What’s going on at the Federal Trade Commission? Whether it’s delving into the cold case of the missing McFlurry or abruptly dropping vertical merger guidelines adopted just a year ago, the Biden Administration is in a hurry to make its mark on consumer protection and competition. But in this rush to adopt new regulations, the administration is creating chaos for business with no clear upside for consumers.
Let’s start with vertical merger guidelines. The FTC recently withdrew its vertical merger guidelines after a 3-2 vote, and has warned companies to merge “at their own risk,” hinting it could launch after-the-fact challenges to mergers that take place before it has completed its review. What was offered in their place? As of now, nothing at all. In their dissent, Commissioners Noah Phillips and Christine Wilson noted that this move effectively “pull[s] the rug out under from honest businesses.”
The FTC has been busy changing rules elsewhere, too. In September, the agency reportedly floated the idea of introducing new privacy rules that would bypass congressional approval. And this isn’t just a political issue: in July, the FTC rescinded an Obama-era competition policy that for years had offered a reasonable, objective consumer welfare standard by which to consistently regulate business operations.
If we want companies to build back better, it’s critical to give them legal certainty. Instead, the FTC is making it harder to determine what’s permissible and what’s not. Smart, consistent regulation is key to protecting both consumers and growing businesses.
In removing established legal guidance and failing to suggest anything new, the FTC is, as Phillips pointed out, “knocking over guardrails that are intended to keep us from politicizing antitrust.”
To date, much of the agency’s regulatory ire has focused on the bugaboo of the moment — big tech. But it’s not just America’s flagship tech companies who lose out when the FTC creates policy chaos. It’s often small businesses and startups, who lack access to teams of attorneys and policy advisors, who feel the pain of legal uncertainty most acutely.
That’s also why the FTC’s regulatory actions are a concern for us at the Consumer Technology Association — 80 percent of our members are startups or small and medium-sized businesses.
Every year, as I talk with the hundreds of small business exhibitors who join us at CES in Las Vegas, I’m struck by the passion and enthusiasm of the entrepreneurs who have taken significant financial risks to introduce new ideas and products to the market. Their success makes it clear that FTC regulation designed to ‘introduce market competition’ is a solution in search of a problem.
In a world where many startups explicitly aim for acquisition by a larger company, unclear merger guidelines could also inhibit investment and innovation from the start. FTC data on mergers by Apple, Amazon, Facebook, Google and Microsoft over the past decade shows that the vast majority involved companies small enough that they did not trigger automatic FTC merger review.
These businesses are rewarding tech talent, identifying successful innovators and operating in compliance with standing legal regulation. They’re also creating a market that rewards innovation and entrepreneurship, which ultimately benefits both businesses and consumers.
Overly burdensome regulations from the FTC could also have a broader impact on American competitiveness. China is investing trillions in its domestic tech sector in efforts to surpass U.S. tech companies. European governments are collaborating with private sector leaders to create the next generation of tech giants. With foreign competitors on our heels, it’s a bad time to target our tech companies if the United States wants to remain a global innovation leader.
The bottom line is this: Informed regulation is good and necessary. Inconsistent and unpredictable policy is not. Regulation must be smart, consistent and clear for the tech industry to thrive. And if tech does well, so will everyone else. Getting regulation right is worth it.
Gary Shapiro is president and CEO of the Consumer Technology Association and a New York Times best-selling author of “Ninja Future: Secrets to Success in the New World of Innovation.”
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