In 2021, Trump stepped down and Biden became the new US president, although the two parties in the United States have different views on many things, but there is one thing that the two sides can agree on - the power of the Internet giants has been too strong and must intervene from the administrative level.
That same year, Lena Khan, who was only 32 years old, was elected president of the U.S. Federal Trade Commission (FTC). Unlike the appearance of his "three good students," the youngest FTC president has been quite aggressive on "antitrust" issues against internet giants and tech companies.
Back in 2017, Lena Khan became famous for a paper published in the Yale Law Journal called "Amazon's Antitrust Paradox." Shortly after taking office, Lena Khan led antitrust lawsuits against Facebook's acquisitions of Instgram and WhatsApp.
In response to Lena Khan's fierce offensive, Amazon and Facebook accused the female chairman of being an "antitrust activist" on the one hand, and applied to the court to "recuse" herself from the trial of related cases.
Lena Khan managed to become the "most feared woman" of all American tech giants.
Not long ago, Lena Khan gave a television interview to CNBC, which was also her first appearance in a commercial media interview. During the hour-long conversation, hosts Andrew Sorkin and Kara Swaiser Kara Swisher performed a full-scale "torture" of Lena Khan.
During the dialogue, Lena Khan's responses often begin with "Look," as if seriously explaining the truth to someone she doesn't know very well. Unlike her slightly naïve performance, she expressed more clearly how the FTC, as a regulator, thinks about how the "antitrust" policy of the United States should be implemented. In the face of the giants' "criticism", the young chairman was not intimidated.
Here are the highlights of Lena Khan's dialogue:
The Antitrust Law is outdated and needs to be revised to adapt to the current dynamic environment, especially in the digital market;
The period when potential platforms begin to appear, and when monopolies are most likely to occur, law enforcers should pay the most attention;
Over the past 20 years, Internet giants have been rampaging mergers and acquisitions, knowing that there will be no serious consequences. Regulation needs to strike hard, reflecting the "deterrent power" of giants;
The entry of Chinese Internet companies into the US market will not become an excuse for the "monopoly" of Silicon Valley giants;
Denying that he is an antitrust "radical" will not talk directly to the CEO of a technology company.
The following is a transcript of cnBC Conversations with Lena Khan, compiled by Geek Park (ID: geekpark):
Platform change period = antitrust key point
Host: Acquisitions and acquisitions in 2021 are close to $6 trillion, and just before the interview, Microsoft announced that it would buy Activision Blizzard for nearly $70 billion. The gaming industry is not usually considered monopoly-related, what do you think of a large company going to make an acquisition in an industry that is not considered a monopoly?
Lena Khan: It's a very important issue that the FTC and the DOJ have been working on, but it's not uncommon. Over the past two decades, the top 5 tech giants have made hundreds of mergers and acquisitions, many of which have gone unnoticed.
The FTC has previously studied these acquisitions to try to understand what was missing and what we can learn to make sure we can accurately identify and better discern which types of transactions may be illegal, even if they are not on the path we have studied before.
That's how we worked with the DOJ to revise the Merger Guidleines, based entirely on a 1914 law in Congress that stated that mergers and acquisitions that could significantly reduce competition and tend to create monopolies were illegal. In practice, this means that the guidelines will change according to economic and market conditions.
As new technologies grow, market dynamics have changed, so we need to make sure that the tools and frameworks we use, as well as the questions we ask, fit into the current market environment and realities, and that's what we're working on.
Host: In Microsoft's acquisition of Activision Blizzard, Bobby Kotick, CEO of the latter company, mentioned competition and metacosmity, and industry insiders have also mentioned China many times. When you revise your M&A guidelines, do you take into account the international environment, because these tech giants can expand overseas?
Lena Khan: That's a big problem, but it's not a new one. The Justice Department's landmark antitrust case against Microsoft was similar at the time to the market situation. Microsoft has taken control of the operating system, and the reason it has been able to maintain this dominance is because it has mastered the "application barriers." Any company that wants to enter the system track must have basic applications to ensure that it attracts consumers, which creates a chicken-and-egg problem.
Java and Netscape threaten Microsoft's monopoly by providing users with an alternative platform for customers to own applications. As a result, the Justice Department's case claims that Microsoft's actions (adding free Internet Explorer to Windows) were indeed intended to maintain its monopoly. Somehow stifle these competitors in the operating system.
We need to ask the same questions today, especially as we see the emergence of new technologies for potential alternative platforms, and this potential transition moment, which is also a moment of particular vigilance for law enforcers, because that's when the giants panic and realize to stay relevant to stay dominant. They may have to adopt tactics that could eventually lead to a violation of the law.
Facebook's acquisition of Instgram and WhatsApp smoothly transitions to the mobile era| network
Host: Facebook's acquisition of Instgram, at that time, some people were not optimistic, thinking that it would fail, but now it seems that this merger is obviously too successful. When should regulation judge, which mergers are feasible and which are not?
Lena Khan: The fundamental question for regulation is to see if mergers and acquisitions reduce competition.
Host: Don't all mergers and acquisitions reduce competition?
Lena Khan: There will be a considerable reduction in competition and a tendency to create monopolies. Congress needs law enforcers to act not just when the third and fourth companies merge or when the first and second companies merge, but actually start in the early days. When you see a trend toward industry concentration, it may also be a time for law enforcers to act.
The FTC is currently filing a lawsuit against Facebook, alleging illegal acquisitions of Instagram and WhatsApp, which are also meant to maintain its monopoly position.
On the other hand, because the takeovers came against the backdrop of the pc-to-mobile transition, Facebook saw it, but it couldn't do it itself to make the transition to mobile devices, and it did need to make these acquisitions to get through that transition.
In hindsight, the FTC reviews the documents and the available evidence. Now we're able to determine that this is an illegal transaction, but I think revising the M&A Guidelines to do these studies to understand what goals we're missing is part of the process and help us answer that question correctly.
Host: On the one hand, important mergers and acquisitions are that now tech giants will copy the product ideas of other companies.
Lena Khan: The purpose of revising the M&A guidelines is to identify the "blind spots" of past laws and raise questions that were not in the past. Some of them are in the tech sector, while others are related to monopsony or employment influences. The whole project certainly contains technology, but it is far more than the technology industry.
There are fundamental questions about digital markets, such as the acquisition of technology companies, which are purely for the purpose of building a moat; another is data, when a company acquires another company, the latter's business-sensitive data can give the former an advantage and help them through important transition periods; and we will also study the externalities of the network to see how these companies can take advantage of the uniqueness of the digital market to gain a competitive advantage.
In 2021, the world's highest market capitalization company, Internet companies continue to dominate the list| Teslaati
China's rivals cannot be an "excuse" for the US giants
Host: By market capitalization in 2022, tech giants such as Apple, Microsoft, Saudi Aramco, Alphabet (Google's parent group), and Amazon account for the top ten companies in the global market capitalization rankings, and back a decade ago, these companies still exist.
Earlier, the names on the list would have rotated almost completely. So the question is, when the market is such a situation, should the regulators themselves step in, and when? I think there is a matter of time in all of this.
Lena Khan: Yes, so the key task for antitrust enforcers is to ensure a market where all companies can compete.
An entrepreneur and entrepreneur who comes up with products and ideas that consumers like can be successful. Whether people can compete fairly, so the purpose of law enforcers is to create an open and fair competitive market.
The job of law enforcers is not to elect winners or losers, but to ensure that companies compete fairly.
The FTC eventually took significant enforcement action against Facebook after the fact, because we had to make sure that companies in the market knew that similar deals would not be exempt from investigation.
Host: Zuckerberg often says TikTok, and he will defend Chinese tech giants such as Tencent and Alibaba, claiming that market competition will eventually get everything back on track. Microsoft also faced antitrust back then, and now it is one of the world's most valuable companies. What do you think?
Lena Khan: Microsoft did face major antitrust lawsuits before, and there was thinking that if the Justice Department hadn't acted that year, there would have been a boom in Internet companies.
From this point of view, law enforcers are very important for the healthy development of the market, and they need to ensure that opportunities such as the Internet wave can emerge.
The "national champion" argument has been debated for decades, and the United States faced this problem in the 1950s and 1960s during the us-Soviet hegemony struggle, and other countries bet on the "national championship" model, and finally the United States chose free competition.
Antitrust litigation at the time broke up AT&T, and in retrospect we find that a focus on free competition is key to ensuring innovation, which keeps the United States ahead. So, we have a successful precedent on this issue.
Host: The Chinese market presents a unique situation, industry insiders say that U.S. users use more microphones and cameras than any other U.S. company, and I think he means that he hopes that these competitors will face the same regulation.
Lena Khan: We've seen tougher regulation in other countries over the last decade, like the European Commission. We've seen a series of actions by China over the past year, which actually shows that they will vigorously enforce antitrust and its antitrust laws, which is very different from what is expected by other countries.
Host: What do you think about whether China's strict regulation of its own technology companies will make American technology companies lose the excuse to say, "If we are not big enough, Chinese companies will seize our market"?
Lena Khan: Yes, it does make the sophistry of the big American companies lose strength.
Host: Although from the point of view of national security and the perspective of the issue of this national championship, we are all surprised. What do you think is the reason for China's strengthening of antitrust?
Lena Khan: It's an interesting question, I don't know, but historically, the regulation of any state would have acknowledged that if unfettered monopolies were allowed to concentrate their power, those monopolies could compete with the power of the state.
Just as we set political boundaries for government, we will define the boundaries of commerce by preventing too much concentration of commercial power.
Host: Do you think these companies now have the power to counter the government?
Lena Khan: We do see that some companies have developed similar capabilities, especially the types of data that these companies have access to right now. And this is not just a commercial competition, but also involves a variety of data privacy and data security issues. And I think that's the more important issue.
For antitrust supervision, we mainly look at the problem from the perspective of competition, to see whether these companies use illegal anti-competitive methods to monopolize. But apparently beyond that, there is a national perspective, where legislators have a series of drafts on similar issues, and those bills are where these issues are discussed.
The FTC and Facebook eventually settled | Getty Images with a $5 billion fine in court
Winning or losing is not important, "deterrence" is more important
Host: Both the FTC and the Justice Department are applying to Congress for more funding ($500 million each), but Congress has yet to approve it. Is the FTC understaffed and under-resourced right now?
Lena Khan: We are grossly under-resourced. We have about 1,100 employees at the FTC, about two-thirds of what we were in the 1980s, and our human resources have remained more or less stable, but have actually declined over the past decade.
The volume of M&A deals has doubled in the last decade, and we are the same number of people who are in charge of the investigation. The sharp increase in the number of deals has created tremendous pressure, and we must choose which multibillion-dollar merger to pursue and ensure the quality of the investigation, but it means that there will be trade-offs and sacrifices.
Host: With limited resources, how does the FTC choose which major companies to follow up on?
Lena Khan: It's a very difficult question, and it definitely makes me feel stressed.
I think "deterrence" is very critical. Over the past decade, large companies have dared to engage in clearly illegal, anti-competitive behavior, meaning they know that such a move will not have serious consequences. And even if these mergers and acquisitions are investigated by the regulator, they only need to fight in court and pay some money.
What we want to see is a lack of deterrence for large companies.
What we consider is which cases can have a greater impact in the context of antitrust, and the success of one case can change the ethos of the entire market, rather than the east and west.
At the same time, we are considering which cases can be traced back to the upstream of the industry, so that we can control the monopoly at the source, which is how to carry out anti-monopoly supervision more effectively.
Host: Facebook's case, which ended in a fine of $5 billion, is a dime a dozen for these giants, and the hordes of lawyers and prists and lobbyists on the other side make people feel sorry for the US government.
Lena Khan: That was before I took over as chair of the FTC.
No, I think it takes courage to do so. These are large companies that are very resource-rich, and they don't hesitate to make the most of their resources. At such an important time, make sure that we really show these companies, and also to the public, that law enforcement officers are not going to back down because these companies are showing some power or trying to intimidate us.
Host: So you don't worry about which cases will fail and suffer?
Lena Khan: It's a difficult assessment, but I think it's still valuable to make decisive decisions when action should be taken.
Even if it's not a big win, even if there's a risk of losing, taking that risk and taking action can still bring huge benefits, and you may win. If you don't take risks, you will definitely lose.
We have become clear that the cost of repeated inactions is enormous, and all we have to do is reverse that momentum.
Host: Does the FTC need congressional help? When you're in court against a big company, it's still up to the court's ruling, or you can fundamentally change the law.
Lena Khan: Our job is to enforce written laws, but Congress believes that there are cases where the law needs to be strengthened, and that some case courts' penalties don't meet the current market realities, where companies can showcase their market skills.
Host: Would you turn to Congress for help, would you spend time discussing these issues with Congress?
Lena Khan: Lawmakers are going to turn to antitrust agencies for technical assistance, and it's becoming increasingly difficult to raise monopoly cases by big companies to such a high level over the past decade, and that's obvious. So I think Congress really wants to change that so that law enforcers can enforce the law more quickly and in a timely manner without having to worry about losing everything when dealing with the worst offenses.
Host: In addition to funding and personnel, what kind of help does the FTC need from Congress, such as various privacy bills, anti-discrimination bills, and so on?
Lena Khan: Money and resources are really important. Beyond that, a series of court rulings have indeed made it harder for institutions to act quickly. So I think the series of changes that are being considered are really encouraging, especially as there is a growing interest and attention that so many bipartisan parties are taking on, and I think it does illustrate the growing awareness that there are deep-seated problems.
Host: In the FTC vs. Facebook case, the judge ruled that the former "did his homework" and gave antitrust a good potential, what do you think about it?
Lena Khan: It was a really great result that allowed us to keep pushing forward, and my colleague fought a beautiful battle. The judge's ruling shows that the FTC has indeed "done its homework."
What's more, through discussion, the court has been able to understand that in addition to price increases, such as privacy damage, it is also a harmful behavior, even if consumers are not paying more.
Moderator: A key issue is that users either lose privacy or they lose free apps. Who should balance the contradictions, regulators, the public or the market?
Lena Khan: Under antitrust law, how a transaction is bad for competition, it's illegal. The tribunal has made it clear that it does not want to put antitrust agencies in a position where such a balance must be made. This is the traditional practice.
But this is also an issue that we need to look at when we revise the M&A Guidelines, and we need to ask people, how should the FTC consider market indices, how should it consider potential quality deterioration? We believe that these further investigations can provide us with greater motivation in the future.
Host: The COVID-19 pandemic has made us more dependent on the apps of tech giants for the first time in history, and without providing data for them, we can't enjoy features such as maps. In such a case, which are the issues that regulation values the most and may harm the interests of consumers?
Lena Khan: That's a good question, and one of the things that we're particularly interested in during the revision is how to strengthen our ability to prove that those companies have monopolistic power, even if they haven't raised prices yet.
At the moment, law enforcers have to bypass various obstacles and go deep into the case in order to prove the price change. Now, there's another way to justify these companies' abuse of their market power by looking at the deterioration of privacy concerns, even if there's no price increase.
Especially in the digital marketplace, some of the issues about data privacy and security are also within the ftc's radar. For example, if some companies acquire a company and the latter has a higher level of data privacy, the former will be exempt from this responsibility. Users will find themselves now needing to hand over more data and will feel deprived of their choices.
Lena Khan attends a Senate Committee hearing in April 2021 | NYT by Saul Loeb
Not a "radical" and don't talk directly to tech gurus
Host: What do you think of your famous paper at Yale, "Amazon's Antitrust Paradox," which was an impassioned critique of Amazon, with comments suggesting that you almost got the FTC presidency as an "activist"?
Lena Khan: My goal has always been to understand the real situation in the market. I started talking to actual market participants as a journalist. You'll read headlines about a big agribusiness making an acquisition and advertising it as great for consumers. And if you dig deeper, you'll see that seed prices are actually rising and farmers are hurting.
So to really dig into what's really going on beneath the surface, what we're seeing is that some of the antitrust standards that have been used in the past haven't really captured the full architecture of market forces and how they've been exercised for decades.
So for me, the key question is really how to make sure that our tools, frameworks, and enforcement methods are aligned with the world today. Antitrust theories and tools should evolve alongside markets.
Host: The big tech companies (Amazon and Facebook) have tried to keep you out of monopoly cases against them, and although the judges didn't agree, these big companies spared no effort to portray you and Senator Elizabeth Warren as activists and anti-tech people.
Lena Khan: As enforcers, our responsibility is to enforce the law on big companies, so the key question is whether we can enforce the law. In fact, in the past, these large companies received relatively light penalties, and they may need to respond to more actions from law enforcement.
It would be nice for the courts to rule in favor of the FTC for similar "recusal" lawsuits, because I have no private or financial bias in these antitrust cases. Therefore, for these anti-monopoly cases, we take a fair approach to enforcing the law and truly ensuring an open, competitive and thriving market environment.
If there are companies, monopolies that do something illegal, we will resort to the law.
Host: So you don't call yourself an activist or an activist regulator?
Lena Khan: I'm a law enforcer, it's an honor to take on this role, and our job is to really enforce the law in a fair way.
Host: There are Internet and technology practitioners who complain that the FTC only focuses its antitrust efforts on the Internet field, but ignores monopoly companies in other industries.
Lena Khan: The scope of FTC regulation is very broad, and Congress has given us the daunting task of regulating the entire U.S. economy, and we will challenge mergers and acquisitions in any industry, whether it's the healthcare industry, or the semiconductor industry, such as NVIDIA and ARM. In the past, the FTC has also sued for mergers and acquisitions in the retail sector.
Therefore, it is not comprehensive to accuse the FTC of only looking at the technology industry, whether it is the FTC or the Department of Justice, it is looking at the whole.
Host: Agriculture, finance, and other industries have separate departments, do you think there will be a separate department to specifically regulate the technology industry?
Lena Khan: This should be something that lawmakers need to discuss, and it's true that there are proposals that the FTC create an independent Internet regulator, but at the end of the day it's up to Congress to decide. All we can do is use the tools at hand to pursue violations as much as possible.
And the FTC has accumulated a lot of experience in the field of Internet regulation, especially if we can have more resources and funds, we have the opportunity to strike hard at some monopolistic behavior. It takes a lot of work to set up a new department, and now there are more important things to do than that.
Host: Would you be directly connected to the CEOs of tech giants? Talk to them directly?
Lena Khan: If it's part of THE FTC enforcement, it does happen, but we make sure we can communicate through normal channels.
Host: There is news that the Internet giants are waiting for you to leave this position, do you think they will succeed?
Lena Khan: We're going to do everything we can to enforce the law in a fair way, and I think it's an important time for us to learn from the mistakes of the past and make a difference, and that's what we're trying to do.
Host: Your time in control of the FTC is limited, and there is still a year to go before the midterm elections, when there may be a power change. What do you think of your tenure?
Lena Khan: I feel like time is very tight.
For certain law enforcement acts, it takes a long time to investigate, even if it is brought to court. It puts a lot of pressure on us and we have to move quickly every day to move things forward.
Reference information
https://www.cnbc.com/2022/01/19/cnbc-transcript-federal-trade-commission-chair-lina-khan-speaks-exclusively-with-andrew-ross-sorkin-and-kara-swisher-live-from-washington-dc-today.html
Head image source: NYT by LEXEY SWALL
Intern Yimeng Zhang also contributed to the article