What Amazon and Facebook Get Wrong About FTC Chair Lina Khan

Last week, Facebook filed a motion with the Federal Trade Commission demanding that its chair, Commissioner Lina Khan, recuse herself from any decisions involving Facebook. Two weeks earlier, Amazon filed the same request, with both tech giants arguing that her previously expressed views on concentration in the tech industry, coupled with her work in Congress investigating Silicon Valley, rendered her too conflicted to fairly regulate the industry.

It’s a brazen claim on one level, as companies never suggest that regulators who cheer on the success of major companies are equally biased in the opposite direction, and if the logic were accepted, it would create a situation in which only allies of Big Tech or those wholly unfamiliar with the industry would be allowed to regulate it.

On another level, it also reflects a fundamental misunderstanding of Khan’s antitrust approach, said Zephyr Teachout, a law professor and antitrust expert in a recent interview for The Intercept’s podcast Deconstructed. When Khan was nominated to the FTC, the news media universally referred to her by some version of “prominent critic of Big Tech.”

Khan earned that moniker partly through her work as a Hill staffer leading a bipartisan Judiciary Committee investigation into leading Silicon Valley firms, but also through her landmark law review article titled “Amazon’s Antitrust Paradox.”

That’s where the confusion comes in. Though Amazon is in the title of Khan’s pivotal 2017 Yale Law Journal article, the company is used as a case study to make a broader point, Teachout noted.

The article is often used to claim that Khan is hostile to Amazon itself, when in reality her paper was grappling instead with the intellectual underpinnings of 40 years of antitrust policy. The introduction to Khan’s paper makes that clear, noting that the article “argues that the current framework in antitrust—specifically its pegging competition to ‘consumer welfare,’ defined as short-term price effects—is unequipped to capture the architecture of market power in the modern economy.”

The clarity of the paper’s argument helped drive a major rethinking among antitrust policymakers, as it made plain that the “consumer welfare standard” was simply unequipped for the internet age of platforms. She summarizes her argument in a way that is at once easy to understand and impossible to refute:

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 heightened 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 rewarded. 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.

Given that Khan’s skepticism of the reigning antitrust orthodoxy is not specific to the technology sector, the rationale that she should recuse herself as chair would need to extend to every other industry in which concentration exists in new ways, which is nearly every industry. As Teachout put it:

Khan’s article was really important about Amazon, but it was about much more than Amazon. It was actually about agriculture. And it’s about airlines. And it’s about pharma. And it’s about the way we think about economic policy. So my pet peeve is you will often see Khan described as a thorn in the side of big tech or a big tech opponent, anti-tech — she’s not anti tech at all. One of the things that we have seen is that these big tech companies are destroying innovations, they’re buying up competitors, they’re choking people who might have more exciting ideas. It’s pro-tech, and it’s about economic theory, not just tech policy.

So it’s very fact-based. It’s very much focusing on what actually happens, not what the theory does. And that’s where Khan’s training is. She started talking to chicken farmers about their experience. She wrote great articles about seeds, and patents, and Monsanto. So she actually started in ag. And then those insights helped her look at big tech without the blurriness and the sort of glamour that tech sometimes brings, where people say, “Tech is totally new! Everything’s disrupted! It’s never happened before.” She went in there and she’s like, “Hey, I’ve seen this. I saw this with Monsanto. I know these practices, because this is what Tyson does.” And I think it’s important to understand her as a pro-innovation, pro-worker, pro-small business, pro-changing-the-way-that-we-approach-equality.

Listen to the full interview here or wherever you get podcasts.

The post What Amazon and Facebook Get Wrong About FTC Chair Lina Khan appeared first on The Intercept.

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