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Expanding the FTC's Role to Counter China

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Expanding the FTC's Role to Counter China

June 22, 2021

The House Judiciary Committee's package of anti-tech monopoly legislation heads to markup tomorrow. Included in it are several proposals to strengthen the Federal Trade Commission (FTC) and the Department of Justice's Antitrust Division (DOJ-ATR), the two primary US competition enforcement agencies.

Out of this package, the two bills that are least controversial, and thus most likely to move forward, are the State Antitrust Enforcement Venue Act of 2021 (H.R. 3460) and the Merger Filing Fee Modernization Act of 2021 (H.R. 3843). The former would empower state attorneys general to do more effective antitrust enforcement, and its Senate companion is co-sponsored by Sen. Mike Lee (R-UT) and Amy Klobuchar (D-MN). The latter bill would increase resources for FTC and DOJ-ATR, offset by new revenues from updated merger fees. As I've argued, I think the MFFMA is smart policy that will build long term enforcement capacity.

But policymakers could take this opportunity to go further. A key dimension that's often overlooked in these debates is the geopolitics of tech competition. As this and other FTC-related proposals move forward, policymakers should take steps to strengthen the agency's ability to counter unfair competition from China's state-backed tech sector, and exploitation of mergers and acquisitions (M&As) to gain access to strategic technology.

This could be accomplished by giving FTC greater authority to scrutinize M&As involving companies that receive direct or indirect subsidies from foreign governments like China, complimenting CFIUS and other efforts by the law enforcement and intelligence communities, and putting US innovators on stronger competitive footing. Indeed, the US China Commission's 2020 report to Congress outlines such a proposal:

Congress expand the authority of the Federal Trade Commission (FTC) to monitor and take foreign government subsidies into account in premerger notification processes.
• The FTC shall develop a process to determine to what extent proposed transactions are facilitated by the support of foreign government subsidies.The definition of foreign government subsidies shall encompass direct subsidies, grants, loans, below-market loans, loan guarantees, tax concessions, governmental procurement policies, and other forms of government support.
• Companies operating in the United States that benefit from the financial support of a foreign government must provide the FTC with a detailed accounting of these subsidies whenundergoing FTC premerger procedures.
• If the FTC finds foreign subsidies have facilitated the transaction, the FTC can either propose a modification to remedy the distortion or prohibit the transaction under Section 7 of the Clayton Act, which prohibits mergers and acquisitions where the effect “may be substantially to lessen competition, or to tend to create a monopoly.”

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