F.T.C.’s Lina Khan Faces Fresh Questions About Her Strategy

Two years ago, Rina Khan became chairman of the Federal Trade Commission, promising to take bold action against big tech companies.

Khan said at the time that the agency had been a weak cop for too long and needed to be challenged in court to stop giants such as Microsoft, Amazon, Meta and Google from expanding their power. Even if the FTC lost, she later added, it would be a partial victory, as it would suggest that antitrust laws need to be updated for the modern internet age.

But on Tuesday, Khan suffered the biggest blow yet to her signature policy. A federal judge has ruled that the FTC failed to prove its attempt to block Microsoft from completing its $70 billion acquisition of video game maker Activision Blizzard, saying the deal would reduce competition and harm consumers. rejected as such. This followed a judge’s dismissal and loss of an FTC lawsuit in February to block Meta’s acquisition of virtual reality startup Within.

The defeat comes as political pressure mounts and the patience of the 34-year-old academic, who has ruffled the feathers of American corporations, wanes, and his ability to carry out the ambitious goal of reversing decades of weak antitrust enforcement. questioning. Khan’s critics are even more courageous, clamoring to undermine her courtroom strategy, claiming that the loss wasn’t even a partial win, just a loss. are doing.

“I absolutely disagree with this approach,” said Anthony Sabino, a business law professor at St. John’s University, of Khan’s method. “She’s trying to change a century’s worth of antitrust laws overnight, which isn’t always wise.”

Adam Kovacevic, chief executive of tech trade group Chamber of Progress, said the loss appeared to make the FTC less credible. “With all these court defeats, their threats are looking more and more like paper tigers,” he said.

Others wondered if Khan was wasting FTC resources on a lawsuit he couldn’t win. “They’re crossing the line of recklessness with the lawsuits they’re filing,” said Ashley Baker, public policy director at conservative think tank Justice Commission.

The wave of criticism has put Khan in a tough position as he prepares for possible further action against the tech giant. The FTC has filed an antitrust lawsuit against Meta and may also take action against Amazon, which is investigating allegations of unlawful monopoly claims.

Khan must first protect himself.She is scheduled to be executed before the House Judiciary Committee on Thursday. hearing The Republican-led commission’s website says it wants to “investigate the FTC’s mismanagement and neglect of ethics and congressional oversight under Chairman Lina Khan,” and also mentions oversight of the FTC. ing.

Khan declined to comment for this article, and FTC spokesman Douglas Farrar also declined to comment on how the court loss would affect her agenda. After Tuesday’s Microsoft and Activision rulings, Farrar said officials were “disappointed by the outcome given that the merger poses a clear threat to free competition in cloud gaming, subscription services and consoles. ‘ said. The FTC may appeal the judge’s decision.

In 2017, when he was a law student at Yale University, Khan wrote a paper in a legal journal, arguing that Amazon was destroying competition and violating antitrust laws despite cutting prices for consumers. suddenly became famous. The paper helped start a debate about how to limit tech giants and how to modernize antitrust practices.

After President Biden elected Khan to head the FTC, she needed to go to court win or lose to send a strong signal to the tech industry that the FTC was becoming a tougher sheriff. repeatedly argued that there is Even if she lost the case, she argued, the antitrust theory would be reformed over time.

Khan applied that idea last year when the FTC filed a lawsuit to block Meta’s acquisition of small virtual reality company Within. The lawsuit came as a surprise because virtual reality is an early technology, and it’s hard to argue that this deal would reduce competition in an as yet unformed market.

But Khan argued that regulators must stop competition violations and consumer protections not only in areas where companies are already giants, but also at the cutting edge of technology.

“What we’re seeing is that omission after omission can be very costly,” she said in January 2022 interviews with The New York Times and CNBC. “And that’s what we’re really trying to reverse.”

Earlier this year, a federal judge denied the FTC’s request to block Meta’s takeover of Within. But the judge agreed with some of the FTC’s arguments, including how the FTC defined the tech market in the lawsuit.

Tuesday’s loss in the Microsoft-Activision lawsuit was more heartbreaking. Part of the reason is that this massive merger is testing the success of technology-related megadeals despite heightened regulatory scrutiny. U.S. District Judge Jacqueline Scott Corey of the United States District Court for the Northern District of California said Microsoft’s expectations of scrutiny have benefited consumers, writing that “that scrutiny has paid off.”But her ruling left little else redeemable for the FTC

In the lawsuit, the authorities argued that the transaction should not be completed as it could harm competition. Microsoft could either make some of Activision’s games exclusive to its own Xbox consoles, or degrade the experience of playing games like Activision’s “Call of Duty” on competing consoles such as Sony’s PlayStation.

But Judge Corey wrote that the FTC probably wouldn’t prevail in an internal court challenge to the merger, and basically said Microsoft was doing enough to prevent damage to its rivals.

“The FTC has not identified a single document that violates Microsoft’s promise to make Call of Duty available on PlayStation,” she wrote.

Eleanor Fox, professor emeritus at New York University Law School, said it was too early to make any judgments about Khan’s strategy. Elsewhere in the world, particularly in the European Union and the United Kingdom, regulators are pursuing antitrust measures against big tech companies, he said.

Khan is “just an outlier in the US, not an outlier globally,” she said.

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