By Ethan Litwin and Keagan Potts
The tide has truly turned in the conservative movement, as leading figures have recently begun advocating to end so-called “corporate welfare.” Last month, for example, Steve Bannon spoke out against preserving the corporate tax cuts that President Trump implemented during his first term,[1] stating that corporations gamed the system and increased their profits rather than reinvesting the savings into productive capital.[2] Similarly, the conservative-leaning Cato Institute has proposed “add[ing] corporate-welfare cuts of $1.8 trillion over a decade” to the budget.[3]
While the merits of corporate tax policy lie beyond this blog’s scope, we note that Europe has long prohibited a particular anticompetitive form of “corporate welfare.” European Union competition law prevents companies from receiving government support to gain a competitive advantage over their rivals. This is the proverbial low-hanging fruit—our government should never intervene in markets to distort competition by playing favorites. The U.S. should enact regulations that would allow the Federal Trade Commission to challenge state aid that distorts market competition by favoring a particular company or sector without sufficient offsetting competitive benefits.
The European Union’s State Aid Rules
European Countries have regulated state aid since the Treaty of Rome was executed in the late 1950s.[4] Today, Article 107 of the Treaty on the Functioning of the European Union (TFEU) generally prohibits companies from receiving government support to gain a competitive advantage in the marketplace, absent exceptional justifications. State aid can come in many forms, including grants, tax relief, guarantees, direct government investment, and the provision of goods or services on preferential terms. Such government support is generally prohibited under EU law where the recipient companies gain an advantage on a selective basis, such as where support is given only to certain specific companies, or companies in a particular sector or from a specific region.
Exceptions to the general prohibition of state aid are varied and nuanced. For example, state aid may be justified to the extent such support serves a permissible policy objective and has positive effects that outweigh potential competitive harms,[5] such as government support for scientific R&D or environmental protection.
EU law requires member states to notify the European Commission before implementing new government aid measures, unless, for example, such support is covered by a Block Exemption (such as the General Block Exemption Regulation (GBER) or the block exemption for Important Projects of Common European Interest), is below the notification thresholds for de minimis support, or otherwise is being provided pursuant to a scheme previously approved by the Commission. For all other new aid measures, the Commission has certain prescribed periods to conduct preliminary and, if necessary, in-depth investigations to determine whether the notified scheme comports with EU law.
Although widely hailed as a cornerstone of EU competition policy, EU state aid rules are not above criticism for being too bureaucratic and too inflexible. But even as regulators in Brussels consider amending state aid rules to meet the needs of European markets today, American antitrust enforcers are unable to combat governmental distortion of marketplace dynamics.
State Aid, Favoritism, and Market Distortion
State aid problems commonly arise when major businesses consider relocating or expanding their businesses to a new location. States and municipalities compete in who can provide more aid to companies that promise to bring jobs to their area.[6] In many cases, even a company’s threat to move is sufficient to secure aid from local and state governments that want it to stay.
For instance, in 2018, Amazon announced plans to open a new headquarters. Dozens of metro areas vied to be the e-commerce giant’s new home base.[7] New York City emerged as a top contender, and Amazon promised to deliver to New York approximately “25,000 full-time high-paying jobs,” $2.5 billion in investments; “4 million square feet of energy-efficient office space” and “an estimated incremental tax revenue of more than $10 billion over the next 20 years.”[8] Amazon’s economic promises were not free: In return, New York State promised to provide Amazon with $1.525 billion in “performance-based direct incentives,”[9] and New York City offered unspecified additional incentives to lure America’s largest retailer to Queens.[10] The proposed deal was controversial. Representative-elect Alexandria Ocasio-Cortez organized efforts to resist Amazon’s proposal,[11] insisting it would gentrify a historically working-class community and push long-term residents out of their homes. Ocasio-Cortez won, and Amazon’s plans were scuttled. While Amazon ultimately opened its new headquarters in Arlington, Virginia, its promised investments have not materialized: Amazon has created only 7,000 new positions and paused the construction of new buildings.[12]
Not every state aid scheme is so easily defeated. Recently, Epic Systems Corp. has transformed itself from small player to monopolist in the vital area of electronic health records (EHRs). Epic’s rise was fueled largely by state aid. The story begins in 2009 when then-President Obama gave Judith Faulkner, Epic’s founder and CEO, a seat on the Health IT Policy Committee, a panel charged with allocating billions in federal monies to bring the health care industry into the digital age.[13] The Committee was formed in response to the passage of the HITECH Act, which had allocated $30 billion to assist hospitals and medical professionals to convert from paper to electronic record-keeping systems.
By all accounts, Faulkner was a strange choice for this committee, not only because her company stood to profit from the panel’s recommendations, but also because Faulkner and Epic strongly opposed President Obama’s vision for interoperable health IT. Interoperability allows EHRs to be shared across competing platforms, driving down cost and ensuring long-term competition on quality and innovation. Faulkner and Epic argue that instead of interoperability, the government should select one system run by one company. This position was and remains unique in the EHR industry.[14]
Predictably, the government panel soon adopted Faulkner’s thinking. Since then, Epic has benefited greatly from billions of state aid dollars and has amassed immense market power, in part by controlling the interoperability of records kept on Epic’s systems.[15] It appears to be only a matter of time before Epic’s dominance of the $9.3 billion EHR market is absolute.
Unsurprisingly, Epic’s rise has not coincided with benefits for consumers. In 2014, a RAND report warned against subsidizing Epic’s walled-off system, which in RAND’s view “did not have the level of connectivity envisioned by the authors of the HITECH Act.”[16] While RAND had predicted that adopting EHRs would produce $81 billion in annual cost-savings, the actual results have been a tiny fraction of that figure. RAND puts the blame squarely on Epic and its hostility to interoperability.
Both Amazon’s HQ2 proposal and Epic’s EHR system raised serious anticompetitive concerns at the time. While we will never know what a NYC-based HQ2 for Amazon would have eventually become, the consequences of supporting Epic over its rivals is now abundantly clear. Epic has spread through the U.S. healthcare system like a virus, forcing itself on hospitals and medical practices in every state, extracting monopoly profits for its services and preventing any meaningful competition. Faulkner’s single-system vision has been realized, enriching her and her company’s shareholders by billions of dollars. While it is beyond the scope of this article to fully analyze whether an EU-state aid regulation would have prevented Epic’s rise to dominance, we believe that the FTC should have been afforded an opportunity to examine the competitive consequences of anointing Epic as “the one”.
Now is the Time to Regulate State Aid
The U.S. should take steps now to protect the economy from anticompetitive state aid. While the U.S. could and should preserve state aid that serves a permissible policy and offsets any marketplace distortion with competitive benefits, robust state aid rules are necessary to prevent aid that on balance harms consumers, workers, and communities.
While Epic may be the most compelling story of how government favoritism distorted competition in the marketplace, Epic is hardly unique. Consolidation has given corporations enormous leverage that allows them to extract aid from cities, states, and the federal government—including from foreign governments who seek to lure American companies to abandon our shores for lucrative tax havens abroad.[17] This creates a race to the bottom that harms Americans—workers and consumers alike.
President Trump has signaled a desire to rebuild America’s manufacturing economy and to stop foreign governments from exploiting American largesse and laissez-faire policies to outsource American jobs and relocate American companies. Banning anticompetitive state aid fits neatly into the President’s agenda and vision of a more competitive America. The time for action is now.
[1] Mandi Taheri, Steve Bannon Warns Corporations ‘Gamed the System’ With Trump Tax Cuts, Newsweek (Mar. 6, 2025, 9:18 PM EST),
https://www.newsweek.com/steve-bannon-warns-corporations-gamed-system-trump-tax-cuts-2040921.
[2] Id.
[3] Chris Edwards, Will Republicans Cut Corporate Welfare?, CATO Inst. (March 6, 2025), https://www.cato.org/commentary/will-republicans-cut-corporate-welfare.
[4] Treaty establishing the European Economic Community art. 108, Belgium-France-Germany-Italy-Luxembourg-Netherlands, Mar. 25, 1957, 298 U.N.T.S. 57 (available at https://treaties.un.org/doc/Publication/UNTS/Volume%20298/v298.pdf).
[5] State aid Procedures, European Comm’n, https://competition-policy.ec.europa.eu/state-aid/procedures_en (last visited Apr. 18, 2025).
[6] The Secret Deals Database, Ban Secret Deals, https://bansecretdeals.org/the-secret-deals-database/ (gathering information on development deals between corporations and states or municipalities) (last visited Apr. 18, 2025).
[7] Sara Salinas, Amazon narrows the list of metro areas for its new headquarters to 20, CNBC (Jan 18, 2017, 9:04 AM EST), https://www.cnbc.com/2018/01/18/amazon-narrows-list-of-candidates-for-new-headquarters-hq2-to-20.html.
[8] Amazon selects New York City and Northern Virginia for new headquarters, Amazon (Nov. 13, 2018), https://www.aboutamazon.com/news/company-news/amazon-selects-new-york-city-and-northern-virginia-for-new-headquarters.
[9] Id.
[10] Erin Durkin, New York City to Amazon: drop dead, The Guardian (Nov. 14, 2018), https://www.theguardian.com/technology/2018/nov/14/amazon-hq2-new-york-protest-queens-long-island-city.
[11] Dana Rubinstein, Ocasio-Cortez takes on the Amazon fight in New York, Politico (Nov. 22, 2018,7:56 AM EST), https://www.politico.com/story/2018/11/22/amazon-hq-2-new-york-alexandria-ocasio-cortez-1012546.
[12] Teo Armus, Amazon slows forecast on HQ2 job growth as D.C. region hurts for employment, The Washington Post (April 25, 2025), https://www.washingtonpost.com/dc-md-va/2025/04/25/amazon-hq2-jobs-federal-cuts-trump/.
[13] Michelle Malkin, Judy Faulkner: The Obama crony in charge of your medical records, Lubbock Online (May 24, 2013, 11:09 p.m. CT), https://www.lubbockonline.com/story/opinion/columns/2013/05/25/malkin-judy-faulkner-obama-crony-charge-your-medical-records/15091083007/.
[14] Lachlan Markay, Democrat Donor Gets Federal Health Policy Slot Despite Conflicts of Interest, The Heritage Foundation (Aug. 14, 2011), https://www.heritage.org/political-process/commentary/democrat-donor-gets-federal-health-policy-slot-despite-conflicts.
[15] Robert Kuttner, An Epic Dystopia, Prospect (Oct. 1, 2024), https://prospect.org/health/2024-10-01-epic-dystopia/.
[16] Patrick Caldwell, We’ve Spent Billions to Fix Our Medical Records, and They’re Still a Mess. Here’s Why., Mother Jones, https://www.motherjones.com/politics/2015/10/epic-systems-judith-faulkner-hitech-ehr-interoperability/ (last visited Apr. 25, 2025).
[17] See Zanele Munyikwa, et al., American Companies Are Offshoring High-Paying, Remote-Friendly Jobs, Revelio Labs (Feb. 18, 2025), https://www.reveliolabs.com/news/business/
american-companies-are-offshoring-high-paying-remote-friendly-jobs/#:~:text=The%20share%
20of%20US%2Dbased,%2C%20or%20a%2010%25%20increase; Offshoring, Everything Pol’y (June 18, 2024), https://www.everythingpolicy.org/policy-briefs/offshoring.
