Vienna Woods Law & Economics

Blog focused on issues in law, economics, and public policy.

Category: Regulation

Federal and State Merger Review Timing Needs Reform — By Theodore A. Gebhard — July 2, 2026

Federal and State Merger Review Timing Needs Reform — By Theodore A. Gebhard

/Vienna Woods Law & Economics/Leave a comment

[Note: The following article, published under my byline at LAW.COM  on June 30, 2026, is reprinted with permission from the National Law Journal © 2026 © 2026 Centellic. All rights reserved.]

Regulatory compliance imposes substantial costs on companies considering acquisitions or mergers.  At the federal level, transactions that meet certain thresholds are prohibited from closing until they have been evaluated by the antitrust regulators to determine whether competition is threatened.  The process can be lengthy and expensive, but in instances where the parties are ultimately cleared or have agreed to conditions that address agency concerns, they can move forward with the transaction as far as the federal antitrust regulators are concerned.

Increasingly, however, the path to closing is delayed by state regulators that wait until after federal review is complete before initiating separate investigations at the state level.  For example, this year a group of eight state attorneys general brought a lawsuit attempting to block the purchase of Tegna by Nexstar Media Group during the same week that the Department of Justice and Federal Communications Commission approved the transaction.  It has also been reported that several states are considering launching a challenge to Paramount Global’s planned acquisition of Warner Bros. Discovery despite the Justice Department’s decision to clear the deal following an extensive investigation.

The timing of these state challenges is problematic.  Even if the lawsuits are unsuccessful, they will have added months of delay, if not years, to the parties’ ability to integrate their firms and proceed with their business plans.  Moreover, until the litigation is completed, the parties must incur still more legal expenses, all the while facing uncertainty about the outcome, which can mean forgoing  strategic opportunities that otherwise would have been seized by the combined firm.

In addition to their own lawsuits under state law, some state attorneys general have also taken to challenging federally negotiated agreements during Tunney Act proceedings.   As a former Justice Department Attorney and FTC Policy Planning Director explains, under the Tunney Act, courts review DOJ antitrust settlements to assure the public that “the Justice Department followed proper procedures, disclosed sufficient information, and explained the rationale behind its decision.” Significantly, “[t]he courts have been unambiguous that the law prohibits them from substituting their judgment for the judgment of the Justice Department.”

In an ongoing Tunney Act matter, the attorneys general of nineteen states and the District of Columbia are challenging the adequacy of DOJ’s settlement agreement with Hewlett Packard Enterprise respecting its proposed acquisition of Juniper Networks. In their letter to the court, the state attorneys general allege that the “terms of the Settlement are themselves bizarre and raise suspicion,” and that the settlement may be a consequence of “lobbying pressure and secret side arrangements [that] substituted for antitrust legal analysis.”  If so, “the DOJ breached the public trust.”

In principle, these allegations, if true, may be proper Tunney Act concerns.  The state attorneys general, however, do not stop there.  They also challenge the substance of the settlement, which they claim fails to “address the harms alleged by the DOJ.” Here they claim that the DOJ abandoned its own factual record in arriving at the settlement.  In making this claim, the state attorneys general ask the court to substitute their analysis of the record for that of the DOJ’s, effectively asking the court to re-examine the substantive issues in the case.

In point of fact, the settlement is hardly a give-away to the parties. Among other things, the settlement requires that the parties undertake certain divestitures and enter into mandatory licensing agreements.  After months of investigation and negotiation, the DOJ concluded that these terms will be effective in disposing of the acquisition’s potential harm to competition.  One need not agree with this conclusion, but a Tunney Act proceeding is not the place to ask a court to reach an alternative conclusion.

In sum, when state objections to a transaction under state law do not emerge until after (or only shortly before) the federal antitrust review process is completed or when states challenge the adequacy of federal settlements, the result is a regulatory review system of sequential proceedings rather than a coordinated regulatory review process among federal and state actors. This situation begs for reform.  On both fairness grounds and cost mitigation grounds, parties subject to merger review should be able to identify a reasonable time frame for ending the process.

In this regard, federal and state enforcers should work to better coordinate reviews of specific transactions such that their respective reviews reach conclusions reasonably close in time, if not simultaneous.  Some options might include sharing information and data, identifying common competitive concerns, and agreeing on parameters that when present result in state deference to federal clearances or settlements. State attorneys general could also commit to inform the parties of their additional competitive concerns during the federal review process whenever possible.  None of these reforms would prevent states from bringing suits under state laws. They would, however, help to establish a clearer and more predictable enforcement framework.

The absence of a predictable time frame for governmental merger review neither serves the parties nor enhances in any meaningful way competition enforcement.  To the contrary, when federal and state reviews take place in sequential time periods, business uncertainty, legal expenses, and the costs of complying with information and data demands are significantly elevated. These consequences occur even if state attorneys general do not ultimately bring charges or prevail in court.  Better federal and state coordination in the timing of their respective reviews is needed, and the federal agencies and state authorities should work toward that end.

Theodore A. Gebhard is a former Antitrust Division economist and Federal Trade Commission senior attorney. He also was an antitrust practitioner at the Washington, D.C., office of a large international law firm and now consults on competition policy issues.  See more about Mr. Gebhard here.

The Hidden Costs of Untimely Antitrust Enforcement – By Asheesh Agarwal — May 1, 2025

The Hidden Costs of Untimely Antitrust Enforcement – By Asheesh Agarwal

/Vienna Woods Law & Economics/Leave a comment

[This post originally appeared at Real Clear Markets on April 28, 2025.]

Businesses need legal and regulatory certainty to invest and innovate. Across the economy, legal predictability allows companies to allocate risk, to invest resources for the long term, and, with luck, one day to reap the rewards of successful new products.

Unfortunately, an ongoing federal lawsuit threatens to undermine that certainty for large swaths of the business community. In a trial that began last week, the Federal Trade Commission (FTC) seeks to unwind two deals that closed more than a decade ago, Meta’s (then Facebook’s) acquisitions of Instagram in 2012 and WhatsApp in 2014. Although the FTC carefully reviewed and raised no objections to either deal at the time, the agency now speculates that, but for the deals, those companies could have grown into viable separate businesses. But the hidden costs of this “retroactive regulatory revisionism” are high – undermining capital formation, innovation, and growth.

Imperiled Investment and Innovation

Setting aside the suit’s merits, the case could damage the nation’s innovation ecosystem by discouraging companies from investing in startups and smaller firms out of concern that, years later, the government could attempt to unwind those deals. Such investments often promote competition by providing small companies with critical financing and technical expertise, while allowing larger companies to bring new products to market more quickly.

In the early 20th Century, for example, John Deere sold planters and buggies, but its tractors flopped in the marketplace. To satisfy its customer base, in 1918, Deere purchased a smaller company that had developed the first successful gasoline tractor. This investment benefited consumers: in its first year, Deere’s distribution network and marketing expertise roughly tripled the tractor’s sales and over time Deere’s investments turned its green tractors into global icons.

Other examples abound. In 1926, General Motors purchased an auto body company to secure its supply chain. In 1928, Boeing Air Transport purchased a west coast airline to expand its national reach. In 1987, Microsoft purchased Forethought, the creator of PowerPoint, to integrate into its software suite. And in 2006, Google purchased YouTube, which had started as a dating app that paid women $20 to upload videos, as an investment in user-generated content. In every instance, the acquiring company invested significant resources to improve and expand delivery of the acquired company’s products, and in every instance, consumers benefited from increased output and innovation.

Notwithstanding each merger’s pro-competitive effects, the government could have challenged each one on grounds that, but for the merger, the acquired firm would have grown to compete with the acquiring company in the same markets. This type of speculative prognostication could have discouraged many beneficial mergers and, going forward, could chill pro-competitive investments.

Reduced Stability

The lawsuit also could undermine public confidence in the stability of the antitrust agencies. In announcing that the revised Merger Guidelines would stay in place, for now, the FTC explained that “stability across administrations of both parties has thus been the name of the game … no business can plan for the future on the basis of guidelines they know are one election away from rescission … stability is also good for the enforcement agencies. The wholesale rescission and reworking of guidelines is time consuming and expensive.”

The FTC’s current lawsuit, however, contravenes the importance of stability. In 2012 and 2014, the FTC carefully reviewed and raised no objections to either purchase, consistent with the congressional design of the Hart-Scott-Rodino Act. Now, many years later, the FTC is using scarce taxpayer resources on a months-long trial to reverse a prior decision, one made with care, and one that a company relied upon to invest billions of dollars in innovations.

Of course, this is not to say that a consummated merger should never receive scrutiny after the fact, but such reversals should happen very rarely and for good cause, such as some sort of misrepresentation, particularly after so much time has passed. As a federal court recently explained in evaluating some ad tech mergers, “it would be a substantial step to find that an acquisition violated the Sherman Act after it was reviewed and approved by federal antitrust regulators.”

Given that the FTC is now looking back more than a dozen years, nothing prevents today’s enforcers from looking back even further in time, or future enforcers from reviewing today’s cleared transactions. Are any mergers ever truly secure?

Empowered Overzealous Regulators

Finally, the FTC’s lawsuit also disregards another concept embraced by the current Administration: regulatory humility. The recent Executive Order to Restore Competition to U.S. Markets ordered agency heads, in coordination with the FTC and Department of Justice (DOJ) to identify any regulations that impose anti-competitive restraints. At the same time, DOJ created a task force to “advocate for the elimination of anticompetitive state and federal laws and regulations that undermine free market competition and harm consumers, workers, and businesses.”

The lawsuit, on the other hand, empowers current and future antitrust enforcers to play regulatory roulette with the economy. If the lawsuit succeeds, government agencies will have a greater ability to unwind prior deals, second-guess their predecessors, and ignore robust evidence about increased output and innovation, all based on their belief that they could have organized entire industries better than the private sector or their predecessors.

In his 1974 speech accepting the Nobel Prize in Economics, Friedrich von Hayek, the author of The Road to Serfdom, urged economists and regulators to exercise caution in light of limits of human knowledge. As he explained, “[i]f man is not to do more harm than good in his efforts to improve the social order, he will have to learn that in [economics] . . . he cannot acquire the full knowledge which would make mastery of the events possible.” In the face of such uncertainty, the government should exercise significant caution before it attempts to rewrite the past.

Asheesh Agarwal is an advisor to the American Edge Project and an alumnus of both the Department of Justice and Federal Trade Commission.  See his mini-bio on the Contributors page.

How the Trump Administration’s Antitrust Agenda Can Tackle Some of America’s Biggest Problems – By Asheesh Agarwal — April 11, 2025

How the Trump Administration’s Antitrust Agenda Can Tackle Some of America’s Biggest Problems – By Asheesh Agarwal

/Vienna Woods Law & Economics/Leave a comment

[This post originally appeared in The Federalist on April 8, 2025.]

In its first months, the Trump administration’s competition policy is off to a fast start. Its antitrust enforcers have disavowed expansive rulemakings and prioritized growth to reduce the national debt.

As it settles, the administration should continue to target the nation’s most critical concerns, including regulatory excess, foreign protectionism, and China. By working with U.S. companies, rather than against them, the administration can preserve American values, security, and global leadership.

More Enforcement, Less Bureaucracy

The U.S. devotes two agencies to competition policy: the Department of Justice’s (DOJ) Antitrust Division and the Federal Trade Commission (FTC), an “independent” agency. For reasons both fiscal and constitutional, the administration should support efforts to transfer the FTC’s functions to DOJ and eventually eliminate the duplicative agency.

The FTC’s chairman, Andrew Ferguson, has argued that “Independent agencies are not good for democracy.” Future historians will marvel that the courts ever validated the FTC, a progressive-era contrivance that consolidates executive, legislative, and judicial powers in five commissioners. Under President Joe Biden, three commissioners purported to invalidate millions of private contracts and the laws of 47 states. Consolidation could prevent such overreach.

Moreover, a merger would save money while increasing enforcement. The FTC spends more than $183 million annually on bureaucratic functions unrelated to frontline enforcement, including dozens of employees in the press, legislative affairs, and commissioners’ offices. This figure excludes the policy and adjudicative staffs — the total bureaucratic cost is much higher.

A pending bill, the One Agency Act, would consolidate antitrust functions within DOJ, improving enforcement and paving the way to transfer consumer protection functions.

Regulatory Excess

Upon retaking office, President Donald Trump moved swiftly to reduce regulatory burdens. The White House froze new regulations and repealed Biden’s onerous AI executive order. The FTC “committed to ending all of the rules and regulations that are no longer necessary.” Building on decades of competition advocacy, DOJ launched a task force to combat anticompetitive regulations.

To date, the FTC has moved more cautiously. The FTC is adhering to the restrictive 2023 merger guidelines, promulgated under Biden, and greenlit a new rule for reporting mergers, even as Congress considered a resolution of disapproval.

As the agencies staff up, they should reduce regulatory burdens. The FTC’s original merger form would have imposed annual costs estimated at more than $2.3 billion and the final still imposes expensive reporting burdens. Similarly, the merger guidelines will reduce capital flows and allow the government to block deals without evidence.

By reversing the prior regime, the administration could kickstart the economy and allow U.S. companies to improve their global competitiveness.

With Friends Like These …

For years, Europe has targeted American companies through onerous laws like the Digital Markets Act (“DMA”), Digital Services Tax, General Data Protection Regulation, and AI Act. These laws usually exclude European and Chinese companies from their ambit and have enabled regulators to fine U.S. firms tens of billions of euros for routine conduct, a pure wealth transfer from American workers and shareholders to European bureaucrats. Regarding a multibillion dollar penalty against Apple, Europe noted that its fines “help to finance the [European Union] and reduce the burden for [its] taxpayers.”

Shockingly, the Biden administration supported Europe’s efforts. The antitrust agencies collaborated with foreign regulators and undermined the due process rights of U.S. companies abroad.

Fortunately, Trump changed course. He directed trade officials to discourage improper digital services taxes. At an AI Summit, Vice President J.D. Vance blasted “reports that some foreign governments are considering tightening the screws on U.S. tech companies … excessive regulation of the AI sector could kill a transformative industry.”

The antitrust agencies should combat the global contagion of European-style regulations. They should advocate for sensible competition policy that protects consumers, rather than industrial policy.

The China Challenge

China is spending $1.4 trillion to dethrone America as the world’s technological superpower while also stealing $500 billion annually in U.S. tech secrets. China now leads the U.S. in 57 of 64 critical technologies, including quantum censors, high-performance computing, and AI algorithms. A commission found that China could supplant the U.S. in AI by 2030, and Trump himself called DeepSeek a “wake-up call.”

In response, American companies are investing heavily in new technologies. As China seeks to embed its technology around the globe, Meta is providing open-source AI alternatives. Google is investing $75 billion in AI in 2025 alone. Apple is investing $500 billion in the U.S., and Microsoft recently unveiled the first quantum chip.

At the same time, some policymakers worry that tech platforms may limit speech. Platforms have reduced the spread of certain news stories. Some companies have admitted that they mistakenly bowed to relentless pressure from senior government officials.

Since 2020, the market has evolved: Elon Musk purchased Twitter; Meta adopted Musk’s content moderation model; Trump himself launched Truth Social; and, for better or worse, foreign-owned platforms maintain popularity. Moreover, upon retaking office, Trump signed an executive order prohibiting federal employees from unconstitutionally abridging speech, and the FTC launched a speech inquiry.

Against this backdrop, measured antitrust enforcement appears the wisest course, neither treating tech companies as “national champions” immune to review nor seeking unprecedented punishments. The agencies should enforce the antitrust laws vigorously but allow companies to innovate and invest. In terms of both policy and precedent, does it make sense to dismember Meta over mergers cleared and consummated a decade ago, unwind Microsoft’s vertical acquisition of Activision Blizzard, or break apart Google for overly long exclusive contracts? Such overly aggressive postures could kneecap domestic innovation and signal to foreign governments that they can hammer U.S. companies with impunity.

Trump appears to agree that enforcers should consider the global landscape. He noted that “I give [Google] a lot of credit … [we] want to have great companies — we don’t want China to have these companies.” When asked whether to break up Google, he responded “If you do that, are you going to destroy the company? What you can do without breaking it up is make sure it’s more fair.”

Finally, a measured approach would promote free speech by encouraging the adoption of American technology. Consider the alternative. Chinese AI models actively censor historical events and spread state propaganda. To counter such lies, the U.S. needs the world to adopt American tech.

By tackling America’s most significant challenges, the administration has a once-in-a-generation opportunity to promote investment, preserve technological leadership, and check China’s antidemocratic global ambitions for decades to come.

Asheesh Agarwal is an advisor to the American Edge Project and an alumnus of both the Department of Justice and Federal Trade Commission.  See his mini-bio on the Contributors page.

As AI Advances, U.S. Must Choose the Path of Regulation or Innovation – By Asheesh Agarwal — March 8, 2025

As AI Advances, U.S. Must Choose the Path of Regulation or Innovation – By Asheesh Agarwal

/Vienna Woods Law & Economics/Leave a comment

[Note: This post was originally published by the American Edge Project on March 7, 2025]

As the rise of powerful Chinese AI models, such as DeepSeek’s r1and Alibaba’s Qwen 2.5, have laid bare, U.S. policymakers must choose a pathway for artificial intelligence (AI). One path, littered with regulations and roadblocks, treats AI as a threat to manage rather than an opportunity to nourish. Down the other path, policymakers and the private sector partner together to promote innovation and maintain our global technological leadership.

The Road to Nowhere

As Vice President Vance recently explained to the AI Summit in Paris, “excessive regulation of the AI sector could kill a transformative industry just as it’s taking off.” The European Union’s (EU) AI Act, for instance, prohibits certain AI functions that the EU deems an “unacceptable risk” to citizens. The Act carries enormous fines for noncompliance, up to 35 million euros or seven percent of their global annual revenues. Canada’s Competition Bureau has cited this Act “as a model for Canada,” and even here at home, the Federal Trade Commission’s (FTC) former chair wants to continue the Biden administration’s AI policies, which required companies to pretest models before their release and which used antitrust law to limit AI investments.

The evidence, however, shows that excessive regulations can stifle innovation. Europe’s AI sector lags far behind the United States; from 2023 to 2024, more than $47 billion in investments flowed to U.S. generative AI firms, while European firms raised only $8.8 billion. In a recent letter, 150 European business leaders complained that the AI Act could damage Europe’s long-term competitiveness. Another official worried that American companies were outpacing their European rivals: “I’m not saying it’s good but in America you have a lot of AI and no regulation, in Europe you have no AI and a lot of regulation.”

Here at home, these types of policies would hamstring American innovators and cede leadership to Chinese companies. President Trump has called DeepSeek, an open-source tool developed by a Chinese company using less data and less sophisticated chips that many U.S. models, a “wake-up call” for America’s tech companies. Indeed, the evidence belies the need for heavy-handed regulations. In 2023 alone, nearly 900 new AI companies entered the market and venture capital soared to $67.2 billion, while U.S. AI patent filings surged 621 percent from 2018 to 2022. Earlier this month, large U.S. companies committed to investing hundreds of billions more into AI infrastructure and research.

Moreover, the FTC itself found no competitive problems in the AI sector. In a report issued in the Biden Administration’s waning days, the agency found that “AI technology is rapidly evolving” and that the sector’s evolution will determine whether competitive concerns arise in the future. The agency also found that small companies can benefit from contracts with large tech companies, such as by gaining access to critical training, testing, computing resources and optimized hardware.

The Path to Prosperity

To promote innovation, policymakers should continue to encourage light-touch AI regulation, ground antitrust enforcement in evidence of consumer harm, invest in critical AI inputs such as energy and talent, and collaborate with our allies to counter authoritarian threats.

Beyond these touchstones, the United States should continue to encourage the development and deployment of both open and closed-source AI models, both to promote competition and to safeguard our national security. In terms of competition, the FTC itself has explained that “open-weights models have the potential to drive innovation, reduce costs, increase consumer choice, and generally benefit the public – as has been seen with open-source software,” while Canadian regulators found that the “increasing availability of open-source AI technology and public cloud infrastructure makes AI development more accessible.”

In terms of national security, the United States must provide the world with alternatives to China’s models. For years, China has sought to leverage technology to supplant the United States as the world’s preeminent technological superpower and gain economic and national security superiority over the Western world. China seeks to achieve its goal, in part, by embedding its technology, and therefore its authoritarian values, into the global technological infrastructure, including Huawei’s telecommunications equipment and now DeepSeek’s open-source AI tools. The United States must develop and deploy both open- and closed-source models to ensure democratic principles shape AI’s future. Ceding this ground risks allowing China’s authoritarian vision to define global AI and perhaps to embed Chinese-built models with our allies.

In Paris, the Vice President warned against “paralyzing one of the most promising technologies we have seen in generations.” America has always prioritized innovation over regulation—and when it comes to AI, America should follow the same course.

Asheesh Agarwal is an advisor to the American Edge Project and an alumnus of both the Department of Justice and Federal Trade Commission.  See his mini-bio on the Contributors page.

Our New Space Race – Review by Asheesh Agarwal — July 5, 2023

Our New Space Race – Review by Asheesh Agarwal

/Vienna Woods Law & Economics/Leave a comment

[Note: This post originally appeared at Law & Liberty on June 29, 2023]

The current space race extends far beyond Elon Musk, Jeff Bezos, and Richard Branson. There’s a New Zealand tinkerer without a college degree who built a billion-dollar rocket company. A Ukrainian multimillionaire who made his fortune off sketchy dating websites. A soothsaying IT executive who attracted millions in investment through relentless optimism, all while blowing up rocket after rocket.

Ashlee Vance’s latest book, When the Heavens Went on Sale: The Misfits and Geniuses Racing to Put Space Within Reach, is an ode to capitalism, risk, and innovation. As Vance relays, the private sector has created the new rockets and satellites that are spreading the benefits of space commerce across the planet. Though still an important partner, the government lacks the mindset or motive to discard old habits and embrace new technologies. Vance’s book should give pause to anyone who would expunge the profit motive from space, overregulate space or any other tech sector, or rely solely on the government to innovate.

Vance traces the origins of several space companies, starting with the most successful of the new breed, SpaceX. Musk “willed SpaceX into existence” by investing $100 million of his own money and rejecting “the ‘truths’ held evident by the old, government-backed aerospace industry.” Instead, SpaceX created reusable rockets, such as the Falcon 9, that have now launched hundreds of times. Musk’s endeavor was not without risk. After multiple launch failures, Musk “was burning through his personal fortune at an alarming rate” and at one point had to launch his last rocket within eight weeks to survive.

Other companies endured by raising prodigious amounts of money via US capital markets. Rocket Labs had developed smaller rockets that reliably ferry satellites into orbit at a low cost. The company started in New Zealand, of all places, and took off in part because the government was “trying to run a pro-business government and quickly embraced the idea of New Zealand being at the forefront of such exciting technology.” Within a few months, in fact, New Zealand created a pro-market regulatory framework and negotiated bilateral treaties with the United States. Eventually, Rocket Labs set up a second headquarters in Los Angeles to help secure talent and capital. As its founder, Peter Beck, noted, “Goddammit, America gets s— done. There is no other place on Earth where a Kiwi could come into town and walk away with enough money to start a rocket company.”

All this competition is, per the book’s title, putting space within reach. Satellite and launch costs have plummeted. The cost of a satellite has fallen from around a billion dollars to as little as one hundred thousand dollars. With lower launch costs, the number of satellites has doubled (to around 5,000) in the last two years and could rise to 100,000 in the next decade. These new satellites will allow companies to provide new and cheaper services and to provide reliable internet connectivity around the globe. Already, private satellites have detected illegal deforestation in the Amazon, Russian military buildups, and Chinese missile sites. In what Vance calls “the first true Space War,” commercial space companies “gave Ukraine advantages that humbled the Russian military and altered the course of the conflict.”

For many of their employees, these space companies are infused with an almost religious sense of purpose. Musk, famously, argues that humans must become a multi-planet species to survive. Another company’s senior executive, a NASA alumnus, believes himself on a mission from God to spread human intelligence throughout the universe. Planet Labs, which started in an actual garage, pioneered the development of inexpensive shoebox-size satellites; prior to a launch from India, the company bought 88 statues of the Hindu deity Ganesh because it “felt sure that the idols would bring good luck.” These entrepreneurs view access to space “as a noble, necessary quest that would fulfill humankind’s destiny.”

At times, Heavens reads like a novel by Andy Weir, author of The Martian and Project Hail Mary. Enterprising engineers must tackle complex aerospace problems but here in real life, they must keep costs as low as possible. Should they make the rocket’s body of standard aluminum or carbon fiber, which is lighter but harder to shape? Should they use solid or liquid fuel, or some sort of hybrid? How many satellites can one rocket launch at once and how long should the satellites last? Different companies approach these questions with a view toward different customers and price points, but the answers help drive innovation.

These sorts of challenges also help to clarify why the private sector has taken the lead in space. Through numerous interviews with both entrepreneurs and civil servants, Vance explains why the government has been unable to overcome challenges, or to innovate generally, as quickly or successfully as private companies. In three words, mission, mindset, and motive.

One NASA executive, Pete Worden, explained that NASA’s mission is (or was) to provide jobs for the constituents of key members of Congress, rather than to explore space. As Worden put it, “A self-licking ice cream cone serves no other purpose than to keep itself alive.” Pork-barrel politics often led NASA’s congressional minders to kill innovative programs. In one instance, insurgent NASA interns were told to hide a program to send a smartphone into space, just to test how well consumer electronics could operate there, out of concern that NASA brass would bury the program in red tape. In contrast, as a NASA alumnus put it, a private company “can’t raise billions of dollars and spend infinite time” without launching anything.

The government’s mindset also discourages innovation. Perhaps concerned about congressional reprimands, NASA and the Department of Defense developed an ethos that “every rocket and every satellite had to work and they would pay whatever it cost to ensure that happened.” An explosion would lead to hearings, oversight, and adverse publicity. This “zero-defects culture” led to endless testing and a reluctance to try new things, literally making the perfect the enemy of the good. Beck, the New Zealander, “thought that JPL [the Jet Propulsion Laboratory] would have the frenetic buzz of a start-up with some people running around trying to hit their deadlines and others sleeping in the corridors after pulling all-nighters. Instead, he found bureaucracy and malaise.”

This bureaucratic mentality also infused many of the government’s old-school contractors. After talking to a defense contractor, one space executive explained that “I was proposing some ideas. I can still hear [the contractor’s] words: ‘We don’t do anything unless the government tells us to and they pay for it.’” Among the new breed of space companies, on the other hand, the companies and their investors understand that some failures and explosions go with the territory of trying to innovate.

Finally, for the same reasons that capitalism works and collectivism fails, private companies have more of a motive to succeed. This is not to suggest that the excellent employees at NASA or any other agency lack ambition, drive, or skill. Given a clear mission and consistent funding, NASA has done and can do great things. Still, as Vance details, the profit motive, the prospect of a stock option paying off, incentivizes people to work for months on end for little pay, to travel to some desolate island or frozen tundra to try to launch a hunk of metal miles into the atmosphere, to risk their mortgages and sometimes their marriages, with no guarantee of success, for the chance to earn a hefty reward and to say to their friends and family that they helped to build something great and historic.

Different motives may drive those who are already wealthy. As Vance points out, the space billionaires could have spent their entire fortunes buying islands, setting up themselves and their heirs for generations, and enjoying every manner of Epicurean delight. No doubt the quest for personal glory plays a role (apparently, investors love to show off their rockets to friends). Still, these entrepreneurs are risking their reputations and fortunes to pursue a dream that could benefit all mankind. How many of us would choose the same path?

Many observers compare these still early days of the new space race to the early days of the tech boom several decades ago. If so, the new space companies should take a moment to examine how yesterday’s tech darlings are now under siege from regulators at home and abroad. How long before the progressives and anti-capitalists, those who proclaim that “you didn’t build that, somebody else built that,” come for these space companies? How long before the Federal Trade Commission, which has already taken an aggressive stance against aerospace mergers that don’t involve direct competitors, tries to declare SpaceX an illegal monopoly or Planet Labs guilty of unfair competition? Rocket Labs built a home abroad in part because New Zealand’s government welcomed it with open arms—will the United States remain a place where “s— gets done” or become a place where bureaucracy and red tape push companies overseas?

The administrative state presents a significant risk to the growth of the space economy. Regulators “cannot keep pace with the launches or the wills of the people leading the various companies” and competitors are already leaning on regulators to erect barriers to competition. As Vance describes, quoting a space historian, “Back in the day, the United States could spin up an entire missile program and the requisite launch infrastructure in eighteen months. ‘We couldn’t even write the environmental impact study in that amount of time now.’” Rest assured, if the United States hamstrings its space sector, other countries, including India and New Zealand, stand ready to welcome more operations to their shores. And if we truly abandon our leadership in space, there is little doubt that China and Russia will fill the void.

Historians describe an earlier era of exploration as motivated by gold, God, and glory. When scholars write the history of this era of space commerce and exploration, they likely will write that space capitalists led humanity to a brighter future—if we let them.

Asheesh Agarwal is an advisor to the American Edge Project and an alumnus of both the Department of Justice and Federal Trade Commission.  See his mini-bio on the Contributors page.