If confirmed, Khan’s nomination potentially heralds a profound shift in the way that antitrust law is enforced and discussed in the US.
Editor’s note: Lina Khan’s nomination to the Federal Trade Commission has been confirmed by the Senate on June 15 and she was subsequently sworn in as chair of the FTC.
Khan, who served as counsel to the House Judiciary Committee during its recent investigation into the power of digital platforms and was the key architect of its landmark report, is a prominent critic of corporate monopolies and a leading figure of the nascent New Brandeis movement. Her nomination—along with that of Columbia law professor Tim Wu, another prominent New Brandeisian, to Biden’s National Economic Council—is widely viewed as a signal that the Biden administration intends to bolster antitrust enforcement, particularly in regards to the four major platforms: Facebook, Amazon, Google, and Apple.
News of Khan’s nomination to the FTC—which has been speculated for some time—immediately sent shockwaves through the antitrust world. In a statement to ProMarket, George Washington University law professor William Kovacic, who served as Commissioner and FTC Chairman under George W. Bush, said that “Lina’s appointment is just the latest sign of the extraordinary influence she has had upon the US antitrust system in a remarkably short period of time. I expect she will be a still more powerful voice for the transformation of US antitrust policy.”
Others within the antitrust world have been congratulatory as well:
Not all responses were as approving. If confirmed, Khan will be the youngest-ever FTC commissioner at 32, following a remarkable career trajectory that saw her become one of the most influential critics of Big Tech and an associate professor at Columbia Law School within four years of getting her JD. In a statement on Tuesday, GOP Senator Mike Lee (R-UT) called the reports of Khan’s nomination “deeply concerning” and said that “Ms. Khan no doubt has a promising career ahead of her, but being less than four years out of law school, she lacks the experience necessary for such an important role as FTC Commissioner.”
But Khan’s appointment holds much larger significance and, if confirmed, potentially heralds a profound shift in the way that antitrust law is enforced and thought-about in the US.
Amazon’s Antitrust Paradox and the Consumer Welfare Standard
Khan, a former journalist who reported on concentrated industries like agriculture and airlines, first rose to prominence with a 2017 article “Amazon’s Antitrust Paradox,” which was published in the Yale Law Journal while she was a law student at Yale. In it, she mapped out the rise of Amazon into a corporate titan that dominates multiple markets and areas of the economy to illustrate that “the current framework in antitrust…is unequipped to capture the architecture of market power in the modern economy.”
The piece became hugely influential in antitrust circles and among policymakers. As the dominance of tech platforms became more salient, Khan—who joined the Open Markets Institute as its first director of legal policy before moving to the FTC to work in the office of outgoing FTC Commissioner Rohit Chopra—quickly stood out as a scholar of platform power. In a 2018 piece for ProMarket, for instance, she explored the different forms that the power of digital platforms can take, how it could be abused, and how to address it. Regulations that prohibit platforms from using user information collected on their platforms to benefit other areas of their business like the EU’s GDPR, she argued, could prove ineffective if the underlying structure of platforms is not addressed through measures like “undoing, for example, Facebook’s acquisition of Instagram and WhatsApp, prohibiting future acquisitions, and granting users ownership rights over their data; requiring social networks and search engines to spin off their ad networks, ending their surveillance-based business models; and prohibiting platforms from entering lines of business that depend on their platform.” [Read Khan’s other ProMarket pieces here]
A similar examination was at the heart of Khan’s 2019 Columbia Law Review paper “The Separation of Platforms and Commerce.” In this follow-up to “Amazon’s Antitrust Paradox,” she examined structural separations as a potential remedy for the dominance of tech platforms by looking into the history of structural separations of other network monopolies in the railroad, banking, media, and telecom industries.
While Khan is best known for her criticism of Big Tech, the thrust of her work is her critique of the framework that has dominated US antitrust enforcement for the past 40 years. Ever since Robert Bork published his seminal 1978 book The Antitrust Paradox, antitrust enforcement in the US has focused almost exclusively on short-term price effects, otherwise known as “consumer welfare.” In “Amazon’s Antitrust Paradox,” Khan argued that the antitrust’s sole focus on price and output has allowed Amazon to get away with anticompetitive behavior like predatory pricing and vertical integration, both of which helped the company position itself as “essential infrastructure.” By redirecting antitrust “toward material rather than political ends,” she wrote, “both the neoclassical school and its critics effectively embraced concentration over competition,” leading to a rise in prices that rendered the consumer welfare standard a failure even on its own terms.
Khan’s critique of the consumer welfare standard helped spur a fierce debate over the goals of antitrust enforcement (some of which has taken place in this publication). It has also been met with a lot of resistance. A 2018 article by UC Berkeley professor Carl Shapiro (former chief economist at the DOJ’s antitrust division and member of President Obama’s Council of Economic Advisers) defended the protection of consumer welfare as the “the core principle guiding antitrust enforcement in the United States that has served us well for so many years” and argued that “today’s populist sentiments are fueling a ‘big is bad’ mentality, leading to policies that will slow economic growth and harm consumers.” A 2019 article by George Mason law professor and former FTC Commissioner Joshua Wright and others named Khan as a leader of “the Hipster Antitrust movement” and argued that replacing the consumer welfare standard with an “incoherent and inconsistent” public interest approach would open the door to “uncertainty and to exploitative behavior.”
In response to Khan’s nomination, Wright told ProMarket: “The FTC is at its best when its Commissioners each bring to the table a diverse set of expertise, skills, and viewpoints. Lina Khan has been one of the most influential contributors to the debate about the role of antitrust in modern society. While we disagree on many issues, Lina is a thoughtful and effective advocate, cares deeply about competition and its impact on society, and her presence will make the Commission stronger. I believe Lina should and will be confirmed, and I look forward to welcoming her back to the FTC community when it does.”
In a 2018 episode of the Capitalisn’t podcast, Khan expanded on her view regarding the consumer welfare standard: “Thinking that antitrust law is only supposed to address consumer welfare is misguided. There’s a lot of scholarship that shows that in terms of legislative history, that was just a fiction that Bork imported into the law, and I think we’re also at a stage where we’re seeing all these merger retrospective studies that are showing, actually, mergers that were approved in fact have led to higher prices and lower output, suggesting that the consumer-welfare approach has actually failed, even on its own terms. So, even if all you care about is consumer prices as the main metric of competition, actually, all around us we’ve seen instances where mergers have been approved and then have led to higher prices.”
Another strand of Khan’s scholarship is the relationship between market power and inequality. In a 2016 paper written with Sandeep Vaheesan, she explored the role of monopoly and oligopoly power in perpetuating inequality and made the case for reinvigorating antitrust enforcement as a possible remedy for the regressive redistributive effects of the rise in concentration. “Our argument is not that addressing inequality should be an explicit goal of antitrust, but that the enfeebling of antitrust has contributed to inequality, and that one effect of reinvigorating antitrust may be to mitigate that inequality,” she told ProMarket in an interview in 2016. In their paper, Vaheesan, Khan outlined what would ultimately become a major tenet of the New Brandeis movement and a central feature of Khan’s subsequent scholarly work—the call to refocus antitrust enforcement around the original intent of the Sherman Act: preventing the translation of economic concentration into political power.
A Change of Values
What makes Khan’s nomination so significant isn’t just her critique of the current status quo in antitrust, but also what she proposes replacing it with. In “Amazon’s Antitrust Paradox,” Khan argued that the unique anticompetitive harms associated with platform markets—harms that the current dominant paradigm in antitrust fails to capture—require a reevaluation of the way antitrust law is enforced. She suggested replacing the consumer welfare framework with a framework “oriented around preserving a competitive process and market structure.” Instead of focusing on price and output, this approach would focus on market structure and competition, with the intent of protecting not just consumers, but also suppliers and workers through measures that would aim for a fairer distribution of economic power—for instance, prohibiting vertical integration by dominant platforms, the kind that Amazon used to enhance and entrench its power by operating as marketplace and at the same time as a competitor of firms that rely on its platform. In cases where a dominant platform like Amazon is pricing products below cost, she wrote, such a regime would introduce a “presumption of predation.”
In “The Separation of Platforms and Commerce,” Khan took this approach one step further, making a case for applying structural separations on dominant digital platforms by limiting the lines of business in which they can operate.
More than it is about any one measure, Khan’s approach to antitrust represents a change of values. In addition to the economic goal of protecting competition, Khan and fellow New Brandeisians view antitrust as having a political goal as well, which is to ensure individual liberty and democratic outcomes by preventing companies from leveraging their economic power into political power. While this approach has been deemed radical by some observers, Khan and the rest of the New Brandeis movement see themselves as reorienting antitrust law toward its original goal. As Khan explained in an article she published in 2018 in the Journal of European Competition Law & Practice, this approach derives directly from the movement’s namesake, Louis Brandeis, who famously worried that concentrations of economic power would allow dominant firms to wield power over policymakers and elected officials and ultimately undermine democracy. In this view, the Borkian revolution is an aberration, and antitrust is but one tool in the antimonopoly toolkit meant to curb concentrated corporate power, along with public regulation and other policy levers. “Laws reflect values,” Khan said in an interview with the Financial Times in 2019. “Antitrust laws used to reflect one set of values, and then there was a change in values that led us to a very different place.”
The most significant manifestation of this approach is the House Judiciary Report on Big Tech, which Khan helped write and which criticizes the FTC and the DOJ for their failure to enforce antitrust law during the past four decades. Khan’s analysis of the way in which digital platforms like Amazon and Google leverage their dominance in one area to cement their dominance in others, as well as her observations regarding the role of the courts in weakening antitrust laws and the failure of the consumer welfare framework, permeate the House report and were the key inspiration behind its far-reaching recommendations.
Among other things, the House report recommends structural separations that would effectively prohibit dominant platforms from future mergers and acquisitions or from operating in multiple lines of business, as well as prohibiting dominant platforms from things like self-referencing and forcing them to make their services compatible with other networks. It also recommends strengthening the existing antitrust laws in ways that would override “problematic” judicial precedent and shifting merger presumptions so that any acquisition by a dominant tech platform would be presumed anticompetitive “unless the merging parties could show that the transaction was necessary for serving the public interest.” As Shaoul Sussman wrote in ProMarket in October, “the intellectual fingerprints of Lina Khan…can be traced throughout this path-breaking portion of the report.”
What impact Khan would be able to have within the FTC remains to be seen, but already, the antitrust debate has changed markedly since she published her Amazon paper, in large part thanks to her work. As Hal Singer notes in his latest ProMarket piece, a bipartisan movement to break-up the big tech platforms is rapidly forming in Congress—a vastly different environment than the one that existed when Khan first raised the idea of structural separations four years ago (and when Richard Posner confidently declared “Antitrust is dead, isn’t it?“). As Commissioner, she will have a powerful platform from which to influence the direction of US antitrust enforcement. But as Matt Stoller and Berin Szóka make clear, Khan’s ability to affect change would largely depend on who Biden nominates for the second open seat at the FTC, and who will be appointed to lead the agency, so what impact Khan would be able to have within the FTC remains to be seen.
While I don’t normally agree with Techfreedom founder @BerinSzoka, he has a point. @linamkhan is formally taking the slot of the former Chair, @JoeSimonsFTC. But @chopraftc, who has been quite bold, is leaving for the CFPB. Her ascension will not change the balance at the FTC. https://t.co/wWEHHMVBs8— Matt Stoller (@matthewstoller) March 9, 2021
Nevertheless, Fordham law professor Zephyr Teachout, herself a key figure in the New Brandeisian movement, hails Khan’s appointment as transformative, telling ProMarket that it marks “the beginning of the end for a 40-year failed regime.”
“She shook up the antitrust world with her brilliant take-down of the consumer welfare standard in Amazon’s Antitrust Paradox and related writings, and then, in her key role in the House Antitrust Subcommittee, was a key architect in revealing the incredible range of harms of big tech companies to small businesses and democracy, and then proposing a path forward,” said Teachout. “Most underappreciated about Khan may be her background as a journalist, where she did path-breaking stories on agriculture. She’s a trifecta: a grounded journalist, a brilliant academic, and a political visionary.”