By Doug Kelly and Asheesh Agarwal
America and China are locked in an intense competition for global technology leadership. The stakes are high, as the victor will gain a long-term advantage in national security, economic growth, and global influence through the advancement of their values. To prevail, America’s elected officials, policymakers, regulators, and private sector must act in a coordinated, united fashion to maintain U.S. technological supremacy, especially in emerging technologies that will be crucial to our security and prosperity.
To help win the tech race and accelerate innovation, the Federal Trade Commission (FTC) must vigorously enforce the law, but in a manner that respects the fact that technological innovation requires enormous investments of capital and a willingness to take risks.
The FTC’s guiding principles should include the following:
Guiding Principle #1: Increased Transparency
Transparency is a core democratic value. Yet in recent years, the FTC’s leadership has been heavily criticized for a lack of transparency, including misleading Congress, destroying documents, and excluding its own staff and commissioners from key decisions. In many instances, the FTC’s dissembling involved industries and companies in the leadership’s ideological crosshairs, particularly in the health care and tech sectors. In fact, at least three U.S. House committees are investigating the FTC, including its attempts to influence trade policy with the U.S. Trade Representative (USTR), while business groups have petitioned the FTC to increase transparency around the FTC’s recusal process.
To regain the public’s trust in 2024, the FTC must embrace greater transparency. This coming year holds promise: two new commissioners could be approved by the U.S. Senate. These members, if granted timely access to information and genuinely brought into the agency’s deliberations, are poised to infuse the agency with much-needed balance and openness. To truly enhance public confidence and bolster its law enforcement capabilities, the FTC’s leadership must commit to full transparency, not only with Congress but also with the public, its staff, and commissioners, ensuring a clear and open view of its actions and policies.
Guiding Principle #2: Bounded Regulatory Activity
Agencies like the FTC must operate within constitutional and statutory boundaries. In recent years, the U.S. Supreme Court has repeatedly struck down agency actions, including some at the FTC, that exceed their statutory mandates.
However, the FTC has announced several aggressive regulatory initiatives that could test the outer bounds of its authority, including proposed revisions to the merger reporting form and a nationwide ban on noncompete agreements. If implemented, such regulations would reduce investment and raise costs for both businesses and consumers. For instance, the proposed merger reporting form would more than quadruple the costs of reporting routine acquisitions that raise no competitive concerns, in direct contravention of congressional intent. As a result, the proposed regulations would imperil capital flows across the U.S. economy, raising the cost of capital for innovative startups and small companies. Indeed, the FTC already issued final merger guidelines that would allow the government to pick economic winners and losers, dictate market structures, and play to favored constituencies, all to the detriment of U.S. companies versus their Chinese competitors.
Guiding Principle #3: Enforcement Grounded in Precedent and Economics
The FTC’s focus should be on business practices that harm consumers, supported by legal precedent and empirical economics. However, in recent years, the FTC has often pursued speculative economic theories grounded in outdated judicial opinions that predate decades of bipartisan antitrust consensus. Courts have mostly rejected these aggressive theories.
Many of these cases have involved the tech sector; recently, the FTC brought a sprawling lawsuit that raises novel “standalone” counts under Section 5 of the Federal Trade Commission Act, which deals with stopping unfair or deceptive business practices. In almost every instance, courts have rejected the FTC’s more aggressive theories, and even when the FTC’s arguments have prevailed, courts have instructed the FTC to address possible remedies that might allow proposed transactions to proceed.
Guiding Principle #4: Promotion of American Interests
For many years, the FTC’s strategic plan stressed that the agency would enforce the law “without unduly burdening legitimate business activity.” Today, the FTC must enforce the law without unduly burdening U.S. economic and technological interests. Unfortunately, in recent years, the FTC’s leadership has gone out of its way to undermine those interests.
For instance, the FTC has:
- Sought to break up some of America’s most innovative companies.
- Pursued novel and aggressive theories to block vertical mergers that would have benefited the competitiveness of U.S. companies in the tech and defense sectors.
- Colluded with foreign regulators to block U.S. transactions.
- Deployed personnel to advise the European Union on how to implement protectionist legislation that targets U.S. companies.
- Persuaded the USTR to abandon longstanding U.S. positions on digital trade.
Indeed, the Competitive Enterprise Institute recently issued a report concluding that the FTC’s agenda stifles U.S. innovation, slows economic growth, hurts consumers, and jeopardize U.S. leadership in critical technologies such as artificial intelligence (AI).
Actions that undermine U.S. competitiveness in the tech and defense sectors must be reassessed. The FTC’s role is to enforce the law in an objective manner, without unduly burdening U.S. leadership in critical technologies.
The bottom line: The FTC can and should enforce the law in ways that do not unduly undermine our country’s ability to innovate and win the tech race with China. That means avoiding ideological and agenda-driven enforcement and instead operating with deep transparency, within legal boundaries, and with a focus on precedent, economics, and the interests of consumers and the American people.
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Note: In the coming months, as part of our second economic policy framework, the American Edge Project (AEP) will recommend key guiding principles for U.S. policymakers, regulators, and the private sector to bolster innovation and maintain America’s technological edge. One of our focuses is the FTC.