Aiming for Evolution: Emphasizing Progress over Revolution at Lina Khan’s FTC

By Maggie Last updated Jul 16, 2023

Lina Khan, the chair of the Federal Trade Commission (FTC), has faced several challenges recently. Her efforts to strengthen antitrust enforcement in the era of Big Tech suffered a setback when a California judge rejected her attempt to halt Microsoft’s $75 billion acquisition of Activision Blizzard, a video game maker. Additionally, Khan endured a four-hour grilling at a Congressional hearing that was often hostile. The FTC appealed the California judge’s decision but was unsuccessful, indicating that Khan’s team may have overreached despite good intentions.

Khan and Jonathan Kanter at the Department of Justice entered their positions with a determination to establish new principles and disrupt decades of antitrust thinking. They believe that the traditional test of harm to consumers, which focuses on rising prices, is outdated. They also argue that vertical mergers, involving companies with a supplier-customer relationship, should face stricter antitrust measures, not just “horizontal” mergers between competitors within a sector. Furthermore, they advocate for regulators to identify emerging monopolies and address them proactively, rather than waiting until they have fully formed.

While these arguments, especially the first one, hold merit, Khan’s team has moved too quickly in uncharted territory. Without a congressional majority to pass her ideas into law, Khan was always expected to rely on creative reinterpretations of existing law and court battles. The Microsoft-Activision deal was a crucial test for these new principles.

However, Judge Jacqueline Scott Corley denied the FTC’s request to halt the deal, rejecting the claim that the merged company would remove the popular game Call of Duty from Sony’s PlayStation platform. Microsoft assured that it would continue to make the game available on PlayStation. The judge also found the FTC’s evidence lacking in proving that the deal would significantly reduce competition in the emerging market for cloud gaming. The European Union had already approved the deal, and the UK’s Competition and Markets Authority reversed its decision following the California ruling.

The FTC might still attempt to challenge the deal in its own administrative court, but it will be more difficult if the acquisition has already been completed. Moreover, Khan’s track record in merger trials is now 0 for 4, as pointed out by a lawmaker. While Khan expressed her willingness to push the legal envelope, it is important to consider that repeated losses can undermine the regulator’s credibility and the viability of its ideas. This is particularly challenging in an environment with a conservative majority on the Supreme Court, which makes it harder to convince lower court judges to support novel legal theories.

To enhance its effectiveness, Khan’s FTC should be more selective in the cases it pursues, focusing on those where it possesses compelling evidence. By prioritizing key cases and presenting strong arguments, the FTC can make a significant impact. Two potential landmark cases against Meta for its acquisition of Instagram in 2012 and a potential lawsuit against Amazon’s online marketplace are worth attention.

Additionally, the FTC can still make a difference through rulemaking, such as its proposal to prohibit employers from imposing non-compete agreements on workers. Collaborating with the Department of Justice, the FTC is also preparing to introduce new merger guidelines. Furthermore, the FTC’s investigation into the data privacy risks associated with OpenAI’s ChatGPT chatbot is an innovative step. When it comes to modernizing antitrust, a gradual evolution approach may be more successful than a revolutionary one.