SCHERER: Another Federal Agency Is Turning Itself Into A Rulemaking Body At Consumers’ Expense

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Nate Scherer Contributor
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It’s no secret that the Federal Trade Commission (FTC) under the leadership of Chair Lina Khan desires to play a greater role in enforcing antitrust law and promoting consumer protection. From an ambitious new agency vision and priority memos to the rescinding of former policy statements, the FTC has made it clear that it intends to establish an aggressive new regulatory regime.

This new regime increasingly relies upon powers that the agency does not possess and that Congress never delegated to it. The FTC seems intent on exercising these powers regardless of their impact on consumers, who are harmed when the agency deviates from its original mission: “to prevent business practices that are anti-competitive or deceptive or unfair to consumers.”

The heart of the problem is that the FTC increasingly sees itself as a legislator and a rulemaking agency rather than as a consumer-based law enforcement agency. The types of activities the Commission chooses to prioritize, such as broad new rulemakings and questionable legal action against a growing number of companies, serve as compelling evidence of this self-perception.

For instance, in January the FTC announced that it was looking to introduce a new rule that would ban all employers from imposing non-compete clauses — legal agreements that prohibit an employee from entering into employment with a business competitor immediately following the end of employment — on workers and enforcing existing non-compete clauses. Such a rule, if enforced, would affect millions of American workers, one in five of whom are bound by such agreements.

It’s not at all clear that the FTC even has the legal authority to impose such a ban. It asserts that Sections 5(a)(1) and 6(g) of the Federal Trade Commission Act (FTC Act) grant it the power to make rules regarding non-competes. However, the FTC has provided little evidence that non-competes constitute “unfair or deceptive practices,” which the agency would need to prove to justify intervention. Congress has also never granted the Commission the power to make competition rules. Therefore, if any branch of government is to have this power, it should be the legislature.

The FTC also recently hinted at the possibility of introducing a federal privacy rule that would regulate commercial surveillance and data security. While a national privacy standard may be necessary, serious questions arise over whether it’s the FTC’s role to introduce it. As former Commissioner Noah Phillips noted in his dissent to the Advanced Notice of Proposed Rulemaking (ANPR), this ANPR would “recast the Commission as a legislature, with virtually limitless authority” and “contemplates banning or regulating conduct the Commission has never once identified as unfair or deceptive.” Yet this outcry hasn’t deterred the Commission, which is currently in the process of sorting through hundreds of public comments regarding the potential new rule.

The FTC’s preoccupation with rulemaking is all the more perplexing considering that Congress only granted the Commission power over rulemaking activities as recently as 1975. Even then, these activities were limited to the space of consumer protection. The fact that Congress quickly reined in the Commission following its decision to launch numerous new rules in the 1970s is a testament to this dynamic.

The FTC has also wielded the threat of legal action as a weapon of choice in its quest to expand its regulatory powers. The lawsuits that the agency has filed against a growing number of high-profile companies like Microsoft and Facebook for supposedly harming consumers by suppressing competition is evidence of this approach.

Many of these lawsuits are based on incredibly weak arguments and diverge sharply from the spirit of the consumer welfare standard, which, until recently, guided the Commission’s actions and served as the “backbone” of American antitrust policy. It doesn’t seem to matter to the Commission if it prevails in these cases or not. As Khan herself has acknowledged, the Commission cares little about whether it wins “big cases” so long as these cases send a message to Congress that “there’s a problem” and the “current law is not adequate.” In line with this strategy, the Commission continues to lose important cases, as it did recently against e-cigarette manufacturers Altria Group and Juul Labs.

The unfortunate consequence of the Commission’s prioritization of activities outside its original mission is that it not only treads on Congress’s role as a rulemaking body, but it does so while wasting public dollars and harming its own credibility with consumers and employees.

In March, the FTC submitted its annual budget request to Congress for 2024. In its request, the Commission asked for a budget increase of $160 million, constituting a 27 percent increase from 2023 and representing almost double the Commission’s 2020 budget. The Commission plans to use this money to hire an additional 310 full-time equivalent employees (FTEs), which it says are necessary to investigate and “litigate larger and more complex matters” like privacy and data security. The Commission also plans to expand its rulemaking capabilities, with some of the requested FTEs slated to go to the Office of Policy Planning (OPP).

As the details of this request reveal, the Commission seems determined to continue expanding its power and influence, whether through rulemaking, legal action, or any other means. That’s bad news for consumers who never agreed to pay for the rogue behavior of a federal agency.

It’s long past time Congress reined in the FTC. The Commission has become increasingly power-hungry and driven more by political considerations than by the interests of consumers. The FTC must again prioritize consumer interests.

Nate Scherer is a Policy Analyst with the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, visit us at www.TheAmericanConsumer.Org or follow us on Twitter @ConsumerPal.

The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller.