Lina Khan became chair of the Federal Trade Commission two years ago with a promise to take bold action against the biggest tech companies.
For too long, Khan said at the time, the agency had been a weak cop and needed to challenge giants like Microsoft, Amazon, Meta and Google in court to curb their growing power. Even if the FTC lost the cases, he later added, it would be a partial victory because the agency would point out that antitrust laws needed to be updated for the modern Internet age.
But on Tuesday, Ms Khan suffered the biggest blow yet to her distinctive agenda. A federal judge has rejected the FTC’s attempt to stop the closing of Microsoft’s $70 billion acquisition of video game maker Activision Blizzard, saying the agency failed to prove the deal would reduce competition and hurt consumers. That followed a loss in February, when a judge threw out an FTC lawsuit seeking to block Meta from buying virtual reality startup Within.
The defeats raise questions about Khan’s ability to carry out her ambitious goal of reversing decades of weak antitrust enforcement, as political pressure mounts and the patience of the 34-year-old academic, who has ruffled feathers, wanes. of American companies. Ms Khan’s critics are more emboldened and speaking up to poke holes in her strategy of taking him to court, saying that the losses are not even partial victories, they are just losses.
“I completely disagree with this approach,” Anthony Sabino, a professor of business and law at St. John’s University, said of Ms. Khan’s methods. “She’s trying to change century-old antitrust law overnight, and that’s not necessarily wise.”
Adam Kovacevich, chief executive of Chamber of Progress, a technology trade group, said the losses made the FTC seem less credible. “All these court losses are making their threats look more like a paper tiger,” he said.
Others wondered if Ms. Khan was wasting the FTC’s resources on unwinnable cases. “They have crossed the line of being reckless with the cases that they are bringing,” said Ashley Baker, director of public policy for the Committee for Justice, a conservative think tank.
The tide of criticism puts Ms Khan on the sidelines as she prepares potential future action against the tech giants. The FTC has filed antitrust lawsuits against Meta and could bring a case against Amazon, which has been investigating claims of illegal monopolization.
Now Ms. Khan will first have to defend herself. On Thursday, she is expected to be questioned in a House Judiciary Committee. audience on FTC oversight, and the Republican-led panel’s website says it wants to “examine the FTC’s mismanagement and disregard for ethics and congressional oversight under President Lina Khan.”
Ms. Khan declined to comment for this article, and Douglas Farrar, an FTC spokesman, also declined to comment on how the court losses will affect her schedule. After the Microsoft-Activision ruling on Tuesday, Farrar said the agency was “disappointed with this outcome given the clear threat this merger poses to open up competition in cloud gaming, subscription services and consoles.” The FTC could appeal the judge’s decision.
Ms Khan rose to fame as a Yale law student in 2017 when she argued in an article for a law journal that Amazon was crushing competition and violating antitrust laws despite lowering prices for consumers. The document helped start a debate on how to restrain the tech giants and how to modernize antitrust practices.
After President Biden chose Ms. Khan to lead the FTC, she repeatedly argued that going to court, win or lose, was necessary to send a clear signal to the tech industry that the agency was going sheriff. harder. Even losses in court, she argued, would gradually reshape antitrust theories.
Ms. Khan applied that thinking when the FTC sued last year to stop Meta from buying a small virtual reality company, Within. The case came as a surprise because virtual reality is a nascent technology, so it’s hard to argue that the deal would reduce competition in a market that hasn’t yet formed.
But Ms Khan argued that regulators need to stop antitrust violations and consumer protections at the cutting edge of technology, not just in areas where companies have already become giants.
“What we can see is that inaction after inaction after inaction can have severe costs,” he said in an interview with The New York Times and CNBC in January 2022. “And that’s what we’re really trying to reverse.”
Earlier this year, a federal judge rejected the FTC’s demand to block Meta’s acquisition of Within. But the judge agreed with some of the FTC’s arguments, including the way the agency defined technology markets in the case.
Tuesday’s loss in the Microsoft-Activision case was more painful, in part because the successful merger has become a test of whether mega-tech deals can go ahead despite mounting regulatory scrutiny. Judge Jacqueline Scott Corley of the US District Court for the Northern District of California said consumers benefited from Microsoft’s expectation of harsh review, writing: “That scrutiny has paid off.” But her ruling left little else to redeem for the FTC.
In the case, the agency argued that the deal should not go through because it could harm competition. Microsoft could make some of Activision’s games exclusive to its Xbox game consoles or downgrade the experience of playing games like Activision’s Call of Duty on competing consoles like Sony’s PlayStation.
But Judge Corley wrote that the FTC would likely not win its challenge to the merger in the agency’s internal court, saying, essentially, that Microsoft was doing enough to prevent its rivals from getting hurt.
“The FTC has not identified a single document that contradicts Microsoft’s publicly stated commitment to make Call of Duty available on PlayStation,” he wrote.
Eleanor Fox, a professor emeritus at New York University Law School, said it was too early to have a verdict on Khan’s strategy. In other parts of the world, notably the European Union and Britain, regulators have also taken antitrust action against big tech companies, she noted.
Ms Khan, she said, “is just an outlier in the US, not globally.”