Ethermac|FTC Chair Lina Khan on Antitrust in the age of Amazon

When Lina Khan was in law school back in 2017,Ethermac she wrote a law review article called 'Amazon's Antitrust Paradox,' that went kinda viral in policy circles. In it, she argued that antitrust enforcement in the U.S. was behind the times. For decades, regulators had focused narrowly on consumer welfare, and they'd bring companies to court only when they thought consumers were being harmed by things like rising prices. But in the age of digital platforms like Amazon and Facebook, Khan argued in the article, the time had come for a more proactive approach to antitrust.

Just four years later, President Biden appointed Lina Khan to be the Chair of the Federal Trade Commission, one of the main government agencies responsible for enforcing antitrust in America, putting her in the rare position of putting some of her ideas into practice.

Now, two years into the job, Khan has taken some big swings at big tech companies like Meta and Microsoft. But the FTC has also faced a couple of big losses in the courts. On today's show, a conversation with FTC Chair Lina Khan on what it's like to try to turn audacious theory into bureaucratic practice, the FTC's new lawsuit against Amazon, and what it all means for business as usual.

Interview Highlights

On the FTC's loss in the Meta/Within Unlimited case, and how there were some small victories for the FTC in the court's decision:

So the FTC's case, seeking to block Meta's acquisition of Within, was really about what's known as "potential competition." And so the claims in the case included noting that Meta itself had actually been planning to enter this market itself, and it ended up doing this acquisition in ways that short-circuited that organic competition that we would have seen if Meta had organically looked to enter. [...] It's true, we did not win and we were disappointed by that, but the court's decision also had a whole set of really important determinations about how [the] potential competition doctrine applies in digital markets. So in the case, one of Facebook's arguments was that this doctrine is so old it doesn't even apply to these markets, and the court firmly rejected that. [The judge] said, 'No, this potential competition doctrine is alive and well, even in markets like digital markets, even relating to virtual reality,' and he noted a whole set of important ways that that doctrine applies in this market, and gave us a whole set of wins that we can build on in any future cases.

On the FTC's case against Amazon and what Khan sees as Amazon's anti-competitive practices:

In today's digital economy, if you want to be visible in e-commerce, you generally have to sell on Amazon, and the lawsuit lays out a set of tactics that Amazon has deployed against those merchants that we believe are anti-competitive. It has basically dictated policies that say, 'If you sell on Amazon, you can't sell anywhere else for a lower price, so you can't list your products on any other website for a price that's lower than what you're listing on Amazon.' And one reason that ends up being problematic is because Amazon has also been hiking the fees that it charges these merchants. So these merchants face higher costs on Amazon, but are not able to raise their price on Amazon to reflect those higher costs. And instead, they have to either raise their price on other websites, or they just stop selling anywhere else entirely because Amazon is so punitive when it does see that people have, you know, listed their products elsewhere for a lower price. And so at the end of the day, Amazon's tactics are actually resulting in higher prices, not just on Amazon, but across the rest of the economy.

On how her strategy and thinking about Amazon's anti-competitive tactics has changed from when she was a law student to now that she is FTC Chair:

The exercise of doing independent research and writing an academic paper is very different from being a law enforcer, where you have subpoena power, you can investigate what's really going on, and ultimately you're charged with (if you bring a complaint) making sure you're alleging law violations and setting up that case to succeed in court. That said, I'll also note that when you have the monopoly playbook, there are different life cycles of where you can be at any given moment, and the tactics that a firm will take to achieve monopoly power will look different from the tactics that it deploys once it's become a monopoly and is really focused on protecting that monopoly and exploiting that monopoly power. And so the case that we brought really reflects Amazon in the year 2023, and what we believe is now extraction mode, where having cemented its monopoly power, having locked out rivals through [these] illegal tactics, it's able to extract from customers, both on the consumer side as well on the seller side. And so that's what the case is about.

On how she views her tenure so far as FTC Chair, despite setbacks in court:

As a law enforcer, one of the things that I think most about is deterrence. You really want to ensure that firms are not engaging in illegal behavior in the first instance. And one set of comments that have really been promising for us, is hearing from prominent dealmakers, prominent bankers, who will say, 'You know, a few years back when I was part of conversations about whether to do a merger, we never really talked about antitrust until the very, very, very end, if at all. And now that's totally different. We talk about antitrust on day one.' And there are a whole bunch of deals that are not even happening because there's a recognition that they would be legally suspect from an antitrust point of view. So as an enforcer, that deterrence is a huge marker of success, right? We want to be making sure we're conserving our resources, that firms are not engaging in illegal mergers in the first instance, and there are a whole set of indications that that's happening.

Today's episode was hosted by Alexi Horowitz-Ghazi and Jeff Guo. It was produced by Dave Blanchard, with help from Sam Yellowhorse Kesler, and edited by Jess Jiang. It was fact checked by Sierra Juarez and engineered by James Willetts. Alex Goldmark is Planet Money's executive producer.

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