The FTC Doesn't Have the Goods
The FTC Doesn't Have the Goods
Plus: Communitarian libertarianism, "Dinotopia," and mixed-up poetry.
This “news”letter’s final edition of 2023 returns to a familiar topic. The Federal Trade Commission (FTC), hopped up on mid-century regulatory hubris, has arrogated to itself extensive and largely arbitrary economic powers. To reify its own myopic conceptions of economic fairness, the agency is contravening decades of settled antitrust law and precedent — sound economics and consumer welfare be damned.
FTC Chair Lina Khan doesn’t mind losing in court, however; she hopes her strategy of enforcement-actions-as-legal-activism will convince judges and members of Congress to revise their notions of what constitutes prudent antitrust. This is the strategy of the toddler who, having failed to convince his parents to allow to have him another cookie, figures that another 15 minutes of needling will wear out their will to say “no.”
This author wrote about the FTC’s suit against Amazon this week in the Washington Examiner:
The agency’s recent suit against Amazon, in which it alleges that the company illegally maintains two monopolies, provides a case study in the agency’s current deterioration. The FTC is targeting Amazon’s incentives for third-party vendors to sell on its platform at lowest-offered prices and to fulfill orders quickly. Vendors that offer lower prices elsewhere online become ineligible for promotion in Amazon’s “Featured Offer ” function (once called “Buy Box”), and those that cannot guarantee Prime-quality shipping services do not receive the “ Prime badge .”
As Amazon summarized succinctly in a recent court filing , the FTC “labels these practices ‘anticompetitive,’ but the facts alleged rebut that epithet.” In fact, both practices promote obvious consumer benefits : cheap prices and reliably quick product delivery. Moreover, both foster customer trust in products the marketplace chooses to promote.
Considering the economic data, the FTC’s charge that Amazon’s conduct has inflated prices internetwide seems odd. As reported by economist Arthur Laffer, online prices decreased 14% from 2014 to 2022, while the consumer price index rose 22%. Adobe’s Digital Price Index (on which Laffer relies) reports that online prices have fallen 6.43% year over year.
Amazon says its pricing guidelines generally cause vendors to lower prices. The FTC’s suit “does not identify a single product or product category for which prices have risen as a result of the challenged conduct,” Amazon writes. “Instead, it implausibly, and illogically, assumes that Amazon’s efforts to keep featured prices low on Amazon somehow raised consumer prices across the whole economy.” Indeed, one 2022 analysis found that, on average, Amazon undercut competing online retailers by 13%.
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The FTC expressly hopes to cement this type of shoddy economic work, which substitutes ominous adjectives for rigorous analysis, as official, binding precedent. In 2022, the FTC published guidance formalizing its new enforcement stance, committing to vague and largely arbitrary standards with little relation to consumer welfare. The policy statement provides no certainty to businesses as to what conduct may, or may not, attract the agency’s ire. Rather, it adopts an “I know it when I see it” standard, as then-Commissioner Christine Wilson, a Republican, put it prior to resigning from the embattled commission .
In the policy statement, regulators seized shocking latitude and case-by-case discretion. The FTC pledged to combat conduct classified as “abusive,” “exploitative,” and “collusive” (among other labels), yet declined to define those nebulous terms. Even “not facially unfair” conduct could draw scrutiny, the statement says.
Moreover, enforcement actions need not “turn to whether the conduct directly caused actual harm in the specific instance at issue” (emphasis in original); merely demonstrating “a tendency to generate negative consequences” suffices under the FTC’s new theory (emphasis added). In short, the agency arrogated to itself the authority to invent novel theories of competitive harm, attempting to replace decades of sound antitrust precedent with Khan’s progressive myopia.
Some Wisdom
Charles Murray’s incredible In Pursuit: Of Happiness and Good Government sums up this author’s views on the relationship between libertarianism, individualism, and humanity’s need for community and social order.
Strongly bound communities, fulfilling complex public functions, are not creations of the state. They form because they must. Human beings have needs as individuals (never mind the “moral sense” or lack of it) that cannot be met except by cooperation with other human beings. To this degree, the often-lamented conflict between “individualism” and “community” is misleading. The pursuit of individual happiness cannot be an atomistic process; it will naturally and always occur in the context of communities.
The question for lawmakers, Murray posits, is how to avoid obstructing individuals’ private associations from forming and operating.
A few pages later, he writes:
[S]ocial policy affects not only individuals. It also takes away functions from the little platoons, and therein lies a much more difficult set of trade-offs to be assessed. If it is true that most of the important satisfactions in life are rooted in, processed through, or enhanced by little platoons, we are left with the general (if still not very specific) conclusion that it is extremely important for social policy to leave the little platoons with the "somethings to do" that keep them vital.
Some Beauty
This author was reminded this week of James Gurney’s “Dinotopia” series. The illustrations are simply exquisite. For the visually inclined, good picture books were an incredible source of joy during childhood (and adulthood).
Some Humor
Sundry Links, &c.
Seriously, read In Pursuit.
The Dodgers are betting the bank on nobody getting Tommy John surgery.
Incessantly posting “Vox populi, vox dei” does not make the point you think it makes. As George Will wrote, “Vox populi, vox dei? For the sake of His reputation, let’s hope not.”