On August 21, the Republican-led House Oversight Committee launched an investigation into the Federal Trade Commission’s (FTC) communications with its counterparts in the European Union (EU). Those who support FTC Chair Lina Khan say the probe is a biased attempt to score political points by scrutinizing a favorite right-wing punching bag. Those who oppose what the FTC is doing argue the agency has been politically captured by a Chair with a clear and expansive agenda. They are both right, and the end result is a realistic and workable system of checks and balances. Just as the Founders intended.

What the FTC is Doing in Europe

The Committee requested documents pertaining to agency officials dispatched by the FTC to Europe to aid with the implementation and enforcement of the EU’s Digital Markets Act (DMA), a far more aggressive antitrust law than anything found in America. Although the FTC regularly coordinates with antitrust enforcement and consumer protection regimes around the world, its work with the EU on this subject raises political, legislative, and due process issues because of the expansive nature of the DMA.

FTC Chair Lina Khan and her colleagues at the FTC have attempted to expand the boundaries of American competition enforcement but have been thwarted by the courts and increasingly by Congress. For example, the Commission’s attempts to challenge certain vertical mergers such as Meta/Within and Microsoft/Activision have been struck down by courts as being overly speculative. In those cases, the FTC’s theory of consumer harm and the evidence it provided did not meet the standard of proof required.

It appears that sending officials to the EU to observe and collaborate with the implementation of the DMA could allow the FTC to work around US law, potentially coordinating with their colleagues at the European Commission (EC) to bring cases against American companies. Indeed, on July 4, 2023, the EC announced the first seven companies that must comply with the DMA, five were American companies: Alphabet, Amazon, Apple, Meta, and Microsoft. All of these companies had been identified by Chair Khan and the FTC as potential monopolies and overly dominant.

Enforcing the DMA against American companies isn’t merely the routine global cartel-busting that has been the hallmark of previous collaborations. The DMA is a unique antitrust law that imposes special “gatekeeper” obligations on companies deemed to be a core platform service, thereby creating far more sweeping authority to regulate under EU law. This authority includes banning self-preferencing, ceasing app pre-installation, allowing interoperability with other systems, and a myriad of other requirements. The US has no equivalent regulation, and the FTC, despite a clear desire to do so, can’t enforce these rules at home.

In short, the Oversight Committee is accusing Lina Khan of subverting American institutional protections by doing what she wishes she could do domestically through direct collaboration with EU regulators.

A Rogue FTC?

The FTC and DOJ have both been actively attempting to expand the scope of antitrust liability in response to a growing view within the regulatory agencies that competition enforcement has been far too lax. The attempts run counter to a series of court rulings that enshrined the consumer welfare standard, which rejects the obligations imposed on large companies found in the DMA. These actions are occurring despite the reality that Congress has not passed any laws like the DMA or updated existing antitrust laws to expand liability to accommodate the actions of the FTC and DOJ.

Antitrust enforcers are using prosecutorial discretion to try to expand the boundaries of antitrust harm, but to date, they have been consistently thwarted by the court system. The Consumer Welfare Standard is a doctrine first adopted by the Supreme Court in the late 1970s, primarily attributable to a 1977 case Brunswick Corp. v. Pueblo Bowl-O-Mat. The decision and the decades of precedent that followed it were predicated on breakthroughs in the understanding of economic judgments that the purpose of competition law was primarily concerned with consumers rather than companies.

Critics of the consumer welfare standard argue that the doctrine is entirely judicial fiat and is ill-defined. They argue that foundational antitrust statutes like the Sherman Act say nothing about a consumer welfare standard and were enacted at a time when legislators were fundamentally critical of large businesses. In short, they claim the legislative intent of American antitrust law is to be fundamentally skeptical of concentrated corporate power and they view the vitality of competing firms as essential to a competitive marketplace. Therefore, they argue that it is not only within the FTC and DOJ’s power to expand the window of antitrust liability, but their duty.

However, working with the EU to enforce laws that have no parallels in the US against American companies may have been a step too far. Although it remains to be seen what exactly the FTC’s intentions are in Europe and with the DMA, Congress has taken interest. The House Committee on Oversight and Accountability began investigating the FTC’s actions and Republican Senator and Ranking Member of the Senate Commerce Committee Ted Cruz sent a scathing letter to the agency in response to the coordination on the DMA. In the letter, he accuses Lina Khan and her allies of attempting to skirt checks and balances to pursue a progressive antitrust crusade through a backdoor channel. In the letter, he asserts that Khan has gone far beyond her authority in actively aiding the EU to enforce its protectionist antitrust laws against American companies to the economic advantage of European and Chinese firms. 

Checks and Balances

Republicans would be less interested in oversight if the FTC were led by a conservative free marketeer who viewed enforcement of antitrust laws with skepticism, which many argue has been the case for years. On the other hand, agencies like the FTC and those who lead them are similarly self-interested political actors who will use the options open to them to accomplish their preferred agenda.

The only real check available to those who are interested in holding the FTC accountable for what they perceive as infidelity to the law is through the congressional oversight process, a clearly partisan affair. The institutions that govern both the FTC and the United States Congress create clear incentives for political actors to position themselves as defenders of accountability when the other party is in power, or to point to partisan self-interest when the roles are reversed. 

The Biden Administration views a new era of antitrust enforcement as an important part of their policy agenda and believes Khan’s actions rightfully check a court system and a Congress that has refused to act. Those who are looking to restrain mission creep and activism at the FTC believe what the Oversight Committee is doing is justified and necessary.

The ongoing tension between Congress and the FTC presents a far too rare case of Congress carrying out its oversight role with vigor. While the political motivations of nearly every action of the Oversight Committee have been criticized by political opponents, it demonstrates what James Madison had in mind when writing in Federalist 51: the division of power would allow political ambition to check political ambition.