Regulatory Rents : An Agency-Cost Analysis of the FTC Rulemaking Initiative

The Federal Trade Commission’s initiative to use rulemaking powers to target “unfair methods of competition” under the FTC Act is part of a broader package of dramatic recent changes in antitrust enforcement policy and practice by FTC leadership. These changes, which have rejected the consumer-welfare standard and rule-of-reason balancing tests, represent a strategic effort to bypass the rigorous standards of federal antitrust case law and qualify for the deference generally accorded agency rulemaking by federal courts. Principal-agent analysis suggests that these changes, by detaching antitrust enforcement from antitrust case law and substituting regulatory discretion for structured guidelines, raise a significant risk that the agency will undertake actions that depart from its statutory mandate by targeting practices that do not pose any credible threat of competitive harm