The Federal Trade Commission (FTC) has dropped its case against PepsiCo after the previous administration accused the beverage giant of providing Walmart with an anticompetitive pricing advantage compared to other retailers. Separately, the new all-Republican commission has dropped the long-standing case against Microsoft’s acquisition of Activision Blizzard.

While these companies have expectedly welcomed the FTC’s move, critics, especially former FTC chair Lina Khan, have lashed out at these actions.

FTC Tried Blocking Microsoft’s Acquisition of Activision Blizzard

For context, days after Microsoft announced the acquisition of Activision-Blizzard in January 2022, the FTC said it would review the deal and voted to block the transaction later that year. However, in July 2023, a federal judge gave Microsoft a landmark victory by striking down the FTC’s attempt to block its planned acquisition of Activision Blizzard, and the company completed that deal later that year.

FTC appealed the decision that declined to block that deal but lost its appeal on May 7. It finally decided to withdraw that case, and in its filing, the watchdog said, “The Commission has determined that the public interest is best served by dismissing the administrative litigation in this case.”

Similarly, the agency has withdrawn the case against PepsiCo, which accused the company of providing preferential pricing to Walmart at the cost of other retail companies. Walmart was able to secure lower prices because it has vastly greater purchasing power than smaller grocery stores and this deal with PepsiCo is just one of many. That case was incidentally filed just three days before Donald Trump’s inauguration.

“The Biden-Harris FTC rushed to authorize this case just three days before President Trump’s inauguration in a nakedly political effort to commit this administration to pursuing little more than a hunch that Pepsi had violated the law,” said FTC Chairman Andrew Ferguson in his prepared remarks announcing the withdrawal of that case.

Ferguson, who dissented from that move as an FTC commissioner in January, added, “Taxpayer dollars should not be used for legally dubious partisan stunts.”

FTC Might Be Understaffed After DOGE Cuts

FTC Commissioner Melissa Holyoak, who also dissented against the case when it was filed, said that the agency should never have pursued the case and termed it a “losing battle.” She added that withdrawal of these cases would help the FTC focus its energies on other cases where it has a “reason to believe the law has been violated.”

Notably, while the FTC has always been understaffed, things have changed for the worse after cuts undertaken by Elon Musk headed Department of Government Efficiency (DOGE).

In the Microsoft case, the FTC hasn’t provided much explanation for its decision. The deal, which was the biggest acquisition in the history of the gaming industry, was scrutinized by several regulators who warned of the consequences of monopolization. Competition regulators in the US and UK sought to block the merger, but the latter cleared it in October 2023.

Companies Welcome Dropping Of Cases

Meanwhile, Microsoft welcomed the decision to withdraw the case, with President Brad Smith writing on LinkedIn, “Today’s decision is a victory for players across the country and for common sense in Washington, D.C. We are grateful to the FTC for today’s announcement.”

Pepsi also welcomed the decision and said, “PepsiCo has always and will continue to provide all customers with fair, competitive, and non-discriminatory pricing, discounts and promotional value.”

Critics Slam Move to Drop Cases

Critics have, however, slammed the move to drop these cases. Commenting on the dismissal of the PepsiCo/Walmart case, Lee Hepner, senior legal counsel at the American Economic Liberties Project, said, “This meritless dismissal is a win for monopolists and billionaires.“ He added, Adding insult to injury, the agency dropped the case just one day before the parties were due to justify extensive redactions in the complaint, denying the public the ability to review the facts and judge the merits for themselves. This is a corporate pardon for Walmart and PepsiCo.”

In her tweet, former FTC chair Lina Khan termed the agency’s dropping of its case against PepsiCo as “disturbing behavior.” She added, “This lawsuit would’ve protected families from paying higher prices at the grocery store and stopped conduct that squeezes small businesses and communities across America. Dismissing it is a gift to giant retailers as they gear up to hike prices.”

Stacy Mitchell, co-director at the advocacy group Institute for Local Self-Reliance, said on X that the dismissal of the case against PepsiCo/Walmart is “effectively an endorsement of the predatory tactics Walmart uses to crush local grocery stores, create food deserts, and drive up prices.”

Would Prices for US Consumers Rise as the FTC Goes Soft?

The FTC was remarkably active under the Joe Biden administration after decades of hibernation. Among the key actions that the agency took under Khan was to vote to enforce the right to repair. Khan particularly targeted tech giants like Alphabet, Apple, and Amazon over alleged antitrust issues. The Biden administration’s Justice Department was also quite aggressive against anticompetitive tactics in the tech industry. It also pushed for breaking up Google over its monopolistic business.

Trump, on the other hand, has vowed fewer regulations, and his administration has been more amenable to M&As. His FTC has also seemed to take a backseat and terminated an investigation into corporate price gouging. While the Trump administration has lashed out at a handful of companies hiking prices amid the tariffs, Democrats allege that stopping that investigation would only embolden companies engaged in price gouging.

In a letter to Ferguson, 36 Democrats said, “Armed with the knowledge that the FTC has turned a blind eye to this price-gouging tactic, companies now have free rein to use surveillance pricing to price gouge consumers.” The letter added that, according to a former FTC official, “The message that is coming out of this administration…is that the watchdog is gone and companies feel emboldened to rip people off.”

Overall, with many companies looking to hike prices amid the tariff chaos, a strong and proactive FTC is more important than ever. While the current administration hasn’t put the brakes on all its cases, namely those against a handful of tech giants, it is undoubtedly favoring corporate America more than its predecessor.