The Future of the FTC Looks a Lot Like Its Past
On the campaign trail, Trump hinted that he would take a more aggressive role in policing corporate mergers, but things don’t seem to be headed in that direction.
With two open seats on the Federal Trade Commission (FTC), Trump has the opportunity to return the federal agency to a Republican majority for the first time since George W. Bush’s administration. The FTC is made up of five commissioners who are tasked with preventing unfair business practices that stifle competition and harm consumers, such as the establishment of monopolies. On the campaign trail, Trump criticized corporate mergers, such as the AT&T-Time Warner deal, for concentrating power “in the hands of too few,” and vowed to block such deals if elected president.
The problem is, traditional Republican antitrust experts don’t share his views on the dangers of corporate consolidation. In fact, the dominant economic thinking on the matter (commonly referred to as the Chicago School) is that, in many cases, vertical mergers, which combine companies that operate at different levels in the market supply chain (such as the AT&T-Time Warner deal), can actually benefit consumers with streamlined services.
In recent years, however, there has been a small but significant movement toward the opposing, populist view (led by Democrats such as senators Elizabeth Warren and Bernie Sanders) that corporate concentration is doing more harm than good to average Americans. In addition, a recent study by the influential White House Council of Economic Advisors blamed market concentration for slow economic growth and rising prices for consumers. These shifts leave many antitrust law experts wondering if Trump will defer antimonopoly enforcement to the Republican establishment, or if he will pick an outsider.
Trump will also have the authority to designate one of the commissioners as the FTC’s chair, giving that person influence in deciding which mergers the agency will review. Bill Kovacic, an antitrust law professor at George Washington University, says it’s hard to gauge what Trump will do. “His comments have been so fragmentary,” says Kovacic, who served as a Republican commissioner for the FTC from 2006 to 2011. “If he’s going to run against the establishment, he’ll need to go far outside the beltway to find someone.”
Were Trump to act on his message of economic populism, it would be a striking departure from decades of lax federal antimonopoly enforcement, in which the Federal Trade Commission and the Department of Justice allowed about 98 percent of all mergers to go through (though slightly more mergers were challenged under Obama’s tenure).
If the transition team Trump assembled is any sign, it means he may be backing down from his aggressive, anti-monopoly rhetoric. On the campaign trail, he vowed to block the AT&T-Time Warner merger and accused the CEO of Amazon of having “a huge antitrust problem.” Yet he picked former FTC Commissioner Joshua Wright, a well-respected, traditional Republican antitrust expert to head the transition of the Federal Trade Commission. Wright, who teaches law at George Mason University, believes that corporate mergers tend to benefit consumers more than harm them.
Wright declined a request to comment on this article, but in a recent op-ed published in The New York Times, he wrote that today’s “antimerger fervor” is misguided and based on the false belief that concentrated market control is bad for consumers.“The quiet consensus among economists in academia and within the two antitrust agencies is that mergers between competitors do not often lead to market power but do often generate significant benefits for consumers—lower prices and higher quality. Sometimes mergers harm consumers, but those instances are relatively rare,” he argues.
As head of Trump’s antitrust transition team, Wright will recommend candidates to fill the two open seats. It’s also possible that Wright himself would want to return to serve on the commission, especially as chair of a commission with a Republican majority. If that’s the case, his views about corporate consolidation are a stark contrast to those Trump expressed on the campaign trail.
According to The Wall Street Journal, Wright was considered the FTC’s most conservative commissioner during his two-and-a-half-year stint on the commission that ended in 2015. He frequently opposed antitrust enforcement efforts proposed by the commission’s Democratic leadership, such as attempts to block the mergers of Ardagh Group and Saint-Gobain Containers (glass-bottle makers) and Nielsen Holding and Arbitron (television and radio ratings providers).
One of the most notable cases was his opposition last year to stopping the planned merger of the nation’s two largest food distributors for restaurants and cafeterias: Sysco and US Foods. The FTC—then under a Democratic majority—sued to halt the $8.2-billion deal, which the FTC argued would raise prices for customers and harm competition by giving the company control of 75 percent of the sales of full-service food distribution at the national level. The FTC’s three Democratic commissioners voted to file the lawsuit to block the merger, with Wright and the other Republican commissioner opposing it. If a majority of the FTC had been Republican, it’s likely that the merger would have gone through.
Wright has been the target of liberals’ criticism for his ties to Google, which partly funded his research on antitrust law when he worked at the International Center for Law and Economics. The FTC and DOJ have often reviewed Google for unfair business practices, such as pushing competitors farther down the page on search results, for which it got off relatively easy. Thought Wright was not involved in that decision, the Consumer Watchdog organization opposed President Obama’s initial appointment of Wright to the FTC in 2012, on the grounds that the FTC would be even more hands-off when regulating Google. Wright recused himself from voting on any Google cases for two years while serving on the commission. After two-and-a-half years on the commission, he left to teach at George Mason University, where he leads the Global Antitrust Institute within the law school.
Bob Lande, an antitrust law professor at the University of Baltimore, says that if Wright is nominated and confirmed by Congress as the new chair of the FTC, Wright will be in a tough position. Even though he works independently from the president, he may feel indirect pressure to be more aggressive toward antitrust enforcement. The FTC would probably still allow most mergers to go through under his leadership, Lande says, but he might be more inclined to attach conditions to mergers like the AT&T-Time Warner plan to ensure competitive behavior. “The thing about a [settlement] is that it can be real and still have no teeth,” says Lande.
There’s also the possibility that Trump won’t consider antitrust enforcement a high priority at all, given his focus on major issues such as national security and international trade. Putting Wright—or someone with similar sentiments— in charge of antitrust, then, could be viewed as a concession to the Republican establishment in exchange for congressional support on some of Trump’s bolder and less popular plans.