What Amazon and Facebook are doing wrong about Lina Khan

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Last week, Facebook filed an application with the Federal Trade Commission, asking its chairwoman, Commissioner Lina Khan, withdraw of all decisions that affect Facebook. Amazon had made the same motion two weeks earlier, with both tech giants arguing that their previously voiced views on concentration in the tech industry, coupled with their work in Congress investigating Silicon Valley, had made them too contradictory to regulate the industry fairly.

On one level, this is a cheeky claim as companies never claim that regulators who hail the success of big companies are equally biased in the opposite direction, and if the logic were accepted, it would create a situation where only allies of Big tech or those unfamiliar with the industry are likely to regulate it.

On another level, it also reflects a fundamental misunderstanding of Khan’s antitrust approach, said Zephyr Teachout, law professor and antitrust expert, in a recent interview for The Intercept’s Deconstructed podcast. When Khan was nominated for the FTC, she was widely referred to by the news media as “a prominent critic of big tech.”

Khan earned this nickname in part through her work as a Hill employee, the one Investigation of the bipartisan judicial committee in leading Silicon Valley law firms, but also through their groundbreaking legal review article entitled “Cartel paradox on Amazon Amazon. “

This is where confusion comes in. Although Amazon is in the title of Khan’s pivotal 2017 Yale Law Journal article, the company is being used as a case study to make a broader statement, Teachout noted.

The article is often used to claim that Khan is hostile to Amazon itself, when in reality their newspaper grappled with the intellectual foundations of 40 years of antitrust policy. The introduction to Khan’s paper makes this clear and states that the article “states that the current framework in antitrust law – in particular its linkage of competition to the ‘consumer welfare’, defined as short-term price effects – is unable to change the architecture of the Market power in the modern economy ”.

The clarity of the paper’s reasoning has contributed to a major rethink in antitrust policy, as it has been made clear that the “consumer welfare standard” is simply not equipped for the Internet age of platforms. She sums up her argument in an easily understandable and at the same time irrefutable way:

We cannot see the potential impact on competition from Amazon’s dominance if we measure competition primarily by price and performance. In particular, current doctrine underestimates the risk of predatory pricing and how integration across business lines can prove anti-competitive. These concerns are heightened in the context of online platforms for two reasons. First, the economics of platform markets incentivize a company to pursue growth before profit, a strategy that investors have rewarded. Under these conditions, predatory pricing becomes highly rational – even if the existing doctrine treats it as irrational and therefore implausible. Second, because online platforms act as critical intermediaries, integration across all lines of business enables these platforms to control the essential infrastructure on which their competitors depend. This dual role also enables a platform to leverage information gathered about companies using its services to undermine them as competitors.

Given that Khan’s skepticism about the prevailing antitrust orthodoxy is not specific to the tech sector, the rationale that she should step down as chairwoman would need to be extended to any other industry, with a new focus on what almost every industry does is. As Teachout put it:

Khan’s article was really important about Amazon, but it was about a lot more than Amazon. It was actually about agriculture. And it’s about airlines. And it’s about pharmaceuticals. And it’s about the way we think about economic policy. So my favorite annoyance is that Khan is often described as a thorn in the side of big tech or a big tech opponent, anti-tech – she’s not anti-tech at all. One of the things we’ve seen is these big tech companies destroy innovation, buy out competitors, and stifle people who might have more exciting ideas. It’s pro-tech, and it’s about economic theory, not just technology policy.

So it’s very fact based. It focuses very much on what is actually happening, not what the theory is doing. And here is Khan’s training. She started talking to chicken farmers about her experience. She has written great articles on seeds, patents, and Monsanto. So it actually started in the ag. And then those insights helped her look at big tech without the fuzziness and glamor that tech sometimes brings with it, where people say, “Tech is completely new! Everything is disturbed! It’s never happened before. ”She went in and said,“ Hey, I saw that. I saw that at Monsanto. I know these practices because that’s exactly what Tyson does. ”And I think it’s important to understand them as pro-innovation, pro-worker, pro-small business, pro-change-the-ways-we-approach-equality.

Listen to the full interview here or wherever you can get podcasts.



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