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Commentary

Gridlock at the FTC Prolongs Washington’s Regulatory Status Quo



Missing from the media’s orgy of “100-day” analyses of the Trump administration’s performance has been any substantive discussion of the Federal Trade Commission (FTC), and the fact that it now is operating at fractional capacity: for the first time in its 103-year history, only two of its five commissioners are on the job.

The media’s silence is deafening, given the FTC’s extensive, but largely unheralded, role in American life. The FTC’s paralysis has helped block President Trump from moving forward with much needed regulatory reform, while leaving U.S. corporations and individuals vulnerable to intellectual property theft abroad. It also has allowed President Obama’s anti-business legacy to continue unchecked, leaving pending lawsuits and proposed business mergers in limbo.

As a practical matter, the FTC simply can’t function with just two commissioners, especially in the hyper-partisan atmosphere in which we all live. Despite heading the executive branch, and leading a party that controls both houses of Congress, President Trump is at the mercy of an agency that can take action only following a simple majority vote, obviously hard to come by when one commissioner can veto the other.

Remember President Trump’s oft-repeated campaign vow to eliminate costly, unnecessary regulations? Or, once in office, the executive order he issued to increase American efficiency and dramatically reduce Washington red tape with a policy that slashes two existing regulations for every new one promulgated by an executive branch agency?

Under normal circumstances—with five appointed commissioners, a majority (three) of whom can be affiliated with the same political party at the same time—the FTC likely would be moving even farther down the path toward fulfilling the president’s regulatory reform goals. And yet, important issues, such as data security and broadband privacy, now languish under perpetual review owing to something of a turf battle between the shorthanded FTC and the Federal Communications Commission.

Perhaps the most compelling example of the FTC’s inability to function is the lawsuit it initiated against Qualcomm during the Obama administration’s final days in office. The agency claimed that the company was abusing its dominant market position based on patents covering a type of smart-phone chip, something the FTC said amounted to an “illegal patent tax.”

Qualcomm sued to overturn the FTC’s action, claiming that it was instigated by Apple, which had misrepresented important facts and withheld critical information from the commissioners. Those claims became more credible when Apple filed its own lawsuits against Qualcomm both in China and the United States soon after the FTC did so.

Then-FTC Commissioner, and Acting Chairperson, Maureen Olhausen, agreed with Qualcomm, writing a rare dissent and blasting the lawsuit on a number of grounds. Most explosively, she asserted that the Commission’s decision to sue was based on “flawed legal theory,” “lacked evidentiary and legal support,” and, by “its mere issuance,” would “undermine U.S. intellectual property rights in Asia and worldwide.”

It’s a nightmare not confined to Qualcomm, but to all U.S. businesses, as the American Conservative Union (ACU), Americans for Tax Reform (ATR), and many others quickly observed. As the ACU warned: “If Asian companies can access our best technology through nefarious government enforcement actions, both U.S. competitiveness and national security are at stake.”

Although nothing is certain in D.C., with an FTC comprised of its usual five members, the Qualcomm case almost surely would have been scrapped by now, as were some of the unsound and unwieldy antitrust matters that had been dragging on for a decade or more when Ronald Reagan entered the White House.

The FTC has been a lightning rod for criticism since its creation in 1914. No matter what you think about its performance, nowadays or in the past, it cannot do much of anything until its three vacant seats are filled.


William F. Shughart II is Research Director and Senior Fellow at the Independent Institute, J. Fish Smith Professor in Public Choice in the Jon M. Huntsman School of Business at Utah State University, and editor of the Independent Institute book, Taxing Choice: The Predatory Politics of Fiscal Discrimination.


From William F. Shughart II
TAXING CHOICE: The Predatory Politics of Fiscal Discrimination
So-called “sin taxes”—the taxing of certain products, like alcohol and tobacco, that are deemed to be “politically incorrect”—have long been a favorite way for politicians to fund programs benefiting special interest groups. But this concept has been applied to such “sinful” products as soft drinks, margarine, telephone calls, airline tickets, and even fishing gear. What is the true record of this selective, often punitive, approach to taxation?







  • MyGovCost.org
  • FDAReview.org
  • OnPower.org
  • elindependent.org