Why are Facebook and Amazon afraid of Lina Khan?

Here’s what you need to know about the brewing battle between Khan and some of the world’s biggest tech firms

Most Americans can’t name the chair of the United States Federal Trade Commission (FTC) – the nation’s antitrust watchdog – because the position normally doesn’t attract widespread attention. But Lina Khan is changing that.

The 32-year-old associate professor of law at Columbia University (currently on leave as she serves in government) has Big Tech up in arms, and the FTC may be poised to take more definitive antitrust action than it has in decades.

Since she was named FTC chair by US President Joe Biden in mid-June, two tech giants — Amazon and Facebook — have filed petitions to have her recused from decisions concerning them.

Khan is set to chair her second open meeting on Wednesday since taking the helm of the organization.

Here’s what you need to know about the brewing battle between Khan and some of the world’s biggest tech firms.

Meet the man designing Google’s futuristic new headquarters

First things first. What does the FTC do?

The Federal Trade Commission was created in 1914 primarily to “bust the trusts”.

It has since evolved to protect consumers by creating a “vibrant economy characterized by vigorous competition and consumer access to accurate information”.

It is headed by five commissioners, and no more than three can be from the same political party. The FTC now has a Democratic majority.

Elon Musk says Starlink will go public when its cash flow is more predictable

So what kind of power does it have?

Big power. The FTC can investigate, bring enforcement, and create rules and penalties for violations.

Decisions rely on votes, but as chair, Khan sets the agenda for the agency.

Mark Cuban: What I look at when comparing blockchains like bitcoin and Ethereum

So who is she?

Khan made her name in 2017 when she published an article called Amazon’s Antitrust Paradox in the Yale Law Journal while still a student. Her article urged that the meaning of “monopoly” be redefined for the digital age.

Why did it need to be redefined?

In the past, trust regulation focused on price. Monopolies would potentially have the power to raise prices, which would harm a consumer.

But as companies like Amazon use cut-rate prices to best the competition, Khan argues that this behavior is also harmful. Lower prices give it an outsize share of the market, which allows it to influence the economy and create an environment where even competitors must become dependent on Amazon and its platform to succeed.

And how did Khan redefine monopolies?

Khan argued that Amazon was a monopoly comparable to US railroads at the turn of the 20th century. And monopolies are bad because while low prices may make consumers happy in the short term, they are bad for the economy and for individual consumers over the long term because they stifle competition – which can eventually harm innovation – and innovation is what keeps economies competitive.

“The long-term interests of consumers include product quality, variety, and innovation — factors best promoted through both a robust competitive process and open markets,” she wrote in the paper.

Did everyone agree with her?

Nope. Critics argue that Amazon’s popularity and low prices should not make the company a target, and Amazon argues that its unique approach creates new opportunities and competition avenues for emerging businesses.

Republican Senator Orrin Hatch branded Khan’s thesis and those who support it as “hipster antitrust”.

Why did US President Joe Biden tap Khan to lead the FTC?

Biden thinks Khan is the woman for the job of reshaping antitrust law and taking Big Tech to task over anti-competitive practices.

Progressive like Massachusetts Senator Elizabeth Warren agree — she called Khan’s leadership of the FTC “a huge opportunity to make big, structural change by reviving antitrust enforcement and fighting monopolies that threaten our economy, our society, and our democracy”.

How has Big Tech reacted?

Facebook filed a petition last week to have Khan recused from antitrust cases involving it, arguing that her past writings and comments make her biased against the social media giant.

Amazon – which is facing multiple probes by the FTC – filed a similar motion seeking to have Khan recused from proceedings involving it as well.

Could Amazon and Facebook get their way?

Potentially. In a 1970 case, Cinderella Career and Finishing School versus FTC, the courts ruled that the chair refusing to recuse himself was a denial of due process. And in a 1966 case, American Cyanamid Co versus FTC, a court disqualified the chair from a hearing because he had conducted previous investigative work for the Senate Subcommittee on Antitrust and Monopoly.

Even if the firms’ recusal requests are unsuccessful, however, experts say this move by Big Tech may cast a shadow over the FTC’s involvement and Khan’s leadership in future antitrust cases.

What does Khan say about the Facebook and Amazon recusal petitions?

Khan says there is no need for her to recuse herself under ethics law, which primarily focuses on financial conflicts. Khan pledged to follow the facts of the case during her confirmation process and said that if challenges arose, she would consult with FTC ethics monitors.

What is Biden’s plan for boosting competition more broadly?

While not as progressive as other Democrats in the 2020 presidential race, Biden ran on a pro-union platform and has pledged to better protect consumers.

To that end, he recently signed an executive order with 72 initiatives designed to limit corporate power and increase corporate competition across a wide range of sectors, including Big Tech.

What about Republicans?

How to best regulate US tech behemoths like Amazon, Google, Apple, and Facebook has become a rallying cry for both parties, even in the US’s polarized political climate, although the parties often disagree on the best approach.

In a deeply divided Congress, it’s telling that 48 Democratic senators and 21 Republicans supported Khan’s nomination to lead the FTC. Some Republicans, however, have expressed skepticism that she has enough experience for the job.

And last month, both Democrat and Republican lawmakers unveiled a five-bill package designed to reign in Big Tech’s power by creating guardrails around mergers and a more even playing field for competitors.

With the bipartisan support of antitrust legislation and bipartisan support of Khan, the issue will likely become central to the FTC’s work in the upcoming months.