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After disputes over the use of Anthropic’s technology in fully autonomous weapons and mass domestic surveillance, War Secretary Pete Hegseth announced restrictions on Anthropic’s operations within and outside of the War Department:
“In conjunction with the President’s directive for the Federal Government to cease all use of Anthropic’s technology, I am directing the Department of War to designate Anthropic a Supply-Chain Risk to National Security. Effective immediately, no contractor, supplier, or partner that does business with the United States military may conduct any commercial activity with Anthropic.”
The War Department can and should cease doing business with companies whose products or services fail to meet the department’s needs. That’s the government acting on behalf of citizens and taxpayers, as an agent in the free market.
In this case, if the War Department wants AI that’s tailored to the department’s needs and unfettered from company-imposed restrictions, it can and should find another company that will provide it.
But using the War Department’s enormous network of contractors as leverage to impose a secondary boycott against Anthropic — even after the department has reportedly given up negotiations with Anthropic and moved on to partner with OpenAI — could do more harm than good for the department and the American citizens it’s sworn to protect.
A secondary boycott is when one company that has a dispute with another tells its unrelated business partners that they must boycott the disputed company to keep their own business.
While this tactic is not illegal for the federal government, the National Labor Relations Act prohibits secondary boycotts in labor disputes so that unions can’t disrupt entire supply chains over limited disagreements.
The Sherman Antitrust Act also restricts private companies’ use of secondary or group boycotts by prohibiting those that restrain trade, unfairly exclude competitors, or involve coordinated actions rather than independent decisions. In general, group boycotts restrict competition and increase costs.
By designating Anthropic “A Supply Chain Risk to National Security,” Hegseth is utilizing a narrow provision in national security law that allows the War Secretary to exclude a particular company from participating in the bidding process for certain contracts or to prevent an existing contractor from using the designated company in its provision of War Department contracts. This authority is intended to protect sensitive information systems — not to impose sweeping sanctions.
If the administration formalizes its threatened supply chain risk designation of Anthropic, the department will have to prove it was motivated by national security and not retribution. That will likely be an uphill battle, but even if the action survives legal challenges, it could trigger a cascade of unintended consequences.
The War Department does business with tens of thousands of companies. Some of them, like the companies that build our weapons, are critical to national security. Others, such as the medical providers and health insurance companies that provide healthcare to active-duty and civilian employees, are indirectly important. And others, such as the chain fast-food restaurants operating inside the Pentagon and within U.S. Army bases, are purely ancillary.
If the War Department excludes all companies that “conduct any commercial activity with Anthropic” from its operations, it will jeopardize current and future contracts. While the market will surely provide alternative suppliers, limiting competition tends to increase costs and reduce effectiveness. Moreover, the transition to finding new providers would create enormous headaches with tons of lost time, money, and efficiencies.
A more targeted, national security focused approach could achieve national security goals without unnecessarily disrupting department operations or the broader economy.
While it’s true that the federal government has a monopoly on national security — that’s a primary reason the federal government was created nearly 250 years ago — the War Department should limit its power over private companies to matters directly tied to national security.
Private companies that produce everyday goods and services shouldn’t have to choose between doing business with the federal government or the free market. Forcing them to do so will only weaken national security and economic well-being.
Rachel Greszler is a Senior Research Fellow in Economics and Workforce at Advancing American Freedom