The Federal Trade Commission Has the Power to Break Up Big Tech

In a groundbreaking 2017 Yale Law Journal study, "Amazon's Antitrust Paradox," the legal scholar Lina Khan sized up the online giant.

"Amazon is the titan of twenty-first century commerce," she wrote. "In addition to being a retailer, it is now a marketing platform, a delivery and logistics network, a payment service, a credit lender, an auction house, a major book publisher, a producer of television and films, a fashion designer, a hardware manufacturer, and a leading host of cloud server space."

"Let me be very clear: capitalism without competition isn't capitalism. It's exploitation."

The company, she continued, "has positioned itself at the center of e-commerce and now serves as essential infrastructure for a host of other businesses that depend upon it," adding, "Elements of the firm's structure and conduct pose anti-competitive concerns--yet it has escaped antitrust scrutiny."

That was then, this is now: In March, President Joe Biden nominated Khan to the Federal Trade Commission, or FTC. Opposition to her appointment was fast and furious. The Wall Street Journal published a half-dozen pieces opposing her nomination, including a July 5 editorial that dismissed her as "a thirty-two-year-old academic who has no experience running anything."

On June 30, after Khan became chair, Amazon filed a petition asking that she recuse herself "from any antitrust investigation, adjudication, litigation or other proceedings in which Amazon is a subject, target, or defendant." It said this was necessary because "Khan's prior statements create the appearance for her having prejudged facts and/or legal issues relevant to the proceedings." No action was taken on the petition; she has not recused herself.

Congress, the media, and the U.S. public are concerned about the ever-growing power of the "Big Five" tech companies--Amazon, Apple, Meta (Facebook), Google, and Microsoft. The recent revelations about Facebook made by whistleblower Frances Haugen, a former data scientist for the company, give insight into just how insidious Big Tech companies can be in their efforts to manipulate market power in order to maximize profit. Her testimony before Congress fueled calls for the breakup of Big Tech companies.

In 2019, Senator Amy Klobuchar, Democrat of Minnesota, introduced the Monopolization Deterrence Act that would give the U.S. Department of Justice and the FTC the authority to seek civil penalties for companies that engage in anti-competitive practices. Although it had strong Democratic support, the bill was never brought to the floor for a vote and died.

In October 2020, following a sixteen-month investigation, the House Judiciary Committee released a 400-page report on the challenges posed by Big Tech companies. And in June 2021, five bills were introduced in the House to reign in the tech behemoths.

"From Amazon and Facebook to Google and Apple it is clear that these unregulated tech giants have become too big to care," said one of the bill's sponsors, Representative Pramila Jayapal, Democrat of Washington State. On the other side of the political aisle, Representative Lance Gooden, Republican of Texas, said, "Big Tech companies are stifling American innovation with their monopolistic behavior." Unfortunately, the House's efforts seem destined to suffer the same fate as the Senate bill.

For more than a century, the United States has witnessed repeated efforts to break up--if not outlaw--monopolies, cartels, and trusts. The 1890 Sherman Antitrust Act and 1914 Clayton Antitrust Act led to the breakup of Standard Oil and other monopolies. While those promoting the current anti-monopoly efforts share much in common with earlier advocates, today's efforts face a very different economic situation.

One difference is that Lina Khan is now the FTC chair, and she's undertaking the monumental task of bureaucratic reform to meet the challenges posed by twenty-first century corporate capitalism.

Khan, thirty-two, was born in London to Pakistani parents and migrated with them to the United States when she was eleven years old. She is a former Columbia law professor who also served as legal director for the Open Markets Institute, a political advocacy group. She is the youngest person to be appointed FTC chair.

The FTC was established by President Woodrow Wilson in 1914. But since the 1980s, under the presidency of Ronald Reagan, it has--in the words of Matt Stoller from the American Economic Liberties Project, an anti-monopoly group--been "defanged," to the point where "economists [are] in charge and made it an agent of monopolists."

"I agree with Matt," Sascha Meinrath of Penn State University told The Progressive. Reagan is an inflection point promoting the deregulatory era. The FTC adopted a policy to not "unduly burden legitimate business and everything else--fostering competition, consumer protection+---became subservient to it."

For decades, the FTC operated under a "consumer welfare standard," focusing on anti-competitive practices that harmed consumers (i.e., pricing practices). "The Big Tech giants are all creations of those shifts," Stoller told Politico. "What Lina is doing is going back to the pre-1980s model."

On assuming office, Khan noted her priorities in a memo to her employees: "American consumers, workers, and honest businesses depend on the Commission to champion a fair and thriving economy for all, and I am confident that we can deliver." One top priority, she added, is taking on a massive wave of proposed mergers and other forms of "rampant consolidation."

Khan repealed an Obama-era policy that limited the commission's ability to challenge anti-competitive behavior. And she rescinded Trump-era guidelines favorable to "vertical mergers" that enable companies in the same industry that aren't direct competitors to merge (e.g., AT&T's acquisition of Time Warner or Amazon's proposed acquisition of MGM Studios.)

Khan faces another, often overlooked challenge: an FTC culture fueled by the "revolving door" between regulators and the companies they regulate.

In a 2020 article, the tech news website Protocol noted that "dozens of former commission lawyers now work for big and small companies across the tech industry." The publication found that of the "nearly 700 lawyers and other employees who left the FTC between 2015 and 2018, at least forty now work for tech companies. At least seventy-two work for private law firms, and at least eighty-two hold other government jobs." Apple, for example, has "at least three former FTC attorneys on its high-powered legal team."

Today, we are witnessing the reemergence of the old Robber Baron cartels. Standard Oil and Ma Bell have been replaced by Amazon, Apple, Facebook, Google, and Microsoft. Rockefeller, Carnegie, and J. P. Morgan have been superseded by Elon Musk, Mark Zuckerberg, Bill Gates, Larry Page, Jeff Bezos, and Warren Buffet. It is a transformation where nothing fundamental really seems to have changed; instead, it's gotten worse.

In 2020, Apple became the first American company to be valued at $2 trillion; with the other big dogs (Google, Amazon, and Microsoft) topping $1 trillion valuations.

But Khan's FTC has only a limited number of tools that can be deployed against Big Tech. She could pursue the August 2021 refilling in the U.S. District Court of the December 2020 antitrust suit against Meta, originally initiated by President Donald Trump's FTC--together with a coalition of attorneys general from forty-eight states and territories--to break-off two of its major acquisitions, Instagram (2012) and WhatsApp (2014).

Khan could also pursue some low-hanging fruit--cases similar to its recent victory against Amazon over $60 million in tips that the company failed to pay Flex drivers. Or she could follow the advice of Stacy Mitchell--co-director of the Institute for Local Self-Reliance--and try to break up Amazon, Google, or Meta along business lines.

Khan's options depend on whether the Democrats hold onto Congress in 2022 and Biden or another Democrat is re-elected in 2024. Otherwise, corporate interests and an increasingly conservative federal court system will constrain her efforts. For now, she has support from Biden, who argued, "Let me be very clear: capitalism without competition isn't capitalism. It's exploitation."

"The big question in my mind is whether the FTC is going to wield the power that it was granted in 1914," says Meinrath. "I would argue that Lina Khan is much more likely to wield the powers the agency has than has been done in recent history."