Like a battered boxer, the vape manufacturer Juul has managed to survive to the bell and will go another round with the Food and Drug Administration (FDA). The company recently locked down the necessary cash to avoid chapter 11 bankruptcy, albeit at the cost of 400 employees and 30–40 percent of its operating budget. The proximate cause of Juul’s financial near toppling is the FDA’s June order that abruptly banned the sale of the company’s vapes in the United States. The company immediately appealed the order and secured a pause on the ban, arguing that the FDA’s objections were “arbitrary and capricious and lack[ed] substantial evidence.” Indeed, Juul says that the agency simply ignored more than 6,000 pages of regulatory filings. But appeal or no, Juul struggled to obtain funding with the sword of Damocles suspended above it. In effect, the FDA nearly forced bankruptcy on a longstanding persona non grata without ever substantiating its accusations against the vape maker.
The agency acted in direct contravention of the American justice sequence, which demands that the accused review and dispute allegations levied against him and that a final judgment be made before a penalty is handed down.
The FDA–Juul debacle isn’t an anomaly. To further ideological ends, officials often use their power to bulldog their enemies with poorly founded administrative actions, threats of regulation, and faux investigations. It’s the ultimate shoot-first-and-ask-questions-later strategy.
Since Joe Biden took office, the Federal Trade Commission and Department of Justice have worked to establish a new age of aggressive antitrust actions that often run afoul of accepted legal standards.
And unfortunately for victims such as Juul, an adjudication’s final result is often beside the point since the regulatory process can itself become a de facto punishment as companies get dragged down below the waterline by procedural burdens. This strategy is a sweet deal for officials, who are liberated to punish and cajole whomever they please, but it’s a disaster for the civil rights of business owners and other citizens. And a pernicious knock-on effect is that other private actors alter their behavior to dodge subsequent spasms of regulatory wrath. Juul, for instance, attempted a détente with regulators in 2019, proactively halting its sale of fruity flavors and slashing its U.S. advertising. (READ MORE: Biden Chases Fool’s Gold With War on Juul)
Federal antitrust enforcers are guilty of this sort of abuse as well. Too many have developed a taste for weaponizing frivolous legal actions and are on a healthy losing streak in their recent attempts to block mergers — but, again, the final outcome isn’t what matters most.
Indeed, Federal Trade Commission (FTC) Chairwoman Lina Khan and Department of Justice antitrust guru Jonathan Kanter seem unfazed by criticisms and judicial rebukes — and, predictably, their failures are still shaping market behavior: “Companies have changed their behavior, structuring deals to avoid accusations that they break antitrust law,” Reuters reports.
The antitrusters have discovered that aggressive action — even action leveled without proof or proper legal basis — can get results. And just like those companies trying to dodge the new antitrust standards, the e-cigarette industry will likely tailor future business decisions to remain in the FDA’s good graces.
Since President Joe Biden took office, the FTC and Department of Justice have worked to establish a new age of aggressive antitrust actions that often run afoul of accepted legal standards (which explains their frequent losses in court). Led by Khan and Kanter, the new radicals — often called “neo-Brandeisians” after famed trustbuster Louis Brandeis — reject the accepted “consumer-welfare standard,” which focuses antitrust enforcement on preventing harms to individuals. The consumer-welfare standard, say the neo-Brandeisians, is too restrictive of their power. Instead, they want the power to prevent any business decision deemed harmful to their conception of desirable market competition.
If that sounds like a vague standard, open to abuse by overzealous bureaucrats, it’s because that’s precisely what it is.
What’s more, the FTC has axed inconvenient procedural safeguards, claimed the right of prior approval for certain mergers, and wildly broadened its other enforcement guidelines. The FTC’s ongoing and quite dangerous bid to prevent Meta’s acquisition of a virtual-reality fitness app is typical of the unbounded Khan regime.
In the end, it’s impossible to determine whether the nudniks at the FDA and the FTC are driven by malicious cynicism or by ideologically motivated reasoning — though it’s likely a combination of both. Human nature drives our species to mix up our biases, self-interests, emotions, and grudges all into a sticky blob of faulty reasoning.
America’s founders understood this. That’s why they explicitly designed a political framework to be used by flawed individuals. They realized that doing things the right way matters deeply and that norms of separated power, democratic accountability, and due process are indispensable to a healthy republic.
In the American system, the government must put up or shut up. It must prove its allegations before punishing its citizens, and all actions in violation of this principle are quite literally a threat to the integrity of our political order.
David B. McGarry is a Consumer Choice Fellow with Young Voices. He has written extensively on tech policy and consumer-choice issues, appearing in such publications as National Review, Techdirt, and RealClearPolicy. Follow him on Twitter @davidbmcgarry.