‘Hipster Antitrust’ Is Coming for Big Tech

A regulatory push in Congress, along with Big Tech critic Lina Khan's ascension as a chief antitrust official, may signal meaningful reform.

An image of the US Capitol building wearing VR goggles that are visibly cracked, against a vast circuit-board background.
Jason Arias

In recent years, academics like Lina Khan have warned that US antitrust and regulatory enforcement has grown toothless and frail, blind to the myriad ways that corporations are exploiting loopholes in government oversight to dominate the interconnected systems underpinning the internet economy.

A rising young legal scholar, Khan was derided as “hipster antitrust” by an establishment whose failures she laid bare. Now, with her shock appointment as chair of the Federal Trade Commission (FTC), Khan’s vision of antitrust reform has jumped into the political mainstream — the opening salvo in a major battle to redefine corporate accountability in the internet era.

Khan began her career by exposing the dangers of unchecked consolidation in everything from the chocolate to the poultry industries. She came to public prominence as a Yale law student, where she wrote “Amazon’s Antitrust Paradox,” a research paper that explored how tech giants like Amazon had become adept at manipulating the consumer welfare standard in US antitrust enforcement, using low prices to cement their market preeminence.

“Due to a change in legal thinking and practice in the 1970s and 1980s, antitrust law now assesses competition largely with an eye to the short-term interests of consumers, not producers or the health of the market as a whole,” Khan wrote. “Antitrust doctrine views low consumer prices, alone, to be evidence of sound competition.”

Amazon is an industry pioneer and entrepreneurial success story, accounting for 40 percent of all e-commerce online while routinely topping most customer satisfaction surveys. At the same time, Khan argued that the millions of consumers who appreciated the company’s speedy two-day delivery of discounted shampoo had effectively led government regulators to believe that if consumers were smiling, any anticompetitive harm must be minimal.

Stacy Mitchell, an economics researcher and co-director of the Institute for Local Self-Reliance, studies how Amazon has exploited these assumptions to dominate not just e-commerce, but the interconnected systems that make e-commerce possible. Her 2016 report, “Amazon’s Stranglehold,” explored how the company increasingly controls the underlying infrastructure of the digital economy through its online marketplace, growing dominance in cloud computing, cozy ties with government and law enforcement, massive warehouse, storage, and delivery apparatus, and its accelerated expansion into shipping.

Both Khan and Mitchell argue this growing power has resulted in a documentable impact on small businesses (the number of small retail businesses in the US declined by 85,000 from 2005 to 2015), harmed employee wages and health, and eroded local community independence — all measurables that are not reflected in traditional customer satisfaction studies. 

“Lina’s nomination was significant, but it’s her appointment as chair that’s a game-changer,” Mitchell told me, referring to the White House’s surprise elevation of Khan to FTC chair hours after the Senate approved her nomination as a commissioner. “She is one of the most insightful critics of what has gone wrong with antitrust enforcement over the last 40 years.”

Policymakers spent much of the early 2000s in a whirlwind honeymoon with the innovative potential of the internet. It took the better part of 20 years for government leaders to realize that a happy consumer doesn’t provide a full accounting of consolidated corporate power, and that feckless antitrust enforcement isn’t an Amazon exclusive.

Over the past year, the Justice Department filed an antitrust lawsuit against Google, accusing it of using anticompetitive dominance of search and search-related advertising. A group of 10 states followed suit, charging that Google had established a digital-advertising monopoly and had violated antitrust laws by manipulating ad markets. Similar scrutiny has befallen Amazon’s control over third-party sellers in its marketplace and Apple’s often ham-fisted dominion over its App Store. Facebook also found itself on the receiving end of an FTC lawsuit accusing the company of anticompetitive conduct. While the suit against Facebook was recently thrown out due to insufficient evidence, the judge has given the government 30 days to present a better case — and Facebook’s soaring value in the wake of the ruling has only renewed calls for meaningful legislative reform.

All told, these tech giants are actively facing more than 70 competition-based lawsuits and investigations, according to The Information.

The idea that regulators were napping as a parade of tech giants engaged in dodgy behavior was initially dismissed by a predominately white, male establishment averse to reform and enamored by the shinier side of technology. But more recently, even economists who were once tightly allied with Silicon Valley have shifted their thinking.

“Institutions are hard to change…. This is why it’s crucial that advocates and the public keep up the outside pressure for change.”

Mitchell argues that a decades-long erosion of both union power and competent government oversight has weakened the US middle class, small businesses, and public confidence. The failure was bipartisan, and Khan’s arrival as a chief trade regulator, combined with legislative momentum on Capitol Hill, threatens to upset deeply entrenched dysfunction and apathy. 

“She recognizes that the problem is not just a matter of being too lax — it’s that the ideological framework that has guided how enforcers think about antitrust is wrong,” Mitchell said. “It’s a big deal, and could change the country’s trajectory in profound and beneficial ways.”

Aware of the sea change Khan’s appointment represents, Amazon has already tried to claim she should be recused from antitrust inquiries into its business because her factual analysis  somehow creates a conflict of interest. The gambit isn’t likely to work. Even happy Amazon customers, whose satisfaction remains the pillar of inaction under the consumer welfare standard, recognize that it’s time for change. Mitchell points to a February poll in which nearly 80 percent of US voters said that they believe Amazon should be subject to stricter regulation, with more than half of them supporting some form of breakup.

To many tech policy experts, Khan’s appointment to the FTC and her sudden promotion to lead the agency is equal parts meteoric and justified. The 32-year-old Khan isn’t just the youngest person to ever chair the FTC, she’s arguably the most progressive official to do so in a generation.

“Chairwoman Khan is the real deal, and brings a vision for a more competitive US economy backed by serious academic rigor,” said Blake Reid, a clinical professor at the University of Colorado Law School. “She reinvigorated a whole school of thought with intellectual honesty and rigor against a skeptical orthodoxy, and her appointment shouldn’t be seen as any kind of surprise given the quality of her work.”

The FTC has historically lacked the funds, staff, or resources to engage in the level of antitrust, fraud, or privacy enforcement common among the agency’s UK and EU counterparts. The FTC Act also restricts the FTC’s authority to only policing clearly “unfair or deceptive” behavior. Modifying either of these constraints requires the approval of a well-lobbied Congress.

After a decade of ugly headlines, a frail bipartisan consensus has emerged that Silicon Valley needs to face greater accountability. Much of this support fixates exclusively on Big Tech, and leans on a GOP that has been historically averse to reform across numerous heavily consolidated industries, including telecom, banking, and healthcare. Silicon Valley’s belated decision to moderate hate speech and online disinformation has triggered a wave of animosity toward tech giants among select Republicans. But this anger rests largely on a tenuous conflation of clumsy online moderation and censorship, and may prove too fragile to persist in the face of real reform.

A 15-month, 450-page House investigation recently culminated in five new antitrust bills that are designed to take on varying aspects of the tech industry’s immense power. While there’s ample concern over whether these bills do too much or too little, they represent the foundation of something that vaguely resembles a seed of real change.

The “Ending Platform Monopolies Act” seeks to prohibit dominant tech platforms from owning various lines of businesses that create anticompetitive conflicts of interest, such as Amazon’s use of third-party seller data to launch products in competition with small businesses on its platform. Another proposal, the “American Innovation and Choice Online Act,” attempts to prevent these platforms from giving preference to their own goods or services, whether that’s Google giving its services priority in search results, Apple prioritizing its own software in the App Store and smartphones, or Amazon prominently displaying its own branded products.

The “Platform Competition and Opportunity Act” takes aim at the “copy, acquire, and kill” tactics that tech giants use to eliminate threats to market power. Facebook, for example, was heavily criticized after leaked company communications showcased the company’s interest in acquiring startups to prevent them from becoming effective competition.

The “Augmenting Compatibility and Competition by Enabling Service Switching (ACCESS) Act” establishes interoperability and data portability requirements to reduce switching costs and encourage online competition, while the “Merger Filing Fee Modernization Act” attempts to shore up funding at the FTC and DOJ’s antitrust divisions, ensuring that they have the resources needed to police increasingly complicated mergers. Even this bill, considered the least controversial of the proposals, proved highly contentious at a recent House Judiciary markup hearing in Washington.

A sixth bill, the State Antitrust Enforcement Venue Act, would ensure state attorneys general that bring antitrust cases in federal court can remain in the court they select, instead of facing costly and time consuming venue changes preferred by the companies they bring action against. 

All of the bills take on antitrust enforcement from various angles, often redundantly. The problem, as always, is how to craft comprehensive legislation that reins in the predatory behavior of industry giants without inadvertently harming the online marketplace and the elaborate, interconnected systems and smaller players that participate.

To address this, the bills are tailored to target only the nation’s biggest technology giants, namely those with 50 million US-based monthly active users and a market capitalization of at least $600 million. But such a narrow window also risks ignoring AT&T or Rupert Murdoch’s News Corporation, which are both eager to see telecom and media consolidation excluded from reform.

Rep. David Cicilline, head of the House Judiciary Committee’s antitrust panel, has said that the narrow, piecemeal approach is meant to make it harder for tech lobbyists to derail a single bill while appealing to Republicans, who are needed for a 60-vote Senate passage. But there are still indications that this approach simply may not work

“These bills neatly position a lot of members between the long-running project to weaken antitrust law and the newfound desire to check the big tech companies,” said Reid. “I just don’t know how the politics will shake out in the end.”

Should the legislative push fail, the Biden administration is also planning an executive order that would push government agencies to more seriously consider how their policies impact competition across industries. Meanwhile, anticipation of meaningful legislative action has resulted in a strain on the pipeline of lawyers skilled in competition law. 

Ambitous antitrust reform will run a gauntlet of relentless lobbying not just from technology giants, but from a vast coalition of industry-funded groups working in coordinated opposition. Such groups, such as the Chamber of Progress, embed themselves among others with more objective, academic concerns, often without disclosing deep-rooted financial conflicts of interest.

As is standard practice in DC, this coalition of consultants, lobbyists, think tanks, and various “dark money” proxy organizations help create a sound wall of illusory opposition that will, over the next few months, attempt to drown out calls for meaningful reform.

Partisan feuds could also imperil other avenues of Khan’s reform agenda. The FTC will need a 3-2 vote majority to pass any efforts of substance, and with current FTC commissioner Rohit Chopra headed to the Consumer Financial Protection Bureau, his replacement will matter, notes Hal Singer, an economist that testified about tech abuses at a House hearing last February. “It could mean a lot if the administration is able to quickly appoint the third commissioner, and if that commissioner has views that are consistent with Khan’s agenda,” he said.

The US Supreme Court could also play a role in scuttling Khan’s ambitions, Reid suggested. In recent years, the court has focused more on curtailing the FTC’s authority, such as limiting its ability to recoup consumer losses from deceptive business practices, than on expanding it. “What she will be able to accomplish depends to some extent on how much power Congress will be inclined to extend the agency — or the courts, if Chairwoman Khan decides to push the envelope on enforcement under existing authority,” he said.

While unchecked corporate power isn’t unique to Silicon Valley, the singular obsession with Big Tech reflects an ongoing myopia in the current policy discourse. US healthcare, insurance, telecom, banking, and air travel all suffer from unchecked consolidation and a near-mindless obsession with megamergers and the empty promises that often accompany them. As head of the top US consumer protection agency, Khan is now tasked with policing everything from the digital economy to bleach-labeling accuracy to auto safety standards. Fixing decades of cross-industry regulatory and antitrust dysfunction is an immense undertaking, but the effort is essential to protect consumers, encourage small businesses, and restore public confidence.

“Institutions are hard to change,” Mitchell told me. “They have embedded ways of thinking and operating. It’s no small task to turn that around. This is why it’s crucial that advocates and the public keep up the outside pressure for change.”

While real reform will face massive resistance from deep-pocketed industries looking to protect the profitable status quo, Khan’s appointment signals a growing consensus: when it comes to protecting workers, consumers, and markets from unbridled corporate power, the US can assuredly do better, both online and off.

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An image of the US Capitol building wearing VR goggles that are visibly cracked, against a vast circuit-board background.

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Jason Arias

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