Congress must not distract the agency from its core mission by mandating that it enforce dubious prohibitions against our most innovative firms.
Congress must not distract the agency from its core mission by mandating that it enforce dubious prohibitions against our most innovative firms.
B y all accounts, the Federal Trade Commission (FTC) has its hands full. Despite the agency’s laundry list of regulatory priorities and strained resources, Congress is poised to bestow it with a new responsibility: policing self-preferencing on the Internet. Whatever that means.
Congress created the FTC in 1914 to crack down on “unfair methods of competition” and, in 1938, expanded the commission’s mission to prohibit “unfair and deceptive acts or practices.” The FTC also screens mergers and acquisitions to block anticompetitive deals and has traditionally focused on conduct that directly harms consumers, such as scams, identity theft, and data breaches.
The FTC certainly keeps busy — and especially so over the last eight months. On June 15, President Biden swore in Lina Khan as chairwoman of the Commission. Since then, the FTC has set out to aggressively reform U.S. competition law.
On August 3, citing a “tidal wave of merger filings that is straining the agency’s capacity,” the FTC implemented a policy of keeping merger investigations open indefinitely. Two days later, the commission released a Request for Public Comment Regarding Contract Terms That May Harm Fair Competition, initiating a lengthy rulemaking process. Then, two weeks later, the FTC filed an amended complaint in its ongoing federal antitrust case against Facebook.
Next, on November 21, the FTC invited public comment on its Draft Strategic Plan for Fiscal Years 2022–2026. Less than a month later, the FTC sued to block Nvidia Corporation’s acquisition of Arm Holdings. And that’s just the second half of 2021.
To kick off 2022, the FTC held a press conference with the Department of Justice announcing plans to revise their vertical– and horizontal-merger guidelines. They requested public comments by March 21 and aim to finish the revisions this year.
In July 2021, the FTC testified to the House Energy and Commerce Committee that “the Commission is currently facing extremely severe resource constraints.” Chief among those constraints is high staff turnover; in July, for example, the FTC’s lead economist in the case against Facebook quit, and, just last Wednesday, the agency’s chief economist abruptly resigned. Last month, Chairwoman Khan described the FTC as “severely under-resourced,” blaming staff shortages for creating “significant strain.”
Congress appears unimpressed or, at least, unconcerned. In October, Senator Klobuchar (D., Minn.) introduced the American Innovation and Choice Online Act, which would prohibit large technology companies from “favoring their own products or services” — a practice known as self-preferencing. For example, the Act would prohibit Google from placing Google Maps listings at the top of users’ search results.
The FTC would be heavily involved with enforcing the Act. To start, the FTC and Department of Justice would jointly designate large digital firms as covered platforms. Within a year of enactment, the FTC and assistant attorney general of the antitrust division would issue guidelines for enforcing the Act, which would then be updated at least every four years.
Next, the FTC or DOJ would enforce the Act by opening investigations into instances of alleged self-preferencing and bringing enforcement actions before a U.S. district court.
In court, the platform would avail itself of the Act’s affirmative defense, arguing that the self-preferencing conduct was necessary to prevent a violation of the law, to protect users, or to enhance functionality. The lawyers would have a heyday. Ultimately, the FTC would find itself in court arguing over the motivations of large technology companies. These self-preferencing suits would be a far cry, if not a distraction, from the fraud and merger cases in the agency’s wheelhouse.
Congress should not order the FTC to police self-preferencing when the agency barely has the resources to fulfill its more salient responsibilities. The FTC already plays vital roles in the U.S. economy, reviewing mergers, promulgating rules, and, above all else, protecting consumers. Realistically, the agency lacks the resources to fulfill these responsibilities while also attempting to police the novel and amorphous “crime” of self-preferencing.
In fact, the jury is still out on whether self-preferencing even harms consumers at all. At the end of the day, Congress must not distract the FTC from its core mission by mandating that it enforce dubious prohibitions against our most innovative firms.