Khan: Republican Budget Reduction Would Create ‘Dire’ Situation at FTC

House Republicans’ proposal that reduces the FTC’s budget 9% would create an “extraordinarily dire” situation at the agency and result in furloughs, Chair Lina Khan told House Commerce Committee members during a budget hearing Tuesday.

The Republican-led House Appropriations Committee approved a $37 million reduction in the FTC’s fiscal 2025 budget. The $389 million Republican proposal (see 2406130064) is about 30% less than President Joe Biden's recommendation in March (see 2403110056).

The agency’s antitrust and consumer protection enforcement would be “diminished across the board,” Khan told the House Innovation Subcommittee. She repeatedly mentioned internal findings showing the FTC returns $14 to the U.S. economy for every $1 it spends. That estimate is based on money returned to consumers and savings related to consumer protection and antitrust enforcement, according to Khan’s testimony.

Commissioner Rebecca Kelly Slaughter agreed with Khan that the proposed budget reduction would create a “dire” situation for the agency. Unchallenged acquisitions will result in higher prices for American consumers and fewer product choices, she said.

In addition, Khan addressed implications of the U.S. Supreme Court’s decision overruling the Chevron doctrine (see 2406280043). In general, the agency strives to ensure its enforcement “closely hues” what comes down in court decisions, Khan said. A “core pillar” of agency strategy is remaining “faithful” to the text of congressional laws, so unelected bureaucrats aren’t overstepping boundaries, she said.

The court's decision will “discipline” agencies across the board, Commissioner Andrew Ferguson said. Since the establishment of the Chevron doctrine in 1984, agencies have relied on it to “get away with a lot of stuff” they will now have a difficult time defending in court, he said. Commissioner Melissa Holyoak agreed, saying the FTC must be prepared to defend its actions and rulemakings without overbroad interpretations of statutes.

The FTC’s noncompete rule is a good example of the agency overstepping its statutory authority through the creation of a “legislative” rule, Holyoak said. The U.S. District Court for the Northern District of Texas on July 4 enjoined the FTC’s rule banning noncompete clauses in employment contracts.

CTA signed onto an amicus brief against the FTC’s noncompete rule, calling it an “overbroad national mandate” established by “unelected bureaucrats” without proper workplace expertise. Public Knowledge condemned district court’s decision, saying it’s another attack on the administrative state that will "only further embolden judges without subject matter expertise to seize power from federal agencies and prevent them from effectively serving the American people.”

Khan declined to say Tuesday that the agency will end its pursuit of the noncompete rule. She noted the court’s decision was a preliminary injunction ruling and that a full opinion is expected in August. The FTC will wait for the full opinion and then decide how to proceed, she said. She said noncompete agreements “trap” more than 30 million American workers.

Based on the rule's language, no court will find the statutory authority the majority claims in its noncompete rule, Holyoak said, noting her dissent in the case with Ferguson. Congress didn’t authorize the agency to issue its final rule, the Constitution forbids it, and the rule violates the Administrative Procedure Act (APA), Holyoak and Ferguson said in their dissent. The Supreme Court based its Chevron decision on the statutory limitations of the APA, instead of relying on constitutional justification. This means Congress could potentially restore Chevron through statutory amendments to the APA.

Rep. Tim Walberg, R-Mich., said the district court’s decision largely tracks the Republican dissent on the FTC. He said he hopes the agency will drop pursuing the noncompete rule.

House Innovation Subcommittee Chairman Gus Bilirakis, R-Fla., accused Khan of pursuing rules based on “generous” interpretations of statutory authority, which, he said, has created “internal discord” at the agency. Rep. Kelly Armstrong, R-N.D., said Khan has failed to convince the committee that the agency’s core mission of protecting American consumers isn’t “taking a back seat to the Biden administration’s radical agenda.”

Democrats have “quite a different” view about Khan's approach and results, said House Innovation Subcommittee ranking member Jan Schakowsky, D-Ill., citing Khan’s statement about returning $14 to the economy for every $1 spent. Rep. Kathy Castor, D-Fla., said hopefully Congress can fend off the “harmful” budget cut Republicans proposed. “This is not the time to take the cops off the beat,” she said.