For Federal Trade Commission chair Lina Khan, the grim news keeps mounting. Last month, a federal judge dismantled an FTC attempt to block Microsoft’s purchase of the entertainment software company Activision Blizzard. Microsoft produces the Xbox videogame console, and Activision makes the popular Call of Duty videogame franchise. By developing both the games and the consoles itself, Microsoft believes, it can cut costs and streamline distribution. Such vertical integration—linking two levels of a supply chain in a single firm—is not usually an antitrust concern. The FTC speculated that Microsoft would withhold Call of Duty from Sony’s PlayStation console—as though Sony somehow needs protecting—and the emerging market for cloud gaming. The judge found the opposite—that the deal will expand access. The agency’s case amounted, she said, to “bald assertion.”
The FTC suffered a remarkably similar loss in February, when another federal judge allowed Meta to buy Within, maker of a virtual-reality fitness app called Supernatural. This, too, was a vertical integration. The FTC wanted to make Meta build a virtual-reality fitness app of its own. “Th[e] case,” even the New York Times had to admit, was “built upon a little-tested legal theory that the deal would hurt future competition in an untested market.”
In other, still-pending cases, the FTC has the tiger by the tail. A federal court of appeals will probably reverse the agency’s effort to separate Illumina, with its platforms for genetic-sequencing tests, and Grail, with its innovative tests for various cancers. (Not only is the agency attacking vertical integration in this one; it’s attacking it when it could save countless lives.) Nor can the agency expect to succeed in its ongoing bid to break up Meta’s Facebook, Instagram, and WhatsApp services. Since the litigation began, TikTok has emerged as a major competitor, Elon Musk has purchased Twitter (now X), decentralized platforms like Mastodon and Bluesky have taken off, and Meta itself has launched Threads. The suit, premised on the notion that the social media market is static, has been overtaken by events.
If the FTC’s courtroom record is bad, what’s happening inside the agency is worse. In June, Bloomberg News uncovered a memo, written by the FTC’s top ethics officer, recommending that Khan recuse herself from the Meta/Within case. Citing Khan’s past calls for Meta to be barred from acquiring other companies, the memo concludes that a reasonable person would question Khan’s impartiality. Khan claims (strangely) that she did not see the memo before deciding against recusing herself, and that she spoke with the ethics officer, who presumably acknowledged, as the memo does, that recusal was not unquestionably required. This was all the excuse Khan needed to set the officer’s guidance aside—and to conceal the fact that she had done so.
At her nomination hearing, Khan pledged to consult “relevant ethics officials at the agency” and “proceed accordingly.” Asked at a hearing in April whether she has ever disregarded an ethics official’s advice, Khan answered no, before adding that she has “taken actions that are consistent with the legal statements [the agency’s ethics officer] has made.” When Khan uses a phrase like “consistent with legal statements,” it seemingly means whatever she chooses it to mean.
The memo came to light several months after the agency rebuffed Meta’s petition for Khan’s recusal. Democratic commissioners Rebecca Slaughter and Alvaro Bedoya didn’t just deny that recusal request; they required Republican commissioner Christine Wilson to redact all mention of the memo in her dissent. (Soon after, Wilson resigned, protesting that “the redactions served no purpose but to protect Ms. Khan from embarrassment.”) To make matters worse, the Wall Street Journal later reported that the ethics officer who penned the memo owns at least $15,000 in Meta stock. An agency spokesman insisted that the officer’s conduct did not itself violate any ethics rules—possibly the most damning fact in the whole affair. Though it began with Khan’s very personal desire to prosecute tech companies, the recusal drama wound up becoming a source of grief for the entire agency.
Even progressive activists are causing trouble for the FTC. To them, the FTC is a vehicle for achieving political victories that Democrats can’t obtain in Congress. In May, the agency directed Meta to show cause as to why it should not face new restrictions under a 2020 consent decree governing its privacy policies. Commissioner Bedoya issued a statement questioning whether a sufficient “nexus” exists between the original decree and the new measures sought by the agency. (Put another way, he mildly suggested that the show-cause order is a power grab.) Dan Geldon, Senator Elizabeth Warren’s former chief of staff, promptly texted Bedoya, complaining that the statement was “insanely at odds” with “representations” Bedoya had made about “backing Lina on Facebook matters.” “Very telling,” Geldon added the next day, “that you don’t even respond to text messages now that you don’t need help getting confirmed.” Bedoya turned these tirades over to the agency, which then released them to the public. Agency rules required as much—which makes you wonder what Geldon was thinking. Faced with the possibility that a Democratic commissioner would dare march out of line, he threw restraint to the winds.
Through it all, Khan presses on. And why not? In her mind, the courtroom fiascos only show that judges and legislators need to rethink antitrust rules. It’s the law that’s wrong, not her. And precisely because so many of her backers see the FTC as a tool for evading democratic outcomes rather than an institution with norms to uphold, she is likely to float above every scandal. Anyway, her staunchest defenders are all too happy to ascribe criticism of Khan to—what else?—sexism and racism.
The FTC has had a busy summer. It proposed severe new disclosure requirements for parties seeking to merge. Joining forces with the Justice Department, it moved to de-modernize the government’s merger guidelines. (“Weighted by the number of citations,” observe Gus Hurwitz and Geoff Manne, “the average year of the 50 cases the FTC and Justice Department cite in support of their approach is 1975—ages ago in antitrust law.”) The agency launched an investigation of OpenAI, maker of ChatGPT, and signaled its intent to regulate artificial intelligence more broadly. It accused Amazon of using so-called dark patterns to trick users into subscribing to Amazon Prime. (It also claims that Prime is too hard to quit. Never mind that one can do so in fewer clicks than it takes to file a comment with the FTC.) And any day now, Khan is expected to file her biggest lawsuit of all: her long-planned quest to break up Amazon.
The more Khan loses, it appears, the more ambitious she becomes.
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