Companies that act as if they can harm customers without worrying about losing their business are exhibiting the kind of behavior that triggers an antitrust probe, Federal Trade Commission Chair Lina Khan told Jon Stewart on The Daily Show this week.
“We really focus on how companies are behaving,” she said. “Are they behaving in ways that suggest they can harm their customers, or suppliers, or their workers and get away with it? That type of too-big-to-care approach is really what ends up signaling that a company has monopoly power, because they can start mistreating you but they know you’re stuck.”
Amazon exhibited monopolistic behavior in a number of ways that gave the FTC reason to allege in the complaint it filed last year that the company was a monopoly, Khan said.
“Over the last few years, they’ve littered their search results page with junk ads — ads that, internally, executives realize are irrelevant and unhelpful to consumers,” she said. “But they can just do it and it makes them billions of dollars in money. They’ve also been steadily hiking the fees that small businesses have to pay to sell through Amazon, and so now, some small businesses have to pay one out of every two dollars to Amazon. It’s basically a 50% monopoly tax.”
The agency is routinely out-gunned when it goes after big companies like Amazon, so it tries to play to its strengths by being entrepreneurial and strategic in its approach, she said.
“If [a company] has monopoly money, they can buy as many lawyers as they want,” she said. “The FTC is around 1,200 employees, but when we’re going up against these monopolistic companies, they can outmatch us, outgun us, sometimes one to 10, just if you’re looking at lawyers, [then] you’re adding paralegals and support staff.”
Khan touted the approach the agency took to get manufacturers to stop overcharging for inhalers, a decades-old technology that still costs hundreds of dollars.
“Our staff took a close look and we realized some of the patents that had been listed for these inhalers were improper,” she said. “They were bogus. So we sent hundreds of warning letters around these patents and in the last few weeks we’ve seen companies delist these patents and three out of the four major manufacturers have now said, within a couple of months, they’re going to cap how much Americans pay to just $35.”
The laws the agency relies on are old. The Sherman Act was enacted in 1890 and the handful of follow-on laws are decades old, but they give the agency what it needs even when the markets at issues are new and involve complex technology, she said.
“For the most part, our lawsuits are still based on those laws going back a century,” she said.
When Facebook started buying up competitors in the early 2000s, she said, it was trying to retain its market leadership position at a time when social media was transitioning from a desktop to a mobile activity. Even though the market involved so-called web 2.0 technology, the agency relied on these laws to go after what the agency viewed as monopolistic behavior.
“One key tenant of the anti-monopoly laws is you can’t go out and buy one of your biggest competitors,” she said. “The lawsuit alleges those acquisitions [of Instagram and WhatsApp] were anti-competitive, and that, instead of competing organically, Facebook instead bought its way to maintaining a monopoly.” That case is ongoing.
Existing law should be adequate for what Khan sees as the next big battleground: artificial intelligence and the few large companies that are positioned to dominate the new technology.
“Businesses try to dazzle enforcers by saying, ‘Oh, these technologies are so new, they’re so different, let’s just take a hands-off approach,’” she said.
But that’s an attempt at misdirection, she suggested. “There’s no AI exemption in the laws on the books,” she said.
The agency is trying to get out in front of the risks by opening a probe into the partnerships that big tech companies have structured around generative AI and other iterations of the new technology.
“We’re investigating to understand whether some of the investments and partnerships they’re entering into right now in the AI space may in fact be giving them undue influence or special privileges,” she said. “If we get any hint that there’s actual collusion happening in the marketplace, we take that extraordinarily seriously and won’t hesitate to take action.”
Apple, which has its own interests in AI and is facing its own antitrust probes, by the Department of Justice and European Union regulators, tried to get Stewart not to bring Khan on one of his shows, the host told Khan.
“I wanted to have you on a podcast,” he said, “and Apple asked us not to do it. They literally said, ‘Please, don’t talk to her.’ They wouldn’t let us do even that dumb thing we did in the first act on AI. What is that sensitivity? Why are they so afraid to even have these conversations out in the public sphere?”
“I think it just shows one of the dangers of what happens when you concentrate so much power and so much decision making in a small number of companies,” Khan said. “Going back all the way to the founding [of the U.S.], there was a recognition that in the same way you need the Constitution to create checks and balances in our political sphere, you also needed the antitrust and anti-monopoly laws to safeguard against concentration of economic power, because you don’t want an autocrat of trade in the same way you don’t want a monarch.”
