The Taxpayers Protection Alliance argues Lina Khan’s FTC has abandoned consumer welfare, seeking to “subvert market forces to regulators’ whims” and wrongly target one of America’s most productive industries: private equity
- The FTC’s aggressive regulatory agenda, spearheaded by Chair Lina Khan, creates unnecessary red tape for businesses that throws sand in the gears of the economy – limiting access to critical capital and ultimately reducing competitive economic activity, the Taxpayers Protection Alliance argues in a new op-ed.
- From supporting 5% of U.S. GDP in 2022 to providing $135 billion in wages and benefits for workers at private-equity backed small businesses, Chair Khan’s agenda wrongly targets private equity’s invaluable market contributions that strengthen the American economy.
As outlined in a new piece from Taxpayers Protection Alliance Policy Analyst David McGarry, recent proposals from the Federal Trade Commission (FTC) and Department of Justice (DOJ) – including changes to the premerger notification requirements and new draft merger guidelines – sacrifice well-established market principles “in pursuit of a radical antitrust theory.” The cost? Lost capital, fewer opportunities for American small businesses, and a less competitive marketplace.
Chair Khan’s FTC threatens economic stability via regulatory overreach
Despite Chair Khan’s agenda, private equity provides critical access to capital that businesses – and, by extension, their employees – need. As McGarry highlights, private equity serves a straightforward, but meaningful, function in the U.S. economy:
“Although not obvious to many, private equity’s economic function is simple — to move money from those who have it to those who need it. Fund managers put otherwise stagnant capital to productive use, enabling under-resourced businesses to grow, innovate, create wealth, and provide goods and services to consumers.”
However, the FTC’s regulatory agenda, as AIC President & CEO Drew Maloney recently argued in the Financial Times, constitutes little more than a “power grab,” ignoring the basic functions of economic growth that private equity facilitates. As McGarry notes:
“The [FTC] explicitly has suborned consumer welfare to its own subjective, economically myopic and legally dubious notions of competitive fairness…FTC Chair Lina Khan’s overarching distrust of private equity harmonizes entirely with her hostility toward many mergers and other common business behaviors that regulators have considered benign or pro-competitive for decades…Khan’s program will prevent markets from distributing capital to its most productive uses…”
Proposed changes depart from established economic precedent, creating uncertainty and unnecessary burdens for businesses
While Chair Khan has touted the FTC and DOJ’s proposed approach as a way to increase competition, McGarry argues that these misguided changes will ultimately harm healthy – and necessary – market activity.
On the draft merger guidelines, McGarry joins the ranks of established antitrust experts like Lawrence Summers, former Treasury Secretary and former Director of the National Economic Council during the Obama administration, who called the draft guidelines “almost like a war on business.” As McGarry notes:
“These [proposed merger guidelines] sever the agency from traditional, pro-consumer antitrust jurisprudence to favor an arbitrary “I know it when it I see it” approach. These vague standards give businesses little certainty about what practices regulators deem illegal.”
Private equity plays a critical role in driving economic growth
Coming at the cost of consumers and American small businesses, Chair Khan’s aggressive regulatory agenda “badly misunderstands markets” and grossly underestimates private equity’s contribution to U.S. economic vitality.
Per a recent EY report, and as McGarry notes, private equity directly generated $1.7 trillion of the United States’ gross domestic product (GDP) in 2022. In addition to its contributions to U.S. GDP, private equity continuously provides portfolio diversification for public pensions and supports American small businesses – with 85% of private-backed businesses in 2022 having 500 employees or less. As McGarry points out:
“[Chair Khan’s skepticism of private equity] stumbles blindly past the stratospheric economic growth that stable banking systems and readily available investment funds make possible. It further overlooks that financial institutions earn the profits they generate by assuming vast risks and performing many other necessary (though sometimes difficult to grasp) services.”
The bottom line
Adding to mounting critiques of recent FTC attempts at regulatory overreach, McGarry rightfully identifies the real consequences such overregulation will have for small businesses and American consumers alike – underscoring just how critical of a role private equity plays in generating sustainable growth across the economy.
Read McGarry’s full piece HERE.
