Report

Against Antitrust Regulation

By Noah Joshua Phillips

American Enterprise Institute

October 13, 2022

Key Points

  • The Federal Trade Commission (FTC) is poised to issue antitrust regulations, a departure from over a century of antitrust law development through adjudication that could affect much of the US economy.
  • The FTC Act does not give the agency authority to issue antitrust regulations, and the sole legal basis for doing so—an appellate court decision from the 1970s—does not comport with contemporary statutory construction or administrative law.
  • The extravagant regulatory power over virtually the whole economy that the FTC claims Congress delegated to it would violate the Constitution’s separation of powers.

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In July 2021, President Joe Biden issued his Executive Order on Promoting Competition in the American Economy (EO).1 The EO called for issuing regulation after regulation, including a bevy of rules concerning “unfair method[s] of competition” (UMC), to be promulgated by the Federal Trade Commission (FTC).2 US antitrust law has been developed through adjudicated decisions for 132 years, and the commission has brought lawsuits to enforce antitrust law since it opened its doors in 1915. Political progressives are instead calling for the agency to issue antitrust regulations with the force of law,3 and my colleague Chair Lina Khan indicated recently that one such rule will be issued soon.4

The power the commission would assert in promulgating antitrust regulations is illegal and unconstitutional. Neither the text nor the structure of the FTC Act support it. Even if they did, delegating to the commission plenary power over virtually all US economic activity would violate the separation of powers embedded in the US Constitution.

The EO contemplates antitrust regulation for everything from privacy to employment contracts to intellectual property to devices.5 Chair Khan described the agency’s power as “shap[ing] the distribution of power and opportunity across our economy.”6 Our Constitution does not abide an agency arrogating to itself the ability to govern any private economic affair, especially without a clear mandate from Congress. So few people grabbing so much power to govern so many with so little check on it flies in the face of the limited, divided, and democratic structure of the United States government. In issuing bright-line rules where the law commands a careful analysis of conduct in light of the market wherein it takes place, antitrust regulation would also contravene antitrust law itself.

It is not too late. The FTC should turn back.

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Notes

  1. Exec. Order 14036, 86 Fed. Reg. 36,987 (July 14, 2021).
  2. Exec. Order 14036, at 36,992. Although the executive order does not specify whether the specific practices it enumerates should be treated as “unfair or deceptive practice[s]” or “unfair method[s] of competition” under Section 5 of the Federal Trade Commission (FTC) Act, almost all fall squarely into the latter category. The distinction matters because the FTC’s authority to issue rules concerning unfair methods of competition is highly dubious, while its authority for rules on unfair or deceptive acts or practices is well established by both law and practice.
  3. By “regulations with the force of law,” I mean legislative rules with binding legal effect on the general public. See Thomas W. Merrill and Kathryn Tongue Watts, “Agency Rules with the Force of Law: The Original Convention,” Harvard Law Review 116, no. 46 (2002): 477, https://scholarship.law.columbia.edu/cgi/viewcontent.cgi?article=1431&context=faculty_scholarship. These “substantive” rules, regulations, and rulemaking are distinct from procedural and interpretive rules, which are not legally binding. This report focuses exclusively on the substantive kind.
  4. Dave Michaels and Ryan Tracy, “FTC Considers Restricting the Use of Noncompete Clauses by Companies,” Wall Street Journal, June 9, 2022, https://www.wsj.com/articles/ftc-considers-restricting-the-use-of-noncompete-clauses-by-companies-11654747203.
  5. Exec. Order 14036, at 36,992.
  6. Corbin Barthold and Noah Phillips, “#322: FTC Commissioner Noah Phillips,” June 2, 2022, in Tech Policy Podcast, podcast, 00:39, http://podcast.techfreedom.org/e/322-ftc-commissioner-noah-phillips, citing Lina M. Khan, Memorandum to Commission Staff and Commissioners: Vision and Priorities for the FTC, September 22, 2021, 2, https://www.ftc.gov/system/files/documents/public_statements/1596664/agency_priorities_memo_from_chair_lina_m_khan_9-22-21.pdf.