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Lina Khan has faced a series of challenges recently. The Chair of the Federal Trade Commission suffered a setback in her efforts to strengthen antitrust enforcement for the Big Tech era. A judge in California rejected her attempt to halt Microsoft’s $75 billion acquisition of Activision Blizzard, a video game maker. Khan also endured a four-hour intense questioning during a Congressional hearing. Despite appealing against the judge’s decision, the FTC was unsuccessful. These losses indicate that Khan’s team, although well-intentioned, has gone too far.
Khan and Jonathan Kanter from the Department of Justice both entered their positions with the determination to establish new principles in order to revolutionize decades of antitrust thinking. They believe that the traditional measure of harm to consumers, which is rising prices, is outdated. They also argue that vertical mergers, involving companies with a supplier-customer relationship, should be subjected to stricter antitrust measures, not just “horizontal” mergers between rivals in the same sector. Additionally, they emphasize the importance of identifying emerging monopolies and addressing them before they fully form.
While these arguments, especially the first one, hold merit and efforts to stay ahead of the regulatory curve regarding technology are commendable, Khan’s team has been moving too quickly in unexplored territory. Moreover, without a congressional majority to pass new laws, they have to rely on creative reinterpretations of existing laws and litigation.
The Microsoft-Activision deal served as a significant test for these new principles. However, Judge Jacqueline Scott Corley denied the injunction to stop the deal, dismissing the FTC’s claim that the merged business would remove the popular game “Call of Duty” from Sony’s PlayStation platform. The judge acknowledged Microsoft’s commitments to share Activision’s content and stated that the FTC failed to demonstrate that the combination would significantly diminish competition in the emerging cloud gaming market. The deal had already been approved by the EU, and the UK’s Competition and Markets Authority reversed its decision following the California ruling.
The FTC may still pursue efforts to block the deal through its own administrative court, but this will be much more challenging once the deal has been finalized. As one lawmaker pointed out, Khan is now “0 for 4 in merger trials.”
Khan has expressed her willingness to push the boundaries of the law, acknowledging that “You lose all the shots you don’t take.” However, repeated losses can undermine the credibility of the regulator and their approach. Additionally, the conservative majority on the Supreme Court poses challenges in persuading lower court judges to support novel legal theories.
The FTC under Khan’s leadership should be more selective in the cases it pursues, focusing on those where they have substantial evidence. By concentrating their efforts on winning key cases or presenting compelling arguments, they can maintain their credibility. Two potential landmark cases against Meta for its acquisition of Instagram in 2012 and a rumored lawsuit against Amazon’s online marketplace are on the horizon and warrant significant attention.
There is still room for the FTC to make an impact through rulemaking, such as implementing a ban on non-compete agreements imposed by employers. The FTC is also preparing to introduce new merger guidelines, and its investigation into the data privacy risks associated with OpenAI’s ChatGPT chatbot is a pioneering step. When it comes to modernizing antitrust, a gradual evolution may prove more successful than a sudden revolution.
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