The Federal Trade Commission (FTC) appears poised to begin testing the scope of its rulemaking authority, including new substantive competition rules for the first time in decades. On March 25, 2021, FTC Acting Chairwoman Rebecca Slaughter (D) formed a group within the agency’s Office of the General Counsel to centralize FTC rulemakings. In announcing the change, Slaughter said that it was “time for the Commission to activate its unfair methods of competition rulemaking authority,” and that she is “excited for this new rulemaking group to explore all the possibilities.”
In a recent speech setting out part of her vision for the new group, Slaughter stated that rulemakings are a “powerful tool” that have been “underappreciated.” She will task the group, which will be led by one of her former advisors, with updating current rules and developing new ones. Slaughter promised to streamline the FTC’s rulemaking process, which she acknowledged could be lengthy and cumbersome.
The Supreme Court’s recent decision in AMG Capital Management v. Federal Trade Commission, which curtailed the FTC’s ability to obtain equitable monetary relief, gives Slaughter’s push for rulemakings added urgency. In her speech, Slaughter specifically noted that establishing rules allows the FTC to seek to impose civil penalties upon finding a violation, even for a first-time violator. She emphasized that “rules create strong incentives to comply with the law” and that “[p]owerful deterrence makes for lawful markets that are good for consumers and businesses alike.”
She also hinted that the group’s likely initial focus would include “areas where our rules of the road simply did not keep up with rapid changes in technology or markets.” Slaughter specifically noted rulemaking petitions the FTC has already received advocating that the FTC adopt rules prohibiting non-compete clauses and exclusionary contracts by dominant firms.
While many of the details remain unclear, Slaughter’s proposal could mark a dramatic shift for the development of U.S. antitrust and competition law from a common law approach to a more European-style regulatory regime. Since the Sherman Act was first signed into law in 1890, most substantive changes to U.S. antitrust and competition law have occurred incrementally, with federal courts interpreting and applying the broadly worded statutory language on a case-by-case basis. In keeping with this history, the FTC has rarely used its rulemaking authority to develop substantive competition rules related to the core of U.S. antitrust law, i.e., the Sherman and Clayton Acts. Rather, its rules in this area have been mainly procedural (e.g., premerger notification).
Wider Competition Policy Debate
Slaughter’s announcement does not occur in a vacuum. Current antitrust law and enforcement policy have been subject to intense scrutiny over the past few years. Critics claim that a common law approach to antitrust is too slow to identify and stop potential harms to competition in a modern economy subject to rapid change. Indeed, FTC Commissioner Rohit Chopra and current nominee to the Commission Lina Khan are ardent rulemaking proponents who believe that the common law approach “has failed to deliver a predictable, efficient, or participatory antitrust regime.”
Many scholars, practitioners, and enforcers have responded to this criticism by noting that the common law approach has been key to the continued relevance of antitrust for more than 100 years. Developing rules of precedent through judicial decision-making allows for the contextual nuance and flexibility needed for the law to evolve thoughtfully over time, largely free from political pressure. They also note that this dynamism in the law and its focus on the welfare of consumers has contributed to the country’s vibrant and diverse economy.
The debate over the direction of competition law development is likely to skew towards a rules-based regime, at least at the FTC, in light of President Biden’s nomination of Lina Khan to serve as an FTC Commissioner. Khan is a prominent voice for significant change to antitrust law and was a counsel on the House antitrust subcommittee during its recent review of competition (discussed further below). The Senate Commerce Committee held a hearing on her nomination in late April and is scheduled to vote on her nomination later this week. If and when Khan is confirmed, the Democrats would have a 3 to 2 majority on the FTC, with all three of the Democratic Commissioners on the record favoring rulemakings in principle. Slaughter clearly would have allies in any substantive rulemaking. (That majority may be short-lived, however, given President Biden’s nomination of Commissioner Chopra to lead the Consumer Financial Protection Bureau.)
Minority Commissioner Criticism of Prospective FTC Rulemaking
While Slaughter will have allies, any activity to develop substantive competition rules would prove controversial and draw significant resistance among the more conservative Commissioners. For instance, in a recent speech, FTC Commissioner Christine Wilson (R) defended existing antitrust laws, calling them “priceless heirlooms that continue to hold great value.” Wilson cautioned that changes to the antitrust laws—especially changes that weakened the consumer welfare standard—would threaten to undermine the “administrability, predictability, and credibility” of antitrust enforcement. Pointing to recent enforcement actions, Wilson defended existing antitrust law as sufficiently robust to protect competition, and observed that the consumer welfare standard captures effects beyond nominal prices. Wilson argued that any criterion other than consumer welfare “inject[s] additional objectives into the analysis” and “make[s] antitrust enforcement more susceptible to political whims and influence.”
On the specific topic of rulemaking, Wilson reviewed the legislative and administrative history of FTC rulemakings and questioned whether the FTC even has the authority to engage in substantive rulemaking on competition issues. And as for any substantive rulemaking shifting the law to a European-style regulatory regime, Wilson warned that writing new rules could “stifle innovation, raise prices, and lower output and quality without concomitant health, safety, or other benefits for consumers.”
Recent Activity on the Hill May Serve as a Roadmap to the FTC
In addition to the rulemaking proposal at the FTC, there is heightened activity on the Hill that may lead to reform in one way or another. The antitrust subcommittees in the Senate and the House have held numerous hearings on these competition issues, and legislators from both parties are debating different proposals to change the antitrust laws. In particular, in 2020, the House Judiciary Committee’s Antitrust Subcommittee conducted a bipartisan investigation into competition in digital markets. At the conclusion of the Subcommittee’s investigation, the Democratic majority issued a lengthy report finding that major digital companies were violating existing antitrust laws and recommending extensive changes to the law that could dramatically reshape how companies are allowed to operate.
Significantly, the report questioned the consumer welfare standard—the touchstone of antitrust enforcement for the past 50 years—and criticized the Supreme Court for “adopting a narrow construction of ‘consumer welfare’ as the sole goal of the antitrust laws.” The report’s recommendations “for future consideration” included breaking up major digital companies in order to separate “adjacent lines of business,” mandating nondiscrimination and prohibiting self-preferencing, requiring interoperability and data portability, prohibiting mergers and acquisitions by “dominant platforms,” and prohibiting “abuses of superior bargaining power.”
Although the House Judiciary committee officially adopted the report on a party-line vote, aspects of its findings had bipartisan support. The Republican minority’s (more limited) companion report identified several areas of agreement, including concerns that tech companies were “using ‘killer acquisitions’ to remove up-and-coming competitors from the marketplace,” and that the burdens of proof for mergers and predatory pricing cases required reevaluation. These narrow areas of agreement reflect a shared interest in action, which may embolden reformers, but most of the antitrust bills introduced this Congress seem intended more to “signal” to core constituencies rather than make new law.
For these reasons, aside from modest proposals to increase funding for antitrust enforcement, significant bipartisan antitrust legislation remains unlikely. In an environment where broad antitrust legislation remains out of reach, the committee report is more likely to serve as a roadmap for future FTC rulemaking, especially insofar as one of its authors is set to become an FTC commissioner.
The FTC’s foray into rulemaking could lead to a period of uncertainty and legal challenges in those areas touched by a new agency rule. There is likely to be significant debate over the scope of the FTC’s authority, the particulars of the rulemaking process, the substance of any proposed rules, and, when tested in court, the extent of Chevron deference to which the agency is entitled. Substantive FTC competition rules could also create potential divergence in enforcement policy or activity between the DOJ and FTC brought about by the new rules.
Opportunities to weigh in on the process and any proposed rules should abound. Slaughter has taken the position—backed by Khan and Chopra in their recent article—that the agency has the authority to issue substantive competition rules and can proceed with participatory notice-and-comment rulemaking in accordance with the Administrative Procedure Act (APA). Foreshadowing the FTC’s likely approach, Slaughter summarized APA rulemaking as having two major steps: “[t]he agency provides the public with notice of what rule it proposes and then carefully analyzes the public’s comments before finalizing a rule.” Once adopted, rules could be challenged in federal court on several bases, including that the FTC failed to follow APA procedures, that the new rules exceeded the authority Congress granted the FTC, or that the new rules violate some other constitutional or statutory right.
The notice-and-comment process will draw vigorous debate on hot-button issues, including those that impact the tech sector. Already, the Open Markets Institute (in conjunction with other advocacy groups) has put two proposals before the agency. The first petitions the FTC to prohibit employers from requiring or enforcing non-compete clauses with regard to their workers, whether employees or independent contractors. Under current federal antitrust law, non-competes are evaluated under the rule of reason—balancing pro-competitive and anticompetitive effects—and are typically found lawful. An FTC rulemaking on non-compete clauses could move the practice from generally allowed to definitively prohibited. The second petitions the FTC “to prohibit businesses from using exclusive dealing, exclusionary payments, and other similar practices . . . that substantially foreclose rivals from customers, distributors, or suppliers of critical inputs.” Again, this rule would take conduct that is currently judged case-by-case based on its effect on competition and prohibit it outright, even if there were no anticompetitive effects.
The FTC is taking steps that could result in substantive rulemaking activity fundamentally changing the landscape of competition law enforcement in the United States. Although much of the antitrust debate revolves around digital platforms and tech companies, that rules could be far reaching and touch all areas of the economy.
 See “Discriminatory Practices in Men’s and Boys’ Tailored Clothing Industry,” 16 CFR Part 412 (1968). Note that this rule was repealed in 1994. See Notice of Rule Repeal, 59 Fed. Reg. 8527 (Feb. 23, 1994).
 Press Release, Fed. Trade Comm’n, “FTC Acting Chairwoman Slaughter Announces New Rulemaking Group” (March 25, 2021), https://www.ftc.gov/news-events/press-releases/2021/03/ftc-acting-chairwoman-slaughter-announces-new-rulemaking-group
 Rebecca Slaughter, Acting Chairwoman, Fed. Trade Comm’n, “Keynote Remarks at the Consumer Federation of America’s Virtual Consumer Assembly 1” (May 4, 2021) (Slaughter Speech), https://www.ftc.gov/system/files/documents/public_statements/1589607/keynote-remarks-acting-chairwoman-rebecca-kelly-slaughte-cfa-virtual-consumer-assembly.pdf; Press Release, Fed. Trade Comm’n, “FTC Acting Chairwoman Slaughter Announces New Appointments to Agency Leadership Positions” (May 5, 2021), https://www.ftc.gov/news-events/press-releases/2021/05/ftc-acting-chairwoman-slaughter-announces-new-appointments-agency.
 Slaughter Speech at 4–7.
 131 S. Ct. 1341 (2021).
 Slaughter Speech at 2.
 Id. at 1–2.
 Rohit Chopra & Lina M. Khan, “The Case for ‘Unfair Methods of Competition’ Rulemaking,” 87 U. CHI. L. REV. 357, 357 (2020), https://lawreview.uchicago.edu/sites/lawreview.uchicago.edu/files/ChopraKhan_Rulemaking_87UCLR357.pdf.
 Christine Wilson, Commissioner, Fed. Trade Comm’n, “Antitrust on the Antiques Roadshow: Appraising U.S. Antitrust Laws in a Modern Economy,” Remarks for NetChoice “Defining the Digital Market” Event 3 (April 27, 2021), https://www.ftc.gov/system/files/documents/public_statements/1589480/wilson-netchoice-keynote.pdf.
 Id. at 4.
 Id. at 3–9.
 Id. at 7.
 Id. at 10–11.
 Id. at 11.
 Majority Staff of H. Comm. on the Judiciary, 116th Cong., “Investigation of Competition in Digit. Mkts.” (2020), https://judiciary.house.gov/uploadedfiles/competition_in_digital_markets.pdf.
 Id. at 391.
 Id. at 20.
 “The Third Way,” Min. Report of the H. Jud. Subcomm. on Antitrust at 3, 116th Cong. (Oct. 2020), https://buck.house.gov/sites/buck.house.gov/files/wysiwyg_uploaded/Buck%20Report.pdf.
 Slaughter Speech at 3.
 See Open Markets Institute et al., “Petition for Rulemaking to Prohibit Worker Non-Compete Clauses” (Mar. 20, 2019), https://static1.squarespace.com/static/5e449c8c3ef68d752f3e70dc/t/5eaa04862ff52116d1dd04c1/1588200595775/Pe tition-for-Rulemaking-to-Prohibit-Worker-Non-Compete-Clauses.pdf.
 See Open Markets Institute et al., “Petition for Rulemaking to Prohibit Exclusionary Contracts” (July 21, 2020), https://static1.squarespace.com/static/5e449c8c3ef68d752f3e70dc/t/5f1729603e615a270b537c3d/1595353441408/Petition+for+Rulemaking+to+Prohibit+Exclusionary+Contracts.pdf.