A Four-Year Failed Experiment: Khan Leaves the FTC

When issuing his administration’s executive order on Promoting Competition in the American Economy, President Biden declared that the consumer welfare model of antitrust law and economics had been a 40-year “experiment failed” that let “giant corporations accumulate more and more power.” With former Chair Lina Khan now out of power and the new Trump administration officials, Gail Slater and Andrew Ferguson, respectively in charge at both the DOJ and FTC—an institution left by Khan in terrible disrepair—the neo-Brandeisian movement has itself been laid bare as a four-year failed experiment in competition policy that not only wreaked havoc on American business but also failed to generate the bipartisan support necessary to establish a new antitrust consensus.

It is not an exaggeration to say that Khan’s tenure at the FTC has been a disaster. A Staff Report by the House Committee on Oversight and Accountability concluded:

Chair Khan has abused her authority at the agency, trampling on the due process rights of regulated parties, upending the rule of law, and violating ethics standards she is bound to uphold. The Committee has found that Chair Khan has consistently betrayed the obligation of the Commission to be an independent, bipartisan agency. Rather than fulfill her obligation to ensure the Commission adheres to its independent role, Chair Khan has subordinated the agency to the political will, direction and leftist ideology of the Biden-Harris Administration its allies in Congress, and activist entities. Finally, the Committee has found that Chair Khan has resorted to means outside the FTC’s legal mandate to realize her desired ends, including through collusion with foreign regulatory regimes.

With literally just hours left in the Biden administration—and in a patent and almost wholly unprecedented attempt at damage control—the FTC released a summary report titled Federal Trade Commission Accomplishments, which claimed that by various metrics, the agency had been a resounding success under Khan’s tenure. Unfortunately, very little in the summary report holds up under even the slightest scrutiny. For example, 4 of what the report lists as 12 “competition wins in court” were merely instances where the FTC was able to survive a motion to dismiss. But of course, and as one would have hoped every antitrust lawyer appreciated, surviving a motion to dismiss just means the FTC’s case proceeds to discovery. It is not a final or “winning” decision in its favor.

The façade that the Khan FTC was a “winner” is particularly egregious with respect to merger enforcement. Specifically, the summary report argues that the FTC had “an overall merger litigation win rate of 93.75%,” which it claims is higher than that of the first Trump administration, the second term of the Obama administration, and the first and second Bush II administrations. But here again, the data is faulty. As the summary report admits, this data includes transactions where the parties abandoned their deal after the FTC filed a complaint, even if there was no consent decree or court decision granting the FTC a preliminary injunction. Those aren’t “litigation wins.” Indeed, of the 36 deals identified where a complaint was filed, a full third (12) fell into this category.

The attempt to portray a record of strong merger enforcement continues in a section of the summary report titled “Challenging Illegal Mergers and Acquisitions,” which, as it turns out, includes numerous transactions that were never challenged. Indeed, of the 66 actions included in this section, 30—that is, nearly half—were simply abandoned without any actual legal challenge. What’s more, two of the actual challenges—Hackensack Meridian/Englewood and Altria/Juul—were brought by the first Trump administration, not the Biden administration. And, of course, this list also includes two high-profile tech merger challenges that the FTC lost—Microsoft/Activision and Meta/Within—which should thus hardly be utilized to give the FTC any sort of bragging rights.

Notwithstanding the agency’s actual record, some have expressed optimism that, much like the Chicago schoolers before them, the neo-Brandeisian ideology has now firmly established itself in the antitrust mainstream. To be sure, the summary report includes sections listing well over a dozen policy statements, numerous amicus briefs, an array of 6(b) market studies, research papers, reports, and other advocacy efforts, along with a list of purported areas where the “FTC advanced the law.” Yet, the reality is that the neo-Brandeisians had only one term to push their agenda. By contrast, the old antitrust vanguard benefited from three consecutive Republican administrations that supported their agenda to fundamentally reshape antitrust policy according to their then-new approach.

Much, therefore, depends upon whether the neo-Brandeisian model of antitrust will continue under the second Trump administration, just as the Clinton administration adopted the prior consumer welfare consensus developed over the Reagan and Bush I years. That outcome, however, is frankly a pipe dream. Indeed, in numerous key areas, Chairman Ferguson has already made clear in his relatively short time at the Commission that he is not a neo-Brandeisian. He has rejected the non-compete rule and the FTC’s authority to issue unfair methods of competition rulemakings, dissented in both of the FTC’s price discrimination cases, and even called the FTC’s “coordination” theory in ExxonMobil/Pioneer “one of the most ludicrous theories of harm in its merger-enforcement history.”

To be sure, that neo-Brandeisian antitrust will not form the basis of a new bipartisan consensus does not mean that the old consensus will return. As others and I have explained, even the Obama and first Trump administrations deviated in important ways from the old neoliberal status quo. Rather, it is likely that antitrust policy in the Trump administration will be a matter of debate between a number of different perspectives: “America first” conservatives, who see antitrust as part of a broader strategy to promote the national interest and counter rivals like China; conservative populists, who wish to continue the fight against Big Tech to address alleged censorship and broader moral concerns about technology’s role in society; and libertarians, who may be sympathetic to the old status quo and eager to roll back the administrative state. While only time will tell which direction the new administration will take, at least one thing is clear: The neo-Brandeisian four-year failed experiment is finally at an end.