Six years after writing an article arguing that Amazon violates competition, Lina Khan has sued the group as president of the Federal Trade Commission. This will be the confrontation of the century.
Lina Khan could have chosen immigration law, environmental law, criminal justice reform… they were the most in-demand specialties in 2015, when she entered Yale Law School. However, she opted for antitrust law, an antique from the first third of the 20th century, from the New Deal years, when the administration actively intervened against monopolies and was wary of large mergers. A discipline that had been eclipsed in the late 70s as a radical vision of laissez faire made its way that accommodated well the growth of groups like Apple or Microsoft.
We do not know why Lina Khan, representative of that meritocracy of Asian origin that triumphs in the Anglo-Saxon world, chose the specialty. Probably because behind that cold and calm look hides someone who cares about social justice. The daughter of Pakistanis (she a Thomson Reuters employee, he a consultant), she was born in north London in 1989. At age eleven her parents moved to a small white town in upstate New York. They were to improve, but in the days that followed the attacks on the Twin Towers of 9/11, they had to endure racism and xenophobia. “They were treated as potential terrorists.”
Khan soon attracted attention. She studied politics, wrote a thesis on Hannah Arendt, became editor of the school newspaper and considered working for The Wall Street Journal (an outlet that later fought her fiercely). The key moment in her life took place mid-career, at Yale. In 2017 she published a 95-page article, “The Amazon Antitrust Paradox,” where she accused the group of illegal practices to grow and eliminate competition.
The article carried an implicit message: antitrust law is obsolete. In the 1980s, regulators had adopted a policy that rested on the idea that monopoly was synonymous with efficiency and that “consumer welfare” in the form of low prices was the priority. Khan reasoned that this argument looks too short-term and prevents us from gauging the structural power of Silicon Valley groups and the potential effects of their activity on society.
The article focused on Amazon, a company that had first subsidized prices to grow, then placed companies and intermediaries in terrible conditions and had become the central avenue of the internet.
There is no company that has shaken up the markets in which it operates as much as Amazon. Founded in 1994 as an online bookstore by Jeff Bezos and later converted into a seller of everything, internet infrastructure (the cloud) and entertainment. Hundreds of thousands of companies have been left along the way that have not been able to withstand price competition. Some have disappeared. Others have adapted to the group’s rules and have significantly reduced their margins.
There is a before and after of Amazon in the world of distribution. But also in the labor market: its work rules in warehouses and in the distribution of deliveries have been harshly criticized. And, of course, in consumption. For new generations, it is impossible to imagine a world without the click that allows the product you just bought to reach your home in just a few hours.
Khan’s article made Amazon’s lawyers uncomfortable. They accused her of not understanding the sector. The concern increased when Joe Biden appointed her president of the Federal Trade Commission (FTC). They sent a request to recuse Khan’s participation in any lawsuit that affected the company. Biden appointed her because she wanted to reform an institution he saw as too accommodating to business.
Economists don’t like Khan. They think he has an outdated view of business and that he doesn’t understand the digital economy. That breaking up these groups is unrealistic and that size, today, does not matter. But for academics, politicians and journalists, she is a liberal heroine, the great hope to regulate those monopolies and return to economic democracy. Ultimately, her proposals are not that different from those of European regulators.
Washington lived an idyll with Silicon Valley. They were innovative, disruptive, they brought new services at low prices to everyone. But the age of innocence was broken in the summer of 2019. Big tech stifled innovation: when a small competitor appeared, they swallowed it up and disabled it. Social networks were no longer so funny. That year, an investigation was launched against Facebook, and another against Google for dominance in the internet search market. Complaints of companies drowned by competition from Amazon abounded.
Lina Khan is a tenacious woman. In six years she has gone from being something of an antitrust activist to the president of the FTC, an organization that on September 26, along with 17 states in the Union, filed a lawsuit against Amazon. She is accused of controlling online sales, stifling competitors, raising prices for users and costs for sellers.
For some analysts, the lawsuit is poorly formulated and will crash against the main argument of Amazon and its lawyers: consumers are happy with the company. But there is no doubt that there are many people who want him to win. The world needs many Lina Khans.
