April 23, 2024

Two years ago, Lina Khan took over as head of the Federal Trade Commission, promising bold action against the biggest tech companies.

Ms Khan said at the time that the agency had long been a weak policeman, needing to challenge giants such as Microsoft, Amazon, Meta and Google in court to curb their growing power. She later added that even if the FTC loses those cases, it will be a partial victory because the agency will signal that antitrust laws need to be updated for the modern internet age.

But on Tuesday, Ms Khan’s signature agenda suffered its biggest blow yet. A federal judge rejected the Federal Trade Commission’s attempt to block Microsoft’s $70 billion acquisition of video game maker Activision Blizzard, saying the agency failed to demonstrate that the deal would reduce competition and harm consumers. It followed a loss in February, when a judge threw out a lawsuit by the Federal Trade Commission (FTC) seeking to block Meta’s acquisition of virtual reality startup Within.

The failures have raised questions about Ms Khan’s ability to meet the ambitious goal of reversing decades of weak antitrust enforcement as political pressure mounted and the 34-year-old academic’s patience waned. the American business community. Ms. Khan’s critics have been bolder and more vocal in pointing out the holes in her court-going tactics, saying the losses aren’t even partial victories — they’re just losses.

“I totally disagree with this approach,” Anthony Sabino, a professor of business and law at St. John’s University, said of Ms. Khan’s approach. “She’s trying to change a century of antitrust law overnight, and that’s not necessarily wise.”

Adam Kovacevich, chief executive of the Chamber of Progress, a tech trade group, said the failures made the FTC look less credible. “All these court losses make their threat look more like a paper tiger,” he said.

Others wondered whether Ms. Khan was wasting FTC resources on unwinnable cases. “They’ve crossed the line and become reckless in filing lawsuits,” said Ashley Baker, director of public policy at the Judiciary Council, a conservative think tank.

As Ms. Khan prepares to take further potential action against the tech giant, the wave of criticism has her in the crosshairs. The U.S. Federal Trade Commission, which has been investigating allegations of an illegal monopoly by Amazon, has filed an antitrust lawsuit against Meta and possibly Amazon.

Now, Ms Khan first has to defend herself.She is expected to testify before the House Judiciary Committee on Thursday hearing Regarding oversight of the FTC, the Republican-led group’s website says it wants to “examine the FTC’s mismanagement under Chairman Lina Khan and its disregard for ethics and congressional oversight.”

Khan declined to comment for this article, as did FTC spokesman Douglas Faller, who declined to comment on how the court’s losses would affect her agenda. After Microsoft and Activision’s ruling on Tuesday, Farrar said the agency was “disappointed with the outcome because the merger poses a clear threat to open competition in cloud gaming, subscription services and consoles.” The FTC can appeal the judge’s decision.

Ms. Khan shot to fame in 2017 while a student at Yale Law School, when she published a paper in a legal journal arguing that Amazon was suppressing competition and violating antitrust laws despite lowering prices for consumers. The paper sparked a debate about how to constrain the tech giants and how to modernize antitrust practices.

After President Biden picked Ms. Khan to lead the FTC, she repeatedly argued that winning or losing would require going to court, sending a strong signal to the tech industry that the agency was becoming a tougher sheriff. She insists that even if she suffers losses in court, it will gradually reform antitrust theory.

Ms. Khan used the idea last year when the FTC sued to block Meta’s acquisition of Within, a small virtual reality company. The case came as a surprise because virtual reality is such a nascent technology that it’s hard to argue that the deal would reduce competition in a market that hasn’t yet formed.

But Ms Khan argues that regulators must stop violations of competition and consumer protection at the cutting edge of technology, not just where these companies have become behemoths.

“We can see that time after time, inaction can have serious costs. And that’s what we really want to turn around,” she told The New York Times and CNBC in January 2022.

Earlier this year, a federal judge rejected a request by the Federal Trade Commission (FTC) to block Meta’s acquisition of Within. But the judge agreed with some of the FTC’s arguments, including how the agency defined the tech market in the case.

Tuesday’s loss in the Microsoft-Activision case was even more bitter, in part because the blockbuster merger has become a test of whether the tech giant’s deal can pass amid growing regulatory scrutiny.U.S. District Judge Jacqueline Scott Corley for the Northern District of California said consumers had benefited from Microsoft’s anticipation of intense scrutiny, writing: “That scrutiny has paid off.” But Her ruling brings little redemption for the FTC

In that case, the agency argued that the deal should not have been completed because it could harm competition. Microsoft could make some Activision Blizzard titles exclusive to its Xbox console, or make playing games like Activision Blizzard’s Call of Duty on competing consoles like Sony’s PlayStation less enjoyable.

But Judge Corley wrote that the FTC likely would not win a challenge to the merger in the agency’s internal courts, saying that, in essence, Microsoft had done enough to prevent harm to rivals.

“The FTC has found no documents that contradict Microsoft’s public commitment to make Call of Duty available on PlayStation,” she wrote.

Eleanor Fox, a professor emeritus at New York University School of Law, said it was too early to pass judgment on Ms Khan’s tactics. Elsewhere in the world, especially in the European Union and the United Kingdom, regulators have also taken antitrust action against big tech companies, she noted.

Ms Khan, she said, was “just an outsider in the US, not globally.”

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