Monopoly on a Bad Agenda

The Federal Trade Commission has thrown so much spaghetti at the wall to see what sticks, it’s made a royal mess of the U.S. antitrust kitchen. In the process, it’s infringing on economic rights that amount to property rights.

Even losing prominent legal challenges against mergers and acquisitions—Microsoft’s acquiring Activision, Illumina’s reacquiring its spinoff Grail, Amgen’s acquiring Horizon Therapeutics, Meta Platforms’s acquiring Within Unlimited—hasn’t deterred the FTC’s radical leadership from wholesale sowing chaos in antitrust policy and enforcement.

You don’t have to love the Big Tech targets among antitrust lawsuits, you can remain clear-eyed about Big Tech censorship of conservative, Christian and other viewpoints and still recognize that the Biden FTC’s weaponization is a serious problem.

A common thread in the FTC’s and DOJ's legal marauding is advancing theoretical or potential concerns of anticompetitiveness. The courts (including FTC’s own in-house administrative “court”) have insisted on evidence to substantiate Chairwoman Lina Khan’s and her allies’ speculative assertions.

The FTC alleged the Illumina-Grail tie-up would harm Grail’s competitors. The agency ignored the fact that Grail is a startup with a novel cancer blood test and no competitors in an emerging market. The FTC’s administrative law judge ruled against the commission, writing, “The Clayton Act protects competition, not competitors.”

Now the FTC and the Department of Justice have proposed onerous merger review guidelines. These appear intended to slow merger reviews way down, increase cost and time barriers for M&A deals, sweep in many more proposed mergers and discourage potential merging parties from combining.

The ante of extensive paperwork filing requirements just to get an initial review will jeopardize many constructive mergers and acquisitions from even being attempted.

Such a hard freeze of routine M&A will carry severe economic consequences, including keeping many a startup or early-stage firm from being acquired by a bigger firm. The smaller business won’t be able to scale up, lacking the practical resources to thrive, perhaps seeing its promising innovations never reach consumers.

The goal of the Biden administration, and Chairwoman Khan in particular, is borne out to be eradication of the Consumer Welfare Standard and imposition of far higher hurdles even for competitively neutral or consumer-beneficial tie-ups.

President Biden’s 2021 executive order and pretty much everything the Khan FTC has done inject factors irrelevant to consumer welfare. The result: less freedom to benefit from the fruits of one’s labors. This new antitrust order assaults free enterprise, which incorporates private property rights in the economic sphere.

The Justice Brandeis model of the earlier part of the 20th century made antitrust jurisprudence malleable to the point of unpredictability and its being less tethered to the rule of law. Things like company bigness, labor market impacts, effects on competitors, etc. counted, with little concern for the welfare of consumers.

That changed in the 1970s and 1980s, as courts adopted objective standards like hard economic data, precisely defined markets and demonstrable consumer harm or benefit.

The Antitrust Division of the U.S. Justice Department has also taken an activist, neo-Brandeisian turn. But DOJ is constrained by greater accountability to Congress as a cabinet department. The FTC, like independent agencies in general, lacks sufficient accountability. The proof of this is in the pudding.

Upon resigning as the sole remaining Republican commissioner, Christine Wilson decried as one reason among many for her resignation the “antitrust enforcement policy statement [of November 2022] asserting that the FTC could ignore decades of court rulings and condemn essentially any business conduct that three unelected commissioners find distasteful.”

The U.S. House of Representatives has launched extensive oversight efforts of the FTC’s excesses. (See here, here, here, and here, for example.) Rep. Scott Fitzgerald (R-Wisc.) has proposed legislation to suspend the FTC’s powers when there isn’t at least one commissioner from the other political party (which has been the case since February).

It’s past time to force Chairwoman Khan, her colleagues and fellow travelers to clean up the mess they’ve made.

Sen. Sanders Wants to Repeat a Policy Failure

What do you get when you cross a self-proclaimed socialist with a U.S. Senate committee gavel?

You get legislative power used to push price controls, extensive regulation and “show trial” hearings and official reports designed for political effect and to cripple highly innovative economic sectors.

Evidentiary exhibit #1: Sen. Bernie Sanders, chairman of the Senate Health, Education, Labor and Pensions Committee, and his crusade against the U.S. biopharmaceutical sector.

Sen. Sanders demands a “reasonable pricing” requirement for federal research funding that leads to a marketable “drug, biologic, or other health care technology.” He and other lawmakers who’ve turned drug pricing into a bloody shirt are pressing for this measure as part of the otherwise bipartisan Pandemic and All-Hazards Preparedness Act reauthorization or Majority Leader Chuck Schumer’s drug pricing legislation.

This legislative demand continues a string of Sanders showmanship berating and attacking successful medical breakthroughs—and the innovators who’ve achieved these successes amidst paths fraught with trial and error.

For example, Sen. Sanders’s HELP staff produced a June 12 report titled “Public Investment, Private Greed.” It purports that the U.S. government’s funding of basic research, the stage where essential scientific discoveries that hold the potential of practical use are made, should constrain the prices of eventual products.

This report takes liberties that distort facts, such as using terms like “invents” in connection with basic discoveries by government scientists. Exceptional cases are made to appear the norm, such as additional collaboration and funds during public health emergencies to bring a drug through Food and Drug Administration approval and to market.

The report skates past inconvenient details. For example, it simplistically compares the American means of rapidly bringing medical innovations to patients with government-run health systems in other countries. Those health systems dictate unreasonably low prices, keep many new treatments unavailable and deny the most vulnerable patients access to new drugs.

Sen. Sanders wants to peg U.S. drug prices to artificially low, government-set ones. And he calls for a “reasonable pricing” clause in National Institutes of Health licensing agreements.

This would repeat the tried-and-failed NIH CRADA experience of the 1990s. The Bayh-Dole Coalition warns, “We've been down this road before, and it was a disaster.” The Sanders staff report tries, but can’t explain away these facts.

In 1989, NIH started requiring a “reasonable pricing” provision in its Cooperative Research and Development Agreement federal contracting vehicle as a condition for an exclusive license to NIH-funded technologies. The clause injected uncertainty, diminished IP value and undermined property rights over any eventual product.

The pricing requirement caused a significant drop in NIH CRADAs. They fell from 42 in 1989 to an average of 32 the next six years. This drop-off in CRADAs led NIH to eliminate the provision. CRADAs with NIH immediately shot up to about 90 agreements in 1996 and more than 160 in 1997.

When the government price control was removed, NIH Director Harold Varmus said “the pricing clause has driven industry away from potentially beneficial scientific collaborations with [NIH] scientists without providing an offsetting benefit to the public. . . . Eliminating the clause will promote research that can enhance the health of the American people.”

In 2021, NIH assessed this episode and squarely attributed the plunge of the 1990s to the “reasonable pricing” clause and the uptake to its removal.

It would be foolish for any reasonable lawmaker to support government price control schemes. Too many have already unwisely enacted drug price controls in the “Inflation Reduction Act.”

The IRA’s government drug price “negotiation” (i.e., dictation) will result in over 235 fewer new medicines and eliminate 1.1 million jobs. It’s already undercutting R&D into biomedical breakthroughs.

The honest truth is that government price controls, including a “reasonable pricing” clause, harm patients and American innovation.

Then NIH Director Varmus put it best: “The [price control] clause attempts to address the rare breakthrough product at the expense of a more open research environment and more vigorous scientific collaborations. One has to have a product to price before one can worry about how to price it, and this clause is a restraint on the new product development that the public identified as an important return on their research investment.”

Amen!

Half a Loaf Reagan Would Have Taken

Is the Fiscal Responsibility Act, the vehicle for dealing with the federal debt limit and avoiding a fiscally irresponsible default by the U.S. government, ideal? No.

Is the Fiscal Responsibility Act worth voting for? Yes.

Consider what’s in it: spending caps for 6 years that hold federal spending nearly flat (and that bureaucrats and special interests that live off federal spending are wailing over); budget cuts as incentive to fund government by regular order—congressional appropriations; defunds new IRS agents, who’d surely harass average citizens and small businesses; spares taxpayers who didn’t take on student loan debt from bailing out financial risk takers who did; reclaims unspent COVID funds; work requirements for able-bodied SNAP/Food Stamps and TANF recipients; closes loopholes by which states cheat on meeting welfare reform work requirements; reins in regulatory excess with administrative PAYGO guardrails (this constrains agencies across the government); better than halves the bureaucratic NEPA process timetable for infrastructure and energy projects; expedites permitting for the Mountain Valley natural-gas pipeline; and a 2-year debt limit extension, removing that sword of Damocles as a pre-election day weapon.

That’s not everything in the House-passed Limit, Save, Grow Act, but it’s not nothing. The fact is, the Limit, Save, Grow Act was never the bill that would reach the president’s desk. But the Fiscal Responsibility Act certainly goes a long way past a “clean” debt ceiling measure. It advances conservative principles, it achieves protaxpayer victories, it reins in the Administrative State and it limits federal spending along with clawing back taxpayer money.

If that’s not a step toward protecting property rights, then what is--that could pass this narrowly divided Congress and get President Biden's signature? It’s more than a reasonable person might have hoped for, but for the savvy approach Speaker McCarthy and Republican leadership persuaded a majority of their colleagues to support. It’s more than most though possible, but for the trust GOP lawmakers in both the House and Senate put in the legislative strategy that has gotten a real chance at enacting a debt ceiling bill with several constructive reforms and fiscal responsibility measures.

My perspective stems from being in Washington beginning when President Reagan resided in the White House and both parties, both sides of the Hill and the principled conservative president understood that their job was governing.

Not compromising principles, but not misunderstanding that governing entails cutting deals that give each side something but not everything. Such a bill may not be satisfying, but it’s usually prudent, responsible and gets you something.

Not making the perfect the enemy of the good.

Not being obstructionist when obstructionism would do more harm than good—which default would surely do. And make no mistake: President Biden and his party wouldn’t reap deserved blame (i.e., for refusing to negotiate for months, for playing a brand of brinksmanship that would make the Soviets and Chairman Xi proud) if the Fiscal Responsibility Act failed.

Understanding that, at the end of the day, most constituents elect their Senators and Congressmen to legislate, not become a Don Quixote.

I strongly suspect that Reagan would have taken the deal. That’s how Reagan got tax cuts, tax reform and other legislation through Congress. Reagan’s former OMB director, James Miller, recounted Reagan’s approach to governing as a principled, pragmatic conservative:

“Despite being tenacious and consistent, President Reagan would go to Congress and ask for certain things. He’d also compromise from time to time. When he’d get a half a loaf, would he say, ‘Thank you for this wonderful piece of legislation; this is exactly what I wanted’? No. He would say, ‘Thank you for giving me this half a loaf. Next year, I’ll be back for the other half!’”