FTC’s aggressive tactics strike fear in tech

The Federal Trade Commission recently announced a new investigation of Google, Amazon, and Microsoft’s respective partnerships with artificial intelligence developers. “As companies race to develop and monetize AI, we must guard against tactics that foreclose this [economic and competitive] opportunity,” said FTC Chairwoman Lina Khan said in a statement.

Under Khan, the FTC has proved itself a poor judge of which business practices foreclose competition. To facilitate its categorical bias against big business and mergers, the agency has often deployed junk economic analysis to bring cases whose theories clearly contravene established antitrust precedent. Moreover, it has skirted inconvenient procedural and evidentiary barriers.

Regulation by raised eyebrow rather than due process has cowed many litigation-averse firms into compliance. Bullying works.

It remains unclear whether the FTC’s AI inquiry will morph into more serious legal action. But the agency, which has received embarrassing judicial rebukes each time it brought a case to trial, has managed to shape industry’s decision-making in another way. It has created a climate of fear, relying on hyperaggressive probes and inquiries over evidence and due process. It has also put forward heightened regulatory-compliance burdens and propagated vague new guidance that provides little certainty as to what conduct the commission might consider illegal.

The agency’s message to the tech companies and their AI partners is clear: The Eye of Sauron is on you — tread carefully. The metaphor is not entirely apt. Sauron would never, presumably, have failed so spectacularly to win his court cases.

In a November 2022 policy statement, the FTC declared it would act against “abusive,” “exploitative,” and “collusive” conduct. To attract scrutiny, conduct need not even qualify as “facially unfair,” the agency said.

What such broad terms might mean in practice, the agency declined to state. Moreover, a mere “tendency to generate negative consequences,” the policy statement read, could draw regulatory ire. Enforcers need not “turn to whether the conduct directly caused actual harm in the specific instance at issue.”

While this guidance governs only a part of the FTC’s regulatory portfolio, its principles illuminate the agency’s larger strategy. In effect, the agency has sought to maintain maximum flexibility to combat whatever business practices it — due to any given set of particulars, at any given moment — deems “anticompetitive.” Actual law and the welfare of consumers are tertiary considerations at best.

This uproots the foundations of American due process, which requires the government to prove wrongdoing before confiscating a citizen’s life, liberty, or property. Under today’s FTC, the process itself serves as the punishment.

Khan has admitted her willingness to pursue cases she likely cannot win. As the New York Times reports, Khan stated that if "there’s a law violation" and agencies "think that current law might make it difficult to reach, there’s huge benefit to still trying." Khan means she will bring lawsuits against mergers that she believes should be illegal, regardless of what the law says.

This sort of regulation by raised eyebrow rather than due process has cowed many litigation-averse firms into compliance. Bullying works. “Companies have changed their behavior, structuring deals to avoid accusations that they break antitrust law,” Reuters reported in October 2022.

Khan has also argued for acting against business practices that current law does not prohibit as a means to lobby Congress. Because, she says, “even if you lose, that then creates the message for Congress to know … they [antitrust agencies] recognize there’s a problem here, the current law is not adequate for them to reach it, and so let’s change the law.”

This statement’s profound injustice is startling. To influence lawmakers, Khan is willing to use her powers — powers predicated on the state’s monopoly on violence — to bully American firms. Even though, by her own admission, the firms have not violated existing law.

If a police officer who favored driving slower were to begin ticketing drivers who drive 10 mph below the speed limit, he would likely lose his job. “Sorry, ma’am, the current law is not adequate to ticket you for driving 50 in a 60 zone, but I have to send a message to city hall,” is not an acceptable excuse. Instead, Khan’s lawlessness has catapulted her to stardom among the progressive left.

“If angels were to govern men, neither external nor internal controls on government would be necessary,” James Madison wrote in Federalist 51. All government officials require constitutional restraints on their exercise of power. The FTC hopes to erode all constraints on its operations — be they statutory, constitutional, political, or economic. Constitutional balance and the rule of law must be restored.