A Trump-Vance Little Tech Agenda for the FTC?
President Trump wants to deregulate and clear bureaucratic sludge. Senator Vance wants to sue Big Tech. Probably. What would a Trump-Vance Little Tech agenda look like for the FTC?
With President Trump naming J.D. Vance as his running mate, speculation is running wild about what that means for policy. And one can see why. The Trump-Vance ticket embraces rather than runs from some of the internal struggles going on among conservatives, small-government minded Republicans, and libertarians. Will a second term for President Trump along with Vance mean rejecting free trade and imposing tariffs? What about taxes? And tariffs? What about deregulation? What does it all mean? I’ll write about those broader issues and tensions in a later column — but right now I want to focus on something a bit closer to home and easier to pin down.
Setting The Stage for Deregulation
The speculation about competition policy is the same basic flavor of dilemma: will the new Administration split the deregulation and antitrust goalposts or hammer on one of them? My prediction: the Trump-Vance administration will be balanced and keep the ball between the uprights. Perhaps the most important thing to understand is that the Biden Administration is coming off a period of remarkable regulatory excess. Here’s a chart from Competitive Enterprise Institute’s Wayne Crews that tracks major rules:
This will ring true to those of you who live and work in the regulatory world. Economic policy within agencies has been more or less delegated to Senator Warren and the policies out of the CFPB, SEC, FTC, and DOJ Antitrust Division walk and talk like she does. President Trump knows there is a unique political opportunity in seizing the deregulatory moment. Listen to his Bloomberg Interview. It is one reason you are hearing a lot less economic populism out of candidate Trump this time around and a lot more about deregulation and a stable environment for businesses. None of this is new to Trump, of course. In 2016 he balanced a strong deregulatory program (naming Neomi Rao, one of the stars of his first term, as OIRA Administrator and the lead of a regulatory rollback) with open calls for antitrust action aimed at Big Tech, Time Warner, Pharma, and others.
J.D. Vance’s appointment also gives the conservatives who would like to weaponize the antitrust laws something to cheer about. Or so they think at the moment. And maybe they will be proven right. “Lina Khan is one of the few people in the Biden administration that is doing a pretty good job,” Vance once announced. That statement does not just bother Big Tech defenders or those weary of Hipster Antitrust and the Neo-Brandeisians or Senator Warren. It bothers just about any one who has been paying attention to the explicit and sub rosa efforts by the Khan FTC to obstruct commerce, to flout the rule of law, to harm small and medium sized businesses with bureaucratic sludge, and to impose barriers to startups.
If you check Senator Vance’s record thoroughly enough you also will find that he rejected a caricatured version of the consumer welfare standard – either falling for (or leaning into) the old deception that modern antitrust is all about prices and does not take into account quality or innovation. Of course, none of it is true. I would not spend too much time worrying about the survival of the consumer welfare standard. Vance is by all accounts a really smart guy. He is capable of understanding the consumer welfare standard point in minutes if he so chooses. He also understands well – certainly better than I do – the political moment. It is not 2016. Nor 2020. Big Tech has already been sued. Over and over. By Trump, the State AGs, Biden, and private plaintiffs. And maybe there will be more. Fine. There may well be more to do enforcement wise. But the larger gains on the margin today are in winning the deregulatory agenda while enforcing the antitrust laws where appropriate.
The questions are: (1) whether Vance will want adjust his position to balance these two forces; and (2) whether it even matters if he does – after all, Mr. Trump is the boss. Plus there is something to be said about playing good cop, bad cop on these issues. Time will tell, of course.
Splitting the Deregulation and Enforcement Uprights
My own view: the pro-Khan and Hipster Antitrust talk from Vance (and others) derives largely from the desire – one shared by his benefactor Peter Thiel – to attack Big Tech when and where they harm competition. But that is not new. Mr. Trump expressed exactly those sentiments the first time around. And maybe will again. But we should not pretend that part is new. Again, the political benefits to the Big Tech attack via enforcement are relatively smaller – there are a half-dozen or more pending suits against Big Tech players. And no significant wins to date. The challenge is how to balance that push with President Trump’s obvious priority of a deregulatory agenda.
First, it goes without saying that one does not advance either of these interests by losing. And the Khan FTC has lost. A lot. And it is not done yet. One does not serve well either President Trump’s deregulatory political interest or Vance’s desire to constrain Big Tech by losing cases or having rules thrown out by the courts. Senator Vance – at the same event where he praised Lina Khan – repeated the conventional and correct wisdom that “personnel is policy.” If that is true then one can expect personnel with expertise sufficient to achieve both goals. That requires intimate understanding of how these agencies actually work, mastery of administrative law, and also antitrust expertise. Everybody likes a winner.
OK, that was a long political economy windup, but what does any of this have to do with startups – that is, Little Tech? Plenty. Little Tech policy stands on the knife’s edge – a balancing act that requires not only a strong impulse toward deregulation to remove barriers to entry and innovation by startups, but also decisive action to deter anticompetitive behavior that thwarts innovation. To put it bluntly, startups will not thrive because Big Tech dies. Startups need large technology firms as viable exit options for successful innovation. But they also need antitrust enforcement to do its job – that is, prevent incumbent firms from deploying conduct that raises barriers to entry. Perhaps most of all, a smart Little Tech policy requires federal and state governments to say “NO” when asked themselves to do the dirty work of thwarting competition from startups.
What Should a Little Tech Agenda Look Like for the FTC?
Optimal Little Tech policy lives in precisely the balancing act between President Trump’s deregulatory motive to take advantage the Biden administration’s excesses and abuses of process on the one hand, and Senator Vance’s impulse to use antitrust to successfully rein in Big Tech overreach on the other hand – while still allowing acquisitions that do not threaten consumer welfare. This is a complex and difficult challenge. One full of political and economic tradeoffs, and one that requires a whole of government approach so that both hands can be helping to achieve the goal rather than fighting one another.
Last week, Marc Andreessen and Ben Horowitz published an important and provocative blog post (and follow up podcast) on what they describe as the “Little Tech Agenda.” What is Little Tech? To them, as the name implies, it is decidedly not “Big Tech,” in the usual sense: Google, Meta, Apple, Amazon, Nvidia, and a few others. But Andreessen and Horowitz mean something more specific by Little Tech: Startups. I’m sure they will lose more than a few friends for suggesting – quite strongly – that President Trump is the better candidate when it comes to the Little Tech agenda and endorsing him on that basis.
Their take is an important one not just because A&H are two of the most important experts on, and players in, the venture capital and the startup ecosystem, but also because the stakes of getting Little Tech right as a policy matter are incredibly high for America. Innovation is key when it comes to economic productivity and the health of the American economy. And, as A&H point out, the success of the American economy in turn determines the role that America is able to play in the world in the next century.
The jumping off point for A&H is something along the lines of “Can The Next 100 Years Be Another American Century?” I do encourage you all to go give it a read and listen. But A&H center the answer to that question around policy - the Little Tech Agenda. They start with a problem: productivity growth is lower than it was in the 1970s. And they have a solution in mind: Little Tech. That is, startups.
We do not today know which startups will matter. We rarely do. But we know we want to set the regulatory conditions such that it is favorable to create, nurture, develop, invest, experiment, and succeed with them here in the United States. The second problem. American policy is anathema to startups. In their own words: “We believe bad government policies are now the #1 threat to Little Tech.”
Amen.
Why? A&H talk about taxes and immigration, but mostly point the finger at regulatory agencies using “brute force investigations, prosecutions, intimidation, and threats to hobble new industries,” and “punitively blocking startups from being acquired by the same big companies the government is preferencing in so many other ways.” A&H share scary, but quite real, examples of startup hostility from inside the White House, as well as from the CFPB and the SEC. But when it comes to an agency most well positioned to either positively or negatively impact the conditions for startups – there is one that stands out above all others.
But Dear Readers, the FTC is at the core of any sensible Little Tech Agenda. The other agencies obviously matter a great deal! As do areas of competition policy that reside in other corners of the government (e.g. immigration policy, permitting reform, and housing policy). We will turn to those soon. But for today – let’s stick with the FTC because I think it deserves the focus. So that got me thinking, what would a serious Little Tech Agenda look like for the FTC?
First, this repeats a bit from above, but just to get everyone on the same page let’s talk about some major themes and underlying assumptions I am starting with in terms of where the next Administration will find itself on January 20, 2025.
Four years of the Biden-Khan and Biden-Kanter FTC and DOJ making M&A activity significantly more costly both through litigation and, more troublesome (because it often evades judicial review), making the pre-merger process as costly and difficult for startups (and others) to exit via acquisition through procedural sludge and bureaucratic shenanigans.
Because of the above, extremely high demand for deregulatory action at the FTC and DOJ to make commerce easier, not harder.
Setting the conditions to win the AI innovation race matters because if we do not win, then China does – and that is not acceptable.
The Administration will understand the double edged sword role that Big Tech plays in the Little Tech ecosystem: (1) acquisitions that can help bring products and innovations to scale and to market for competition and consumers (good); and (2) the threat of imposing barriers to entry for Little Tech through government favor or private action to impede competition.
The combination of the demand for deregulation after the excesses of the Biden antitrust regime with understanding the threat and benefits of Big Tech to Little Tech means two things:
One, the priority will be personnel that have expertise in both administration of agencies, administrative law, and antitrust.
Two, Big Tech will remain under the antitrust radar for the next four years, from antitrust agencies with the capacity to enforce existing law at an expert level, rather than by threats of legislatively abandoning the consumer welfare standard.
I believe these themes play out in a number of ways for the FTC Little Tech agenda. There are five channels through which the FTC policy (and to a lesser extent, DOJ) can influence Little Tech through policy. I’ll talk about each of those five channels, how they might work to influence startups, and what I expect to see.
#1: If the Consumer Welfare Standard is King – Trinko is Prince
The road to the Europeanization of American antitrust and with it, the American economy, begins with undermining the consumer welfare standard. The consumer welfare standard is really short hand for the American antitrust legal system’s requirement that plaintiffs’ burden is to show evidence of harm to competition rather than merely harm to a rival or, even less, just vibes. Plaintiffs often win when they can do that. They often lose when they do not.
Discussions around competition policy often underestimate which parts of its institutions are doing which work to facilitate competition and dynamism. I’ve been singing this song for decades, but no part of the consumer welfare standard is more important than the Supreme Court’s holding in Verizon v. Trinko (2004) that:
"The mere possession of monopoly power, and the concomitant charging of monopoly prices, is not only not unlawful; it is an important element of the free-market system."
This is a simple, and powerful principle. Be they Neo-Brandeisian or progressive or conservatives who desire to weaponize antitrust against large tech firms, demand to undo this core feature of American antitrust law runs high. See, for example,. Lina Khan’s calls to reverse Trinko in her role in producing the Democratic’s House Report.
It is a core feature of American antitrust and, in my view, a fundamental reason why the targets of antitrust suits in the US and Europe are American. Successful, innovative, entrepreneurial firms choose to locate here, not there.
The reasons why are complex. But Trinko and the DNA of American antitrust law choosing not to punish success is certainly one of them. Trinko and the principle that firms can innovate, compete, and succeed -- even become a monopolist and charge monopoly prices -- without violating the antitrust laws is a fundamental core of American antitrust law. Trinko's principle is the doctrinal version of "America does not punish winners." Antitrust law does not and should not be used to hamper winners or create participation trophies for aggrieved rivals less able to satisfy consumers in the marketplace.
This core principle is obviously key to innovation and startup incentives. Having succeeded in building the better mousetrap, the innovator must be allowed to recoup rents from innovating. Maintaining the rate of return on innovation rather than engaging in opportunistic ex post rent extraction is what keeps powerful incentives to innovate.
Yet, Trinko has been under attack. From the FTC’s efforts in its Qualcomm litigation, the DOJ’s case against Apple, and the House’s overt attempt to simplify overturn it, the threat is real and it is coming from our own competition agencies and against the interests of our own economy, competition, and consumers. Just this week we saw tech firms announce they will not roll out new innovations to consumers in Europe because of the regulatory overhang.
The very first thing the FTC and DOJ can do to serve the Little Tech agenda is to – well, knock it off. Don’t bring cases trying to nibble around the edges of Trinko, do not advocate for its end or undermine it. In fact, the FTC and DOJ should use competition advocacy and ability to persuade in international circles that other authorities ought to think about embracing this principle. American antitrust is part of the system that leads the world in promoting the conditions for innovation and economic growth. It is something to be proud of.
#2: Mergers and Acquisition Competition Policy for Startups
Again, some of this is obvious. From a substantive standpoint, the Biden FTC and DOJ have been overtly hostile to startups. It is not always targeted. The new Merger Guidelines bring back 1960s style antitrust analysis that encourages courts to block nearly every transaction. Not even the FTC or DOJ take them seriously. I suspect that courts will not either. But they are worth getting rid of and replacing with the 2020 Merger Guidelines.
Some of the action has been targeted. Both the new Merger Guidelines and FTC policy statements have singled out “serial acquirers” and transactions that impact “nascent competition” as special targets of antitrust scrutiny. Startup acquisitions often do involve repeat players because the repeat players have the financing and scale to bring the innovation to the marketplace. That does not require a free pass for large incumbents by any means. But it requires understanding the economics of these transactions and that the counterfactual world (the one where transactions are prohibited) often will end in no product coming to market and less innovation tomorrow. Similarly, the agency approach to “nascent competition” – now cemented in Merger Guidelines – is often used as a buzzword to excuse the agency from serious thinking about whether the transaction will impact competition in lieu of hand waving and speculation.
And some of the action has been sub rosa – simply imposing merger review burdens and delays to deter transactions. Proudly at times, for this FTC in particular, with its worldview that all commerce and transactions are and efficiencies arising from acquisitions are not real. It is nonsense. But this view finds its way into policy not just in statements and litigated cases, but also abuse of process. A second request for a transaction like this can cost upwards of $5 to $10 million dollars. And that is just the second request. The FTC and DOJ have ample leverage to make life hard on startup firms and they often use it.
There are tough questions here that require empirical evidence and hard thinking. But there are simple and obvious steps to take toward sensible M&A policy aimed at startups: (1) drop the new Merger Guidelines; (2) simplify the second request process; and (3) use the expertise and resources in the building to think hard about the problem of startup incentives and acquisitions rather than cement policy that raises barriers to exit and thus harms competition.
#3: Federal Regulation and Competition Advocacy
This one is simple. And I’ve already mentioned it a few times in the context of deploying competition advocacy to states and international competition regimes. But perhaps the most low hanging fruit available is at the federal level right here in the United States. There are hundreds of federal agencies and authorities that carry out “competition policy” in some way or another. The overlap among these authorities and interaction between them often leads to externalities that hinders policies’ effectiveness.
The Biden administration “whole of government” approach to competition policy – the creation of an Executive Order – recognized the overlapping authority problem and attempted to solve it by creation of a Competition Council within the Executive Office of the President. Tim Wu was its first Chair. And the Council’s mandate was to “work across agencies to provide a coordinated response to overconcentration, monopolization, and unfair competition in or directly affecting the American economy. The Council shall also work with each agency to ensure that agency operations are conducted in a manner that promotes fair competition, as appropriate and consistent with applicable law.”
This is a great idea. And it is more important than ever. Within just the last month the FTC, FAA, CFPB, FCC, DOJ, FERC and others have engaged in competition policy decisions. Many of these impact Little Tech. The Council has the potential to help to mitigate the costs and burdens of overlap while coordinating and focusing the President’s competition policy objectives. The next Administration should keep it – it is a useful tool to implement sound Little Tech policy but also competition policy generally.
The Council can be useful in helping to split the uprights discussed above. It can play a role in achieving deregulatory objectives. Perhaps most importantly, it can help agencies say “NO” to rent seeking attempts to harm Little Tech to benefit powerful incumbents or otherwise.
#4: Artificial Intelligence Policy at the FTC
This could be a whole separate newsletter. And it probably will be in the next few months. But it is incredibly important so let me say something about it here both in terms of the FTC’s consumer protection mission as well as its competition mandate. Though much of the competition point is subsumed in having a sensible approach to mergers, as discussed above.
First, the regulatory battle over the future of AI now takes place now over – and this is a gross oversimplification – two competing visions. In one, some “AI model” ultimately prevails on the market and in the other, thousands upon thousands of flowers bloom and complete. In this second vision, some AI models fail, some AI models succeed, and ex ante it is really hard to tell which is which. The former model often appeals to competition regulators. Scale does matter in AI. And if scale is so essential then maybe only a few models can survive in equilibrium. If that is the case – we better think hard about issues like market power and how to regulate various AI use cases.
The regulatory approach under the first vision is, not to put it too bluntly, but largely to stop innovation in its tracks now, declare winners, and work on a regulatory framework to control uses as one would with a common carrier. A&H criticize the Biden AI Executive Order for taking this approach – including a comical interaction they report with the White House claiming it is willing and able to shut down whatever parts of matrix algebra it needs to in order to keep innovation limited. The Biden AI Executive Order ought to be dumped immediately.
The second vision rejects the premise that only the big guys can win and focuses instead upon a regulatory apparatus to facilitate startups in the AI space rather than control them. The most important aspect of Little Tech policy in the AI space is probably mergers and acquisitions. Innovators have to be able to experiment and then, if successful, exit profitably without cumbersome delay. But there are other dimensions to Little Tech competition and consumer protection policy. To name just a few: (1) the use of noncompete agreements in AI companies is a much more efficient way to protect and develop knowledge than trade secret; the FTC has banned all of them; (2) competition advocacy to promote the second model in other jurisdictions – both at the state level (where a lot of shenanigans are occurring) and internationally; and (3) bringing a healthy dose of skepticism and uncertainty into antitrust and consumer protection analysis of claims that depend upon knowing today which innovations will be successful tomorrow.
#5: Antitrust Enforcement
Plain and simple, the antitrust agencies need to bring cases when private conduct harms that raise barriers to entry to startups and prevent competition. This does not take new legislation nor rulemaking. What this requires is smart and savvy enforcement by the FTC and DOJ staffs to identify anticompetitive conduct. This is what the FTC and DOJ do best when picking cases to win rather than for political purposes. Both agencies remain, despite a significant talent drain at the FTC, full to the brim with talented lawyers and economists.
There are a few specific Little Tech components of this. There will no doubt be good cases to bring to protect the startup ecosystem from anticompetitive behavior without killing the market for profitable exit and scale to bring new innovations to the market for consumers.
This is the second upright. It plays an important role to achieve both goals of the next Administration. It is a delicate operation – defanging the administrative state and fighting bureaucratic sludge that hinders Little Tech with one hand while using the other to police anticompetitive conduct from would-be rivals. The second upright is critical to a Little Tech agenda. It is a double-edged sword, indeed. But it is also, I think, a balancing act that is not only required for Little Tech to thrive, but also complements quite well the combined politics and priorities of the President and his running mate.