Following his election, one of Zohran Mamdani’s first acts was to appoint former Federal Trade Commission chair Lina Khan to co-lead his transition team. Late last year, just days before Mamdani took office, the New York Times reported that Khan was leading an effort to “scour” New York City’s legal code for “dormant or underused” mayoral powers that could help Mamdani push his agenda.
New York might be about to see a repeat of Khan’s tumultuous, norm-busting reign at the FTC. Her apparent plans would harm New York businesses while offering few benefits to consumers.
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Khan’s term at the FTC was characterized by disdain for past precedents and norms, as well as open hostility to corporations. During her tenure, the agency struck from its mission statement the goal of pursuing its policies “without unduly burdening legitimate business activity.”
Under Section 5 of the Federal Trade Commission Act, the commission polices “unfair methods of competition in or affecting commerce.” Longstanding, bipartisan agreement held that this function should be limited to monitoring antitrust violations. But under Khan, the FTC decided that it would start cracking down on unfair competition outside antitrust, such as by targeting deceptive advertising practices involving AI and by launching a war on so-called “junk fees.” As critics argued, the change gave Khan a license to target any business conduct she didn’t like.
Another initiative outside the antitrust realm was Khan’s attempt to ban noncompete clauses nationwide. Under Khan, the FTC also tried to block a host of corporate mergers, even when there was scant evidence the merger would produce monopoly power. In both cases, Khan’s aggressive strategy meant the FTC routinely lost in the courts.
Khan is now bringing her methods to the Mamdani administration, part of a broader pattern of hostility to corporations in the new mayor’s office. Just as she did at the FTC, Khan is pushing expansive interpretations of existing legal authority, seeking to extend the mayor’s power well past traditional understandings. So far, her plans include more robust enforcement of the city’s recently passed ban on real-estate-broker fees, as well as renewed use of a 1969 price-gouging statute to target alleged “predatory pricing.”
These laws may sound consumer-friendly, but they are likely to hurt many of the people they’re meant to help. Price-gouging laws have many problems, the most obvious being that “gouging” is notoriously hard to define. As the Cato Institute’s Michael Giberson has noted, “in popular usage, consumers complain about ‘price gouging’ just about anytime they do not like a price.”
The law that has caught Khan’s eye is New York City’s Consumer Protection Law of 1969. It prohibits “unconscionable” trade practices, including ones in which there is a “gross disparity between the value received by a consumer and the price paid.” The law has apparently been used only once. Khan, reports suggest, wants to wield it against hospitals that charge higher prices for prescription drugs than nearby pharmacies, and against stadium vendors that charge high prices for hot dogs and beer.
The problems with this approach should be apparent. “Gross disparity” is the sort of ambiguous term that can give regulators wide latitude to target business practices they don’t like—just as Khan sought to do at the FTC. Some producers—like stadium hot-dog vendors—may decide the regulatory risk is too high and drop out of the market altogether.
Broad-brush crackdowns on “unconscionable” prices would also amount to a de facto price control. Research amply demonstrates the drawbacks of price controls, which can lead to supply shortages and even trigger black markets.
Another of Khan’s focuses is making app-based ridesharing and food delivery platforms adhere to worker-protection laws. She’s likely particularly interested in New York City’s new law providing “just cause” protection for rideshare, delivery, and gig workers, meaning they can’t be kicked off platforms at-will. If Khan boosts enforcement, the result will be higher costs for New Yorkers, as well as waitlists to become drivers on the platforms.
Lina Khan’s hallmark at the FTC was aggressive and creative interpretations of existing laws to crack down on businesses. Yet this approach yielded little consumer benefit. So far, her involvement with New York City appears likely to result in more of the same.
Photo by Alexi J. Rosenfeld/Getty Images