FTC Antitrust Plans Are Likely Illegal and Certainly Harmful to the U.S. Economy, New Report Concludes

WASHINGTON—The Federal Trade Commission (FTC) has signaled that a key element of its 2022 regulatory agenda will be using its rulemaking authority to prohibit so-called “unfair methods of competition” (UMC), meaning that instead of conducting “ex post” antitrust enforcement against companies based on demonstrable harms they have caused, regulators will instead impose “ex ante” rules to preemptively prohibit a wide range of practices. This shift—which emulates Europe’s precautionary approach to antitrust—would be both detrimental to the economy and counter to U.S. law, according to a new report from the Information Technology and Innovation Foundation (ITIF), the leading think tank for science and technology policy.

“The FTC’s plan violates settled case law, ignores statutory language, and overlooks the fact that it lacks any congressional mandate to engage in UMC rulemakings,” said Aurelien Portuese, director of the Schumpeter Project and author of the report. “The FTC’s only mandate is to engage in rulemaking for consumer-protection matters.”

The report explains that antitrust through preemptive rules of per se illegality—or “precautionary antitrust”—borrows from the European school of precautionary antitrust already at play in the European Union’s Digital Markets Act. Yet ITIF’s analysis shows why the FTC’s precautionary antitrust approach is likely to be unlawful in the United States based on statutory language, case law, and a congressional analysis. Moreover, the efficiency costs for consumers and innovation that such an approach would impose are prohibitively high, making the FTC’s plans economically harmful.

ITIF recommends that the FTC refrain from engaging in UMC rulemakings and instead endorse principles of “dynamic antitrust,” which would adhere to ex post enforcement of antitrust laws and focus on fostering dynamic competition to spur innovation rather than static competition to shelter market participants.

“U.S. antitrust agencies should push back, rather than endorse European precautionary antitrust, given the costs that approach would impose on American innovation and consumers,” said Portuese. “Agencies should instead adhere to principles of ‘dynamic antitrust,’ wherein evolutionary economics meet an evolutionary application of the law through the adjudicative process.”

Read the report.