Success of Biden’s FTC is dependent on future legislation.

As we have seen, the FTC that Khan inherited was one of the most widely respected government institutions in the world. Nevertheless, in 2021, President Biden proclaimed the previous 40 years of antitrust an “experiment failed.” Biden, and Khan, rejected the longstanding reliance on the welfare of consumers as the basis for the bipartisan approach to antitrust policy. The Biden administration’s conclusions are controversial, and do not enjoy the widespread support shared by the simple market concentration doctrine that grounded FTC antitrust in 1970 and the consumer welfare standard in the decades preceding 2020.

Certainly, by 2021, there was recent dissatisfaction with the agency in some quarters, including about competition issues, despite the agency’s stellar reputation. As we noted above, Commissioner Chopra regarded the FTC as a failure, and frequently reminded the staff of that view. He argued the Commission was “battling its most serious credibility crisis in decades,” because too many “enforcement actions provide no help whatsoever and do nothing to deter misconduct.” He told Congress that “the FTC has shown it is willing to be lax and forgiving,” and claimed “there simply is lawlessness in our economy writ large, and the FTC is a big part of it.” In frequent dissents from Commission decisions to accept consent agreements, he disparaged orders for not providing meaningful accountability and for not being credible, criticized the staff’s approach to pharmaceutical mergers as “narrow, flawed, and ineffective,” and suggested that the remedies used in cases of fraudulent conduct bordering on criminal should be applied routinely to non-fraud cases involving executives of publicly traded companies. The other minority Commissioner in the Trump administration, Rebecca Slaughter, after a few early disagreements in votes with Chopra, frequently also dissented, but often with separate and more tempered statements.

In antitrust, the Biden administration reflects the views of the neo-Brandeisians, for which Khan and Tim Wu, the White House competition advisor for the first two years of the administration, are prominent advocates. Even a few years before the 2020 election, their views were outside the mainstream. Indeed, the 40 years President Biden condemned included 16 years of Democratic control, under Bill Clinton and Barack Obama, years in which the Commission followed policies widely endorsed across the political and academic spectrum. As we discuss below in analyzing the sharp departure in merger policy the Biden appointees propose, former Clinton and Obama antitrust officials have been forced to choose between defending their previous views or supporting their party’s current political leadership.

In consumer protection, Chopra was especially skeptical of the fraud program as a centerpiece of the Commission’s consumer protection mission, criticizing its “heavy focus on shutting down fly-by-night criminal scams.” Instead, he argued for “reorienting the Agency to focus on the largest problems in the marketplace.” His concerns channel those of an earlier progressive when the fraud program was starting, with Michael Pertschuk, Chair during the Carter administration, contending that such cases had “only marginal deterrent effect” and “relatively little impact.” Some modern progressives, like their earlier counterparts determined to remake the economy, find focus on criminal scams beneath the FTC, contending fraud is work for someone else.

As with its competition views, these progressive policies are controversial. Because of the need for an agency to lead and coordinate at first the national, and then increasingly the international, fight against fraud, the FTC has assumed a central role, with great success, as we have detailed elsewhere. Attacking fraud has become an immensely popular program with Congress, the press, and the public.

There was no widespread agreement about new policies

The return to “Big is bad”: With the success of modern technology companies, it was perhaps inevitable that both their economic and political power would be challenged. Under the acronym GAFA for Google, Apple, Facebook, and Amazon, with occasionally an M added for Microsoft, press, political, and academic attention to “big tech” increased. Lina Khan’s nearly 100 page student note in the 2017 Yale law Journal was well timed and widely cited, making its author a celebrity among progressives, and eventually catapulting her to the head of the FTC.

Although attacking bigness for its own sake had long disappeared in antitrust’s mainstream, such concerns remained on the fringes. For example, when Wal-Mart became the largest retailer in the United States, Barry Lynn, one of Khan’s mentors and Executive Director of the Open Markets Institute, for which Khan worked, complained of its alleged dominance and called for antitrust action. Perhaps because Wal-Mart achieved prominence with at most a small presence in the major American media centers, and business writers did not use its products as they use those of today’s large technology companies, Wal-Mart never became the target Lynn and similar critics hoped.

While skepticism about the large tech companies grew under Trump, his antitrust agencies rejected Khan’s fundamental conclusion that antitrust law under the consumer welfare standard was inadequate to police the modern technology corporation. In 2020, the FTC sued Facebook while the DOJ sued Google, both with broad allegations of anticompetitive conduct, that, if proven, could lead to some form of at least partial divestiture. Moreover, the Trump DOJ brought a major (albeit unsuccessful) vertical merger challenge, an area progressives faulted the 40 years for allegedly abandoning.

These lawsuits ran counter to the narratives of the press, progressives, and President Biden, as well as counter to Khan’s and similar scholarship that antitrust was obviously inadequate. Throughout the 21st-century, the FTC had continued to bring cases charging single firms with monopolization. The Clinton administration had pursued an aggressive single firm monopoly agenda, but surprisingly in contrast to the FTC, the Justice Department, after its success on the merits against Microsoft, virtually abandoned the field for almost 20 years until the Google case.

Echoing the progressive narrative and following the 2018 election that gave the Democrats control of the House of Representatives, efforts to pass new legislation regulating the largest technology companies gained some momentum in the next two Congresses, although the legislation was never debated on the floor of either the House or the Senate. The House Judiciary Committee Report discussed above, in which then Professor Khan had a major role, was a significant Congressional statement about the alleged problems of these companies. Legislation would have created new substantive standards for liability, under which it would have been easier to prosecute than under current law. Most versions would have given the FTC power to draft regulations that presumably would have facilitated the progressive desires to “rein in Big Tech.”

The Khan leadership appeared to have placed heavy reliance on the prospects of new legislation and the promises of enormous new budget increases. Although the Commission did receive a significant budget increase for fiscal 2022 and 2023, one version of the 2021 Build Back Better bill had a massive increase in FTC spending, promising $1 billion over 10 years, including a planned new third enforcement Bureau, involving privacy and technology. Because Chair Khan repeatedly emphasized both the competition and consumer protection aspects of privacy, presumably the money would have been used for tech sector competition initiatives as well. In fact, the Trump administration had already created a technology enforcement division within the Bureau of Competition, which would have fit well in the new Chair’s vision of the problems in privacy and technology.

Perhaps assuming that new legislation would pass, Khan did not begin planning and case development initiatives immediately, unlike leaders of the two previous change eras. Moreover, she faced significant headwinds not present earlier. The agency she inherited was widely praised, not widely condemned. Although progressives and those directing the President’s economic policy wanted dramatic change, just a few years before they were “hipster antitrust,” virtually outside of the debate of how antitrust policy should proceed. Not surprisingly, although many in the President’s political party saluted and joined the effort, others did not, having developed and enforced the now castigated policies, as has occurred in the debate over merger policy.

Importantly, Chair Khan faces a judiciary likely to be as hostile to her efforts to change the law as it was to the FTC in the late 1970s when the agency refused to change. Unlike the Reagan administration, which prioritized appointing judges with a law and economics background who were uniformly sympathetic to antitrust’s consumer welfare standard, President Biden has not made the appointment of judges with an antitrust, or even economics background, an important criteria. Although the Biden administration continues the success of its predecessors in litigating up or down challenges to horizontal mergers with a few competitors in well-defined product markets, it is largely unsuccessful elsewhere. Thus, the FTC recently prevailed in IQVIA’s attempted acquisition of its competitor, Propel Media while losing both of its most high profile challenges, Meta’s acquisition of Within, and Microsoft’s of Activision. Neither involved acquisition of competitors; they involved theories rarely used in recent decades, and the agency challenged both in the northern District of California, hardly known for its conservatism. Moreover, judges appointed by Presidents Obama (Meta-Within) and Biden (Microsoft- Activision) rejected the FTC motions for preliminary injunction.