Increased Budget for Antitrust: Increased Risks for Policy Errors

Trelysa Long May 2, 2022
May 2, 2022

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President Biden’s proposed budget provides significant increases for the Federal Trade Commission (FTC) and the Department of Justice’s (DOJ) Antitrust Division. However, given the radical “neo-Brandeisian” agenda from the leadership of the federal antitrust agencies, Congress should not go along with these increases.

President Biden’s proposed budgets would increase FTC funding by 30 percent from the 2022 fiscal year appropriations, while DOJ’s Antitrust Division would see a 42 percent increase. While DOJ’s Antitrust Division has seen an increase in its budget faster than inflation since 2006 (78 percent budget increase, with 44 percent increase in inflation), the FTC budget has fallen in real terms (34 percent increase).

The issue is not whether both agencies, especially the FTC, deserve budget increases. The issue is whether the money will be well spent. This large increase is concerning because of the agencies’ current radical antitrust agenda. This concern led Congress to reject the 11 percent budget increase for the FTC and the 9 percent increase for the DOJ’s Antitrust Division last year. Congress will hopefully respond similarly this year, especially because Neo-Brandeisian positions and advocacy have hardened even more since last year. 

Both agencies are now run by so-called “Neo-Brandeisians”—a populist school of antitrust dedicated to “reinvigorating” antitrust through “greater presumptions and bright line rules” instead of economic analysis. The neo-Brandeisians antitrust policy would harm consumers and innovation.

For example, the Neo-Brandeisian FTC has called for “unfair methods of competition” rulemaking. However, such rulemaking activity is not only likely illegal but also fails to enhance competition while simultaneously hurting consumers by stifling innovation. A historical moment that exemplifies the failure of agency rulemaking is seen in the 1950s. Southern Railroads innovated a more efficient rail car that would lower prices for consumers; however, the Interstate Commerce Commission’s regulations would not allow them to lower rates for the more efficient rail offering. As a result, consumers paid higher prices, and the incentive to innovate decreased. This historical example is a warning that increased resources to antitrust agencies devoted to potentially illegal rulemaking adventures will decrease innovation and competition at the expense of consumers and productivity. 

In addition, FTC Chair Khan highlights in her memorandum to the commission’s staff that one of the agency’s priorities should be moving away from consumer protections to an approach that also focuses on “workers and independent businesses.” However, there is a general consensus that competition laws and regulations should only focus on “lower consumer prices, higher quality products and better product choice” to be efficient and effective. FTC Commissioners Phillips and Wilson warned against deviations from this consensus as these radical changes have already resulted in a substantial decline in the “enforcement productivity of the agency” in the last year. Moreover, while supporting workers and independent business sounds noble, the result would be lower productivity and future standard of living, especially as smaller, less efficient businesses would now be protected from competition.

Additionally, the antitrust agencies have sought to revise the merger guidelines to reflect neo-Brandeisian political goals. Even the Organization for Economic Cooperation and Development warned against including public interest considerations, or non-competition factors, in merger guidelines: Including these considerations would increase the difficulty of interpreting the guidelines due to competing interests. As such, the inclusion of public interests in merger guidelines increases the risk of approving anti-competitive mergers while blocking economically efficient mergers. But the recent request for information on merger guidelines suggests that the agencies want to include public interest considerations when reviewing mergers, thereby decreasing consumer welfare and innovation.

These two actions—rulemaking and merger guidelines revisions—taken by the FTC and the DOJ’s Antitrust Division in the last year speak volumes about their priorities toward innovation and consumer welfare. There is no evidence that the agencies are backing away from their radical turn. 

The combination of a Neo-Brandeisian ideology and the President’s proposed increases in appropriations for the FTC and the DOJ’s Antitrust Division will undoubtedly decrease consumer welfare and innovation through policy errors. 

This is not to say that both agencies, particularly the FTC, do not need increased staff. They do. But that staff should be focused on the right thing, particularly more vigorous enforcement of uncontroversial policies. There is no evidence that increased funds money would be used for that.

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Increased Budget for Antitrust: Increased Risks for Policy Errors