Lina Khan is an anti-trust researcher whose expertise area is the immense market power of big tech companies like Apple, Google, Amazon etc. Tuesday was a big day for this researcher because she was sworn in as the chair of the US federal state commission. Lina Khan at the helm of FTC is a victory for progressives who seek embargo on tech firms. Joe Biden who is seen as pro-immigrant has many immigrants on his team, be it the vice president of the United States of America Kamala Harris or Lina Khan. Biden seems adamant to control the growth of big Tech because he also included Tim Wu, who is also a progressive and a big tech critic to join the National Economic Council. Big Techs have not issued any statement yet on the appointment of Lina Khan. The FTC as of now is investigating Amazon and has sued Facebook.
What is the US federal state commission?
The US FTC protect consumers by prohibiting deceptive, fraudulent and unfair practices in the marketplace. They conduct investigations, file lawsuits on companies and people who violate the law. The main aim of FTC is to ensure a free and fair marketplace with a transparent flow of information about rights and responsibilities.
Who is Lina Khan?
Khan who was born in London is an American legal scholar of Pakistani parents who specialises in antitrust and competition laws in the United States of America. She was also an associate professor at Columbia Law school, before that she co-authored a massive report on misuses of market dominance by Apple, Facebook, Amazon and Alphabet. In 2017 Khan wrote a prestigious and highly recommended article “Amazon anti-trust paradox “ for the Yale law journal. The article had a major impact on the American legal and business circle environment. This article is seen as a game-changer in decades-old monopoly laws by The New York Times.
What was the article “Amazon anti-trust paradox “about?
When this article was published in 2017 it was seen as a breath of fresh air amidst old monopoly laws. In the article, Khan argued that the present American anti-trust law framework does not take into account the anti-competitive repercussions of platform-based business models. Its main focus is to keep prices down for consumers irrespective of the problems faced by other businesses. She argued that competition should not be measured only through price and output, if done so potential harms to the competition by Amazon cannot be summarised. The article also points out how predatory pricing and business line integration is toxic and anti-competitive. Predatory pricing is addictive because online platform serves as intermediaries and because online platforms pursue growth over profit. It is the growth of any start-up that earns it venture capital or funding. The solution given by her was restoring traditional antitrust and competition policies or applying carrier obligations and duties.
What are the present anti-trust laws in the US?
The federal government works on three core anti-trust laws which are the Sherman Act, the FTC Act and the Clayton act. These laws prohibit unlawful mergers, acquisitions and business practices, the consequences, penalties and punishments are decided by the courts.
The Sherman act penalises any unreasonable contract or combination of conspiracy and contract that pose hurdles in trade. It also deters monopoly, attempted monopolisation or conspiracy to monopolise. Activities like rigging bets, dividing markets and fixing prices are illegal.
The FTC act bans any method of unfair competition and deceptive practices. The Supreme Court of USA has said that all those activities that violate Sherman act also violate the FTC act.
The Clayton act was made to plug the loopholes left by the Sherman act. The act prohibits mergers and acquisitions which narrows competition or create a monopoly. Mergers that interlocks directorates are prohibited because the same person then makes business decisions for his competitors thereby creating a monopoly and reducing competition which is never good. It bans discriminatory prices and services in trade, advises companies to notify the government before planning big mergers and allows the defendant to sue for triple damage.
What are the changes suggested in the Senate to revive anti-trust enforcement?
The big techs have grown so much that they pose threat to society, the economy and democracy. They have the biggest piece of pie, growth, money and other small businesses are dependent on them due to integrated intermediaries.
Speculations like Russian help via Facebook in electing Donald Trump as the president do no good. The big techs are also being investigated by FTC for the alleged deceptive advertising. They are also being investigated for abusing their market power and stifling competition.
Hence US senator Josh Hawley has introduced a bill that would ban all mergers and acquisitions by companies having a market value larger than a hundred billion dollars. This category is specifically for the five big US technology companies. Senator Holly is a Republican who is a staunch critic of big tech companies. If this bill passes it would stop the big technology companies to stop favouring products on their platforms. The bill introduced is tough but according to progressives, monopolies have been roaming in the jungle far too long and need to be tethered.
What are the lawsuits and investigations pursued by the state into big tech companies?
Lawmakers have customised legislative packages specially designed for the big tech companies that would curb the market power and make them follow rules of business like everyone else.
A 15-month long investigation by the House Judiciary committee’s anti-trust committee concluded that these firms– Apple, Google, Amazon and Facebook are exploiting other businesses by levying extra fees, unreal terms of the contract and forcibly taking data from businesses and individuals that are dependent on them (integrated intermediaries). They exploit start-ups by deceptive advertising, when they favour their (merger) product over others on the platform the start-ups cannot hope to fight them. Hence these startups are structurally destroyed thus reducing the competition. According to representatives these companies decide winners and losers, haves and have nots and destroy small businesses. The legislature is considering breaking up big tech firms.
What are big tech firms?
As of now Apple, Amazon, Facebook, Google are the big tech companies for the dominant almost every aspect of our life. They reached this rank by acquiring (almost every intermediary) hundreds of companies over decades. Some of these firms have a market capitalisation that is equal to or more than the GDP of some countries. The dominance in politics by firms will destroy the global democratic fabric of the world.
What does this mean now?
With Lina Khan at the driving seat, supported by Tim Wu and Joe Biden big tech companies and the market will surely see a change that will have a progressive impact on technology ecosystems all around the world. We live in a globalised era where the world is just a small global village and every decision by any country has an impact on every country. As suggested by Senator Hawley either the big tech firms will not be allowed to merge or their powers of market dominance will be cut off. Biden has hinted at breaking up the big tech firms to disburse monopoly, the world may witness this. There may be a significant and structural change in the US FTC’s anti-trust laws because Khan is a firm advocate of traditional anti-trust laws with carrier obligations and duties. We don’t know anything for sure, but monopolistic powers of the big firms are going to be contained.