April 18, 2023
Every year, the heads of each federal agency and government department will make a pilgrimage to Capitol Hill to request their budget for the next fiscal year. Some, like the Department of Defense, request, and are likely to receive, an eyewatering sum from the American taxpayer. Others, like the Small Business Administration, will only request a relatively small appropriation to fulfill their mission.
Then, there is the Federal Trade Commission, a government agency that has simultaneously wasted taxpayer dollars on failed antitrust cases and requested Congress appropriate more money to fund its activities.
Congress must be skeptical of such requests. Since being confirmed to head the FTC in June 2021, Chairwomen Lina Khan has advanced a political agenda that penalizes success and relegated consumer welfare to an afterthought, despite the agency’s mission of “prevent[ing] business practices that are anticompetitive or deceptive or unfair to consumers.”
The behavior of the FTC has become so problematic over the past two years that some Republican senators contend that by steering the agency in an “increasingly partisan and anti-business direction,” Chair Khan is leading a rogue agency.
It should go without saying, but lawmakers should not reward a rogue agency that has wasted taxpayer dollars and failed to meet its congressional mandate of protecting consumers with an
increased budget. Doing so would only harm American consumers and empower further institutional drift.
Specifically, the FTC requested Congress appropriate $590 million for the 2024 fiscal year, an increase of around $160 million from the current fiscal year. The FTC contends that this increase will partly go toward funding an additional 310 employees who can expand its capability of “identifying, challenging, and litigating anticompetitive mergers and conduct” and “conducting merger and merger remedy retrospectives.”
For anyone who has been watching the FTC since Khan took over, the prospect of the agency having additional capabilities should be met with significant skepticism, if not outright dismissal. After all, Congress should not force the American taxpayer to increase funding for an agency that is determined to harm their consumer interests.
Congress should only award such appropriation after the agency can demonstrate to lawmakers that it is successfully defending consumer interests and has returned to being guided by its congressional mandate, not a political ideology.
The most recent example of the FTC’s failure to fulfill its mission and wasting taxpayer dollars was the agency’s rejection of Meta’s $400 million acquisition of Within, the studio behind the popular virtual reality fitness app. The FTC alleged that “if consummated, the acquisition would substantially lessen competition, or tend to create a monopoly, in the relevant market for VR-dedicated fitness apps and the broader relevant market for VR fitness apps.” The FTC continued, arguing that the “lessening of rivalry may yield multiple harmful outcomes, including less innovation, lower quality, higher prices, less incentive to attract and keep employees, and less consumer choice.”
Despite ignoring that mergers and acquisitions can enhance consumer welfare and spur innovation, the FTC ignored economic reality and proceeded. Predictably, a federal court in California denied the agency’s argument and allowed the acquisition to go ahead because the FTC had failed to prove anticompetitive harms or that the acquisition would lead to a monopoly.
Similarly, the FTC sought to prevent Illumina from acquiring Grail, a company developing innovative cancer tests. The FTC contended that the almost $8 billion acquisition “would substantially lessen competition in the U.S. multi-cancer early detection (“MCED”) test
market by diminishing innovation and potentially increasing prices and reducing the choice and quality of MCED tests.”
Unfortunately for the FTC, an administrative judge concluded they had failed to demonstrate that the acquisition would “result in a substantial lessening of competition.” While the administrative court found in favor of cancer patients, the months of litigation cost the American taxpayer millions of dollars that Congress could have been better spent protecting consumers from actual egregious economic behavior.
After Chairwomen Khan makes the short trip down Pennsylvania Avenue to justify an increased budget, Congress must fully consider what acquiescing to her request would mean for taxpayers and consumers. Firstly, it would mean more capacity for the agency to launch more taxpayer-funded lawsuits that are rejected when scrutinized by the courts. The FTC’s hostility toward Microsoft acquiring Activision seems like clear evidence of this dynamic. Secondly, it would empower an increasingly militant FTC that penalizes innovation and growth. Perhaps most concerning is that increasing funding for the FTC will enable the agency to drift further from its mandate, leaving consumers playing second fiddle to a presumption that big is bad.