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In Competition and Consumer Protection, The FTC Needs More Funding To Give Economic Power Back To Americans

Congressional Democrats managed to pass a few crucial measures during December’s lame duck session. One tiny fraction of the omnibus bill to fund the government was the Merger Filing Fee Modernization Act, a measure for which anti-monopoly advocates have long been pushing. 

The Act reforms the Hart-Scott-Rodino (HSR) filing fee structure, the program through which the Federal Trade Commission (FTC) and Department of Justice (DOJ) collect fees from corporations seeking to merge and gain federal approval. The HSR program takes significant resources to administer, and the number of companies seeking to merge has increased in recent years — between 2020 and 2021, filing more than doubled from 1,637 to 3,644, but the fee system had not been updated to account for increased burden upon the antitrust enforcers. Due to the Merger Filing Fee Modernization Act increasing the cap on fees, the Congressional Budget Office estimates that the new fees will result in $325 million in each of the first five years, with the two antitrust agencies splitting the fees and receiving $162.5 million each per year. 

Congress appropriated $430 million for the FTC and $225 million for the DOJ Antitrust Division for FY2023. These budgets represent only a 22.5% and 11.9% increase from FY2022, respectively, and fall well short of the agencies’ respective requests of $490 million and $273 million. Since 2010, when adjusted for inflation, the FTC has received only a $40 million increase and the Antitrust Division a measly $7 million extra, despite processing more than double the number of HSR transactions in 2022 that they did in 2010. The agencies didn’t request more funding because they’re greedy; they need more funding to carry out their enormous missions, and Congress should support the missions. 

The Merger Filing Fee Modernization Act, while an important reform, only increases what share of the FTC and DOJ Antitrust budget comes from HSR fees, and does not increase the overall budget independent of congressional funding. The recent flood of mergers (and higher valuations of those mergers) necessitates additional staff and resources at the agencies to properly review each transaction. Without more investment by Congress, the FTC and DOJ will remain pitifully short-staffed and under-resourced relative to the thousands of mergers and acquisitions that take place each year. 

The perpetual underfunding of antitrust regulation has been known for years. As anti-monopoly researcher Matt Stoller pointed out, “spending on antitrust today is about a third what it was throughout most of the 20th century, and with a much bigger economy today. To get back to the level of antitrust enforcement we had in 1941 would require increasing the budgets of the agencies by ten times.” 

And beyond the DOJ Antitrust and FTC’s edict to enforce competition, the FTC has another underfunded but crucial mission: consumer protection. 

The FTC’s Mission To Protect Consumers Is Just As Important As Protecting Competition

In 2022, the headlines were filled with stories of corporate misdeeds, oftentimes involving deceit of customers. The FTC has a legal mandate and enforcement power to crack down on many such businesses. Through Section 5 of the FTC Act, the FTC can take legal action against companies that engage in “unfair or deceptive acts.” 

The FTC has two options for enforcement under Section 5 — administrative and judicial. Administrative enforcement happens after a problem has already arisen. It involves a proceeding in front of an administrative law judge, who issues a cease and desist order if they find a given practice illegal under Section 5. It is then up to the FTC to determine whether the illegal practices warrant additional penalties, mainly through consumer redress or civil fines. Judicial enforcement, on the other hand, is a preventive measure used by the FTC while the administrative process is still underway. For example, the FTC can use judicial enforcement to enjoin a merger that will hurt consumers while the administrative judge is still determining its legality.

One of the FTC’s “top priorities” is to protect older consumers. A 2022 FTC report found that older Americans were more likely to be victims of scams and lost more money when being scammed. The best-known of these are telemarketing scams in which fraudsters convince people to transfer money by impersonating a friend or government agent, or convincing them they’d won a prize or lottery. The fraudsters can’t carry out these schemes alone — and the FTC is cracking down. 

FTC Chair Lina Khan has made good on the promise to prioritize cases that harm elderly Americans. In June 2022, the FTC filed a lawsuit against Walmart for its part in facilitating fraudulent transactions that targeted the elderly. The lawsuit alleges that Walmart’s money-transfer service routinely turned a blind eye to fraudulent transactions by not training their employees or warning consumers, thus allowing the scammers to collect the ill-gotten money. Over a five-year period, over 200,000 fraud-induced money transfers were sent to or from Walmart stores, costing consumers nearly $200 million. If the FTC is successful, Walmart will have to compensate consumers for the lost money, pay civil penalties, and be subject to a permanent injunction that forces them to end money-transfering practices that result in fraud.

While older consumers are more likely to fall victim to telemarketing scams, children are unknowingly being tricked by corporations to increase their profits. Epic Games, the video game company that owns Fortnite, was fined $520 million for numerous privacy violations and “deceptive interfaces” that resulted in users, many of whom were children, making unintended purchases. 

The FTC also cracked down on so-called “dark patterns” — underhanded tactics that companies use to squeeze more money from consumers including junk fees, misleading advertising, data sharing, and making it difficult to cancel subscriptions. The agency has prosecuted LendingClub, ABCmouse, and Vizio for these dark patterns, and returned millions of dollars to consumers. The public benefits greatly from this work, both by cracking down on shady schemes and putting money back in the victim’s pockets.  

Although it carries out work that clearly benefits everyday Americans, the consumer protection side of the FTC often gets less press than high-profile mergers and acquisitions. But Americans are weary of corporations deceiving them to make more money off their private information. According to a 2019 study by Pew Research, 79% of Americans are very or somewhat concerned about how companies are using their personal data. Enforcing laws we already have in place shows people how the Biden Administration can help them by reining in corporate misbehavior and putting money back in their pockets. 

In FY 2022, the FTC returned a total of $459.6 million to 2.3 million consumers who lost money to illegal business practices. These are material results demonstrating to people that the government can protect them from corporate shenanigans. And yet, the budget for FY 2023 underfunded the FTC by $60 million. The FTC’s budget request included funds for an additional 148 full-time staff members specifically dedicated to consumer protection, a worthy investment for addressing more of these complaints. Without the full amount of requested funds, it’s unclear how many staffers the FTC will be able to hire, but it certainly will not be enough.

The FTC should make bold requests for adequate staffing, and the Biden Administration should be willing to elevate any resistance from Congress. And don’t just take our word on why such a fight would be good politics – Biden’s prioritizing consumer protection in his State of the Union address demonstrates that he and his team see consumer protection as a political winner. 

Going After Dominant Firms Is Not Enough To Protect Consumers

As with antitrust enforcement, the FTC looks to “maximize impact” of its limited resources for enforcing data privacy by going after “dominant” and “intermediary” companies. While this makes the best of the situation, this approach means plenty of abuses are falling through the cracks formed by inadequate funding for enforcement. Compare this to how the Securities and Exchange Commission often targets well-known celebrities when they engage in petty financial fraud — these cases are relatively easy to prosecute and generate headlines that hopefully give the impression of a tough agency on the beat, but these are all ultimately efforts to make do with far too little.

The actions the FTC does take against privacy-violating corporations are isolated and have limited power to deter future misconduct. For example, in 2019, the FTC fined Facebook $5 billion for misleading users by sharing personal information to third parties without their knowledge. While the fine was the largest ever levied by the agency, Facebook was using this misleading tactic for seven years in violation of a 2012 FTC order following previous allegations of even more brazenly deceptive practices. 

And it is far from clear if the Trump-era FTC would have taken enforcement action but for the horrendous press Facebook generated for their relationship with Cambridge Analytica. Reliance on high stakes and high stress journalism is not a dependable basis of law enforcement – especially as journalism declines as an industry (ironically, in large part due to abuses by social media platforms). The fact that Facebook, one of the largest companies in the world, got away with deceptive data sharing for seven years also indicates that the FTC needs more resources to go after the dominant firms in addition to ensuring that smaller companies are not engaging in similar tactics. And the $5 billion fine, while historic, was a drop in the bucket for a company that hit a $1 trillion market cap not long after. 

The limited financial impact of historic fines would be true for other large corporations profiting off their customer’s information as well. As Marta Tellada of Consumer Reports pointed out, “fines alone will not reform [the] market,” and the tech giants view fines “as a cost of doing business.” 
And it’s not just Facebook which collects personal information on its users — today, 73% of companies in the United States do so, from small businesses to monopolies, with many opportunities for corporate malfeasance. When a potentially unfair or deceptive business practice becomes endemic across the economy, regulators cannot meaningfully “set examples” and hope the rest of the market complies. Yes, the FTC needs new rulemaking as well as congressionally-mandated tools for protecting consumers, but ramping up capacity in the meanwhile can tangibly benefit millions of Americans. The FTC needs the resources to properly enforce the laws it is already charged with carrying out.

Andrea Beaty is Research Director at the Revolving Door Project, focusing on anti-monopoly, executive branch ethics and housing policy. KJ Boyle is a research intern with the Revolving Door Project. The Revolving Door Project scrutinizes executive branch appointees to ensure they use their office to serve the broad public interest, rather than to entrench corporate power or seek personal advancement.

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