stay out of such matters absent a clear congressional mandate.
The agency’s pivot toward rulemaking snubs the judiciary in another way. Antitrust scrutiny comes in two forms: per se prohibition and “rule of reason” analysis. Markets are varied and complex. Often, a business practice—the use of noncompete clauses, for instance—will be pro-competitive in some contexts and anti-competitive in others. Over time, the courts have come to see that the rule of reason—the weighing of costs and benefits—is necessary in most instances. The FTC is ignoring the courts’ hard-won insight. More than that, it is evading their authority. By “establishing per se rules about conduct covered by the rule of reason,” former commissioner Phillips complains, the agency “effectively overrules Supreme Court precedent.”
Even when it brings individual antitrust cases, the FTC thinks that it knows better than the judiciary. For almost half a century, the federal courts have focused, when resolving antitrust suits, on whether firms are competing to provide the best products at the lowest prices. By and large, the agency’s three remaining commissioners—all Democrats, after the resignations of Phillips and fellow Republican Christine Wilson— reject this consumer-welfare standard. They want antitrust law to serve a range of ends, such as helping smaller companies and promoting workers’ rights. And if they cannot get the judicial branch to join the cause, they will try to go around it.
The FTC may oppose a proposed merger in its own administrative court, where, needless to say, it enjoys many advantages. To block a merger during the course of that in-house proceeding, the agency must obtain an order from a federal court. But why let an Article III judge weigh in when you can rely on some friendly European bureaucrats? Increasingly, the agency assumes that EU antitrust enforcers, rather than American courts, will block mergers while it proceeds in its internal forum. There is even evidence that FTC officials seek to evade judicial oversight by asking their European counterparts to attack deals the agency disfavors.
Is the FTC at least obeying the will of the executive branch? Shortly after Khan assumed office, President Biden signed a directive urging the agency to set standards around “unfair data collection and surveillance,” to “curtail the unfair use of noncompete clauses,” and “vigorously” to enforce the antitrust laws. To be sure, Khan shares these aspirations. But this is a far cry from saying that she is acting as the president’s faithful servant. The FTC’s rank and file are demoralized; many of its senior attorneys are jumping ship. The problem, it would appear, is not the agency’s sharp policy turn, but inept stewardship. Before Khan took the helm, another staunch progressive, Commissioner Rebecca Slaughter, served as acting chair. In her resignation letter, Wilson lauded Slaughter’s transparency, openness to debate, and respect for agency staff. She accused Khan, by contrast, of showing “scorn” for the institution she is supposed to lead.
When Richard Posner, then a law professor, turned his discerning eye on the FTC, he recognized a pattern. Decade after decade, the agency could consistently be described as “poorly managed,” “politicized,” and “largely impervious to criticism.” Posner made this observation in 1969, but it sounds remarkably contemporary. The body’s “performance has been gravely deficient through its entire history,” Posner concluded. “The costs of having a federal trade commission appear to exceed the benefits.”
As Posner realized, the FTC’s founders were “mistaken in supposing that an ‘independent’ agency” would be free “from debilitating political influences.” Rather than reduce politicization, independence may be increasing it. A federal district judge (an Obama appointee) recently acknowledged that the “for-cause protections” shielding the agency’s commissioners may well lie “past the outermost constitutional limits on the President’s removal power.” Stripping those commissioners of their autonomy might not turn the agency around, but no one could claim that Khan and her associates haven’t been asking for it.
