FTC Expands Its Power to Penalize Powerful Companies

Expanded authority could help commission go after Facebook

Santi Ruiz • July 1, 2021 3:50 pm

In a major shift from its current position, the Federal Trade Commission voted Thursday to expand its authority to investigate powerful companies for “unfair or deceptive acts.”

The 3-2 vote, which took place in the first public hearing in decades, struck down internal guidance that said the FTC should avoid pursuing companies that haven’t clearly violated two federal antitrust laws. Some antitrust experts criticized the old guidance for tying the hands of the FTC. With that guidance removed, the FTC will now have greater authority to administer civil penalties for anti-competitive behavior.

In a sign of the shifting political landscape, all three Democrat-appointed commissioners voted to strike the Obama-era guidance, while the two GOP-appointed commissioners defended it. “This was a summation of black-letter antitrust law during the Obama administration,” said antitrust expert Jennifer Huddleston, noting the guidance was “not seen as particularly controversial” when passed in 2015.

The change is a win for newly appointed FTC chair Lina Khan, who has argued that companies as big as Facebook or Amazon may be a danger to competition even if they don’t strictly qualify as monopolies. Khan first rose to prominence with a 2017 law review article that argued traditional antitrust standards don’t adequately capture the “architecture of market power in the modern economy.” Amazon makes $1 billion a day in revenue and has faced widespread criticism for forcing third-party sellers off of its marketplace.

Khan defended the commission’s decision, claiming the old guidance constrained “the FTC’s unique authority” and turned its power into “a dead letter.”

But FTC commissioner Christine Wilson bemoaned the change, saying the old guidance reflected “more than a century of precedent.” Alden Abbott, the FTC’s general counsel during former president Donald Trump’s term, warned that abandoning the statement would “create great confusion and uncertainty for the private sector.” Both criticized any move away from the “consumer welfare standard,” which holds that only companies that directly harm consumers can be labeled monopolies.

Khan, who President Joe Biden nominated to the FTC in March, was confirmed by the Senate in June. She earned votes from multiple Republican senators who endorsed her goal of cracking down on corporate power.

Amazon on Wednesday called on Khan to recuse herself from any antitrust cases involving the retail giant, saying she could not be trusted to be objective after criticizing the company’s dominance.

The rule change has immediate implications for the FTC’s lawsuit against Facebook, which alleges that the social media giant has too much power over the social networking market. A federal judge dismissed the case in June, saying the FTC had not met the high burden of proof to show Facebook has a technical monopoly. Under the new guidance, the FTC could prosecute the trillion-dollar company anyway.

In Thursday’s meeting, the FTC commissioners also voted 3-2 to finalize a “Made in America” rule long sought by Trump.