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September 2012 Policy Study, Number 12-10

   

The Federal Trade Commission’s Investigation of Google

   

Boldly Going

   

 

Ominously for consumer welfare, two of the Federal Trade Commission’s members, Chairman Jon Leibowitz and Commissioner Thomas Rosch, have said the FTC should adopt novel theories in order to expand the agency’s consumer protection authority. Last year Chairman Leibowitz said that “one of the commission’s priorities is to find a pure Section Five case under unfair methods of competition. Everyone acknowledges that Congress gave us much more jurisdiction than just antitrust.”[15]

 

What Leibowitz and Rosch would like to do is develop a theory that would not require finding real harm to competition — reduction in consumer welfare (see our discussion above) — but only harm to . . . well, whatever they want. Rosch has suggested that finding reduction in consumer choice might be sufficient for bringing an action, even where consumers are not hurt.[16]

 

There are two problems with Commissioner Rosch’s theory. First: there’s no evidence that reducing consumer choice would reduce consumer welfare. Almost no competition theory scholars have supported that novel theory and it looks as if the theory could be used to prop up competitors instead of competition.[17] That is, essentially, the European view of competition law, not the American view.

 

More ominous still, however, is the concept of a new theory in law enforcement. We are a nation that, we hope, lives under laws, not under novel theories of men. How can Google, or any other company, obey the law if the law to which it will be held accountable is still being formulated in the mind of the law enforcer? Surely that violates at least the spirit of Article I, Section 9, Clause 3 of the U.S. Constitution, which provides that “No Bill of Attainder or ex post facto Law shall be passed” because it denies the company fair notice of what conduct is unlawful.

 

If Commissioners Leibowitz and Rosch haven’t even gotten to the point of being able to say about conduct prohibited under their novel theory “I know it when I see it,” how could Google or any other company engaging in such conduct be found guilty for violating the law? The chance that any decision that the Federal Trade Commission made under such a novel interpretation would be upheld by an appellate court is gloriously low — which argues for the FTC’s not bringing such a case in the first place.

 

And if the Commission were somehow to prevail on such an “unfair” theory, the result would be to deter large companies from engaging in future innovations, lest they run the risk that some future regulator will decide — after the fact — that the innovations were unfair. That would harm the very consumers the laws were intended to protect.[18]

 

   

 

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