Competition Corner by Alden Abbott: Tough Questions for Chair Khan

Special Issue

U.S. Federal Trade Commission Chair Lina Khan will testify before the House Judiciary Committee on 13 July. The hearing comes after months of criticism from economists, a (now former) fellow FTC commissioner, and her own staff, over the direction that the FTC has taken under her.

I’ve prepared a number of questions for committee members to put to Chair Khan ahead of the Congressional hearing. I’ve included them below.

Chair Khan,

1. In an April 18 hearing before Congress, you stated that you had taken actions consistent with the legal statements made by the FTC’s Designated Agency Ethics Officer.

How do you square this with the fact that you ignored a DAEO ethics memo stating that a reasonable person would question your partiality if you participated in a particular matter as a judge? Wasn’t your April 18 statement at best highly misleading, or at worst untrue?

2. What legal authority supported the Democratic majority’s vote to redact key parts of Commission Wilson’s dissent from your refusal to recuse yourself in the Meta/Within matter? Wasn’t this action legally unjustified? At best, wasn’t this an unprecedented breach of FTC collegiality?

3. In prior years you claimed to Congress that you were working to restore FTC staff morale, but there is no evidence that you have succeeded. To the contrary, FTC morale continues to drop. An Office of Personnel Management survey released in January 2023 found that less than half (49 percent) of FTC employees agreed that FTC “leaders maintain high standards of honesty and integrity.” That is four points lower than in the previous year’s survey and 38 percent lower than the year before that. Other measures of FTC staff morale also show a continuing decline.

What do you have to say for yourself now? Are you willing to accept blame?

4. The “major questions doctrine” bars an agency from construing a statute to regulate a broad swath of the economy when Congress has not spoken directly to the issue. The Supreme Court very recently reiterated the importance of that doctrine in finding that President Biden lacked statutory authority for his student loan forgiveness plan. The Supreme Court also applied that doctrine last year in limiting the EPA’s statutory authority to regulate carbon dioxide emissions.

Doesn’t the logic of these decisions totally eviscerate the FTC’s claim of substantive rulemaking authority to ban non-compete agreements? After all, such a ban would affect a huge swath of the economy, and there is no established statutory basis for finding FTC authority to engage in this sort of regulation.

5. The proposed new HSR (Hart-Scott-Rodino Act) pre-notification rule would prove enormously burdensome. The draft rule admits that it would enormously increase the number of hours required for even the most basic merger reviews. If implemented, it will obligate filing parties to provide substantially more documents and information upfront regardless of competitive concerns—exceeding the requirements in other jurisdictions. The FTC and DOJ estimate that the proposal will almost quadruple average preparation time, but some commentators suggest they will considerably prolong review timelines. (Given inevitable resource constraints, this is a sound assumption.) What’s more, the proposed rule also delves into new areas, such as worker and workplace safety information, that do not have any logical connection to competitive issues.

How do you justify imposing such an enormous new burden on the private sector? What is the legal basis for asking questions that would virtually never prove relevant to likely harm to competition?