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, Ms Khan said at the time, the agency had been a weak agent, having to take giants like Microsoft, Amazon, Meta and Google to court to stem their growing power. Even if the FTC lost the cases, she later added, it would be a partial victory, as the agency would indicate that antitrust laws needed to be updated for the modern Internet age.
But on Tuesday, Ms Khan suffered the biggest blow yet to her signature agenda. A federal judge rejected the FTC’s attempt to prevent Microsoft’s $70 billion acquisition of video game maker Activision Blizzard from being completed because the agency was unable to prove the deal would reduce competition and harm consumers. That followed a loss in February, when a judge dismissed an FTC lawsuit to stop Meta from buying the virtual reality start-up Within.
The defeats raise questions about Ms Khan’s ability to carry out her ambitious goal of undoing decades of weak antitrust enforcement, as political pressure mounts and patience wanes for the 34-year-old academic, who has left the feathers of corporate America has disrupted. Ms Khan’s critics are more emboldened and are speaking louder to poke holes in her strategy to take it to court, saying the losses aren’t even partial wins – they’re 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 a century’s worth of antitrust laws overnight, and that’s not necessarily wise.”
Adam Kovacevich, the CEO of Chamber of Progress, a technology trading group, said the defeats made the FTC less credible. “All these losses in court make their threats look more like a paper tiger,” he said.
Others questioned whether Ms. Khan was wasting FTC resources on cases that could not be won. “They’ve crossed the line of being reckless with the cases they bring,” said Ashley Baker, director of public policy for the Committee for Justice, a conservative think tank.
The wave of criticism puts Mrs. Khan in the hot seat as she prepares further possible moves against the tech giants. The FTC has filed antitrust suits against Meta and could file a case against Amazon, which it is investigating over claims of illegal monopolization.
Now Mrs Khan will have to defend herself first. On Thursday, she is expected to be grilled at a House Judiciary Committee hearing on oversight of the FTC, with the Republican-led panel’s website saying it “excused the FTC’s mismanagement and its disregard for ethics and congressional oversight under chairman Lina Khan wants to investigate”. .”
Ms. Khan declined to comment on this article, and Douglas Farrar, an FTC spokesman, also declined to comment on how the court losses affected her agenda. Following the Microsoft-Activision ruling on Tuesday, Mr Farrar said the agency was “disappointed with this outcome given the clear threat this merger poses to open competition in cloud gaming, subscription services and consoles.” The FTC may appeal the judge’s decision.
Ms Khan rose to fame while studying law at Yale in 2017 when she argued in a paper for a law journal that Amazon crushed competition and violated antitrust laws despite lower prices for consumers. The paper helped spark a debate on how to curb the tech giants and modernize antitrust practices.
After President Biden selected Ms. Khan to run the FTC, she repeatedly argued that it should go to court — win or lose — to send a strong signal to the tech industry that the agency was becoming a tougher sheriff. Even losing in court, she argued, would gradually reshape antitrust theories.
Ms. Khan applied that thought when the FTC filed a lawsuit 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, making it hard to argue that the deal would reduce competition in a market that hasn’t yet formed.
But Ms Khan argued that regulators should end competition and consumer protection violations at the cutting edge of technology, not just in areas where the companies had already become giants.
“What we can see is that inactivity after inactivity after inactivity can have serious costs,” she said in an interview with The New York Times and CNBC in January 2022. “And that’s what we’re really trying to reverse.”
Early 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 how the agency defined technology markets in the case.
Tuesday’s loss in the Microsoft-Activision case was more painful, in part because the blockbuster merger has become a test to see if tech mega-deals can continue despite increased regulatory scrutiny. Judge Jacqueline Scott Corley of the United States District Court for the Northern District of California said consumers benefited from Microsoft’s expectation of a harsh assessment, writing, “That investigation paid off.” But her ruling left little else that was redeeming for the FTC
In the case, the agency argued that the deal should not be closed because it could harm competition. Microsoft could make some of Activision’s games exclusive to its Xbox game consoles or diminish 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 was unlikely to win the merger’s challenge in the agency’s internal court, essentially saying that Microsoft was doing enough to keep 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,” she wrote.
Eleanor Fox, a professor emeritus at New York University’s law school, said it was too early to pass judgment on Ms Khan’s strategy. Elsewhere in the world, especially in the European Union and Britain, regulators have also taken antitrust actions against big tech companies, she noted.
Ms Khan, she said, “is only an outlier in the US, not globally.”