Biden Taps Lina Khan to Chair the FTC

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By Jerri-Lynn Scofield, who has worked as a securities lawyer and a derivatives trader. She is currently writing a book about textile artisans.

Yesterday President Joe Biden tapped antitrust expert Lina Khan to chair the Federal Trade Commission (FTC), hours after the Senate voted 69-28 to confirm her nomination as an FTC commissioner.

Khan, a Columbia University law professor, is a noted Big Tech critic. While still a student at Yale Law School, she penned an important article for the Yale Law Journal, Amazon’s Antitrust Paradox. From the Abstract:

Amazon is the titan of twenty-first century commerce. In addition to being a re- tailer, it is now a marketing platform, a delivery and logistics network, a payment service, a credit lender, an auction house, a major book publisher, a producer of television and films, a fashion designer, a hardware manufacturer, and a leading host of cloud server space. Although Amazon has clocked staggering growth, it generates meager profits, choosing to price below-cost and ex- pand widely instead. Through this strategy, the company has positioned itself at the center of e- commerce and now serves as essential infrastructure for a host of other businesses that depend upon it. Elements of the firm’s structure and conduct pose anticompetitive concerns -yet it has escaped antitrust scrutiny.

This Note argues that the current framework in antitrust -specifically its pegging competi- tion to “consumer welfare,” defined as short-term price effects -is unequipped to capture the ar- chitecture of market power in the modern economy. We cannot cognize the potential harms to competition posed by Amazon’s dominance if we measure competition primarily through price and output. Specifically, current doctrine underappreciates the risk of predatory pricing and how integration across distinct business lines may prove anticompetitive. These concerns are height- ened in the context of online platforms for two reasons. First, the economics of platform markets create incentives for a company to pursue growth over profits, a strategy that investors have re- warded. Under these conditions, predatory pricing becomes highly rational -even as existing doctrine treats it as irrational and therefore implausible. Second, because online platforms serve as critical intermediaries, integrating across business lines positions these platforms to control the essential infrastructure on which their rivals depend. This dual role also enables a platform to exploit information collected on companies using its services to undermine them as competitors.

This Note maps out facets of Amazon’s dominance. Doing so enables us to make sense of its business strategy, illuminates anticompetitive aspects of Amazon’s structure and conduct, and underscores deficiencies in current doctrine. The Note closes by considering two potential re- gimes for addressing Amazon’s power: restoring traditional antitrust and competition policy principles or applying common carrier obligations and duties.

The WSJ. called selecting Khan to head the FTC “a move that caps the ascendancy of a progressive camp that favors far-reaching changes to antitrust enforcement.” Further:

Ms. Khan has been the leader of that movement, which believes the current decades long approach has done too little to restrain corporate dominance and stop mergers that have eroded competition. She has argued in favor of blocking more mergers, aggressively attacking monopolistic practices and potentially breaking up some of America’s largest companies.

By designating Khan as FTC chair, Biden is signaling that he favors tougher antitrust enforcement. Per the WSJ:

While Democrats across the board have argued that antitrust enforcement has been too lax, they have been split on just how far the pendulum should swing. Some have questioned whether a wholesale philosophical shift is needed. Ms. Khan’s leading FTC role signals which way Mr. Biden is leaning in that debate, a warning shot to Silicon Valley and dominant firms in other industries.

Senator Elizabeth Warren hailed Biden’s decision as “tremendous news,” according to Politico:

“With Chair Khan at the helm, we have a huge opportunity to make big, structural change by reviving antitrust enforcement and fighting monopolies that threaten our economy, our society, and our democracy,” Warren said.

Khan herself tweeted:

Khan also enjoyed the support from some Republican Senators. Per Politico:

Tuesday’s bipartisan support for Khan shows Congress’ “hearty appetite to rein in Big Tech,” said Sarah Miller, executive director of the anti-monopoly advocacy group American Economic Liberties Project.

“Her presence on the FTC marks the beginning of the end of an era of lawlessness for powerful corporations that they’ve enjoyed at the expense of workers, smaller businesses, and democracy,” Miller said.

[Senator Amy] Klobuchar praised Khan’s “deep understanding” of the tech platforms as “vital” to helping strengthen antitrust enforcement.

“We need all hands on deck as we take on some of the biggest monopolies in the world,” said Klobuchar

Big Tech’s reaction to Khan’s ascension was not so positive. With Khan at the FTC, they no longer have carte blanche to conduct business as usual.

NetChoice, an industry group with members including Inc., Google and Facebook Inc., said it was “disheartened” by Ms. Khan’s confirmation and questioned whether she could “enforce antitrust laws as they are, not as the commissioner wishes they would be.”

Democrats Will Temporarily Lose Their FTC Majority

One immediate obstacle to implementing any FTC agenda in which the commissioners might divide along partisan lines is that the Democrats will soon temporarily lose their 3-2 majority, as commissioner Rohit Chopra has been nominated to head the Consumer Financial Protection Bureau (CFPB). Politico suggests a vote on his CFPB nomination is unlikely much before July. So, the time window for acting on matters that lack bipartisan support is potentially small. If his nomination as CFPB head is confirmed, Biden must nominate someone to fill Chopra’s vacant FTC seat. It could be several months before Khan again has a firm Democratic majority to work with on the FTC. The other Democratic commissioner, Rebecca Kelly Slaughter, has served as  acting chair until now.

Politico speculated on what the Khan nomination bodes for the FTC’s enforcement and rule making agenda:

…Amanda Wait, who chairs the antitrust practice at the law firm Norton Rose Fulbright, said Biden’s selection of Khan for FTC chair marks a clear break with Obama-era antitrust enforcers. At her confirmation hearing, Khan focused on unearthing what she called “hidden gems” from the FTC’s statute to pursue innovative enforcement and rulemakings, she said.

“One theme we are likely to see out of Lina Khan as chair is trying to find new ways to do things with existing tools or using tools in a new way,” said Wait, who spent three years at the FTC before moving to private practice.

Khan and Chopra have argued that the FTC should create rules outlining specific behaviors that amount to unfair methods of competition under the agency’s governing statute. That could affect the tech giants, but also the pharmaceutical and health care companies who are frequent targets of FTC enforcement.

Both Chopra and Slaughter have also advocated for a rulemaking focused on non-compete agreements, contractual provisions that companies in many industries use to bar employees from switching jobs. The FTC’s two Republicans have been less supportive of that move. (Non-competes are less of an issue for tech companies based in California, as the state already prohibits them, but are frequently used in health care and among franchise restaurants.)

7-Eleven merger: More immediately, Khan’s addition to the FTC may help break a deadlock that has existed for the past month on convenience store giant 7-Eleven’s $21 billion purchase of Speedway stores from Marathon Petroleum. The parent company of 7-Eleven closed the transaction last month over the objections of the FTC. [original emphasis.]

Biden has yet to decide on the other candidates he wants to add to his antitrust team. According to the WSJ:

The White House has been slow to nominate a full cast of antitrust enforcers, creating uncertainty about the administration’s approach to enforcing U.S. laws that are designed to promote and protect competition. The president hasn’t yet nominated anyone to run the Justice Department’s antitrust division, which shares authority with the FTC.

Antitrust policy will be only one of areas Khan will oversee in her role as FTC chair. The agency has responsibility for other consumer protection issues. The FTC has recently waded into the right to repair debate, as I wrote  here in May

Republican success in confirming judicial nominations during the Trump administration means that even when the FTC is back to full strength, and Democrats once again have a clear 3-2 majority, the FTC will not have a free hand in setting antitrust policy. According to the WSJ:

If the FTC decides to push antitrust boundaries in future cases, it will face a federal judiciary that over recent decades has read antitrust law more narrowly. Both the commission and Justice Department have lost high-profile cases in recent years.

Congress is considering whether to make legislative changes to promote more expansive enforcement, but it’s not clear if lawmakers will find enough consensus to move forward.

The commission for many months has been examining a variety of practices by Amazon. It is also possible the FTC could review the online giant’s proposed acquisition of Hollywood studio MGM.

Ms. Khan has faced questions about whether she would have to recuse herself in an FTC case against large technology companies because of her past work on the House antitrust investigation. She has said she would consult with FTC ethics officials if recusal questions arose.

The Last Word

As to what this all means, I’m going to give the last word to Matt Stoller, who knows far more about antitrust and competition matters than I do:

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