President Barack Obama was more moderate than many might think or remember. While he was a champion for many progressives, one area where he was anything but was in antitrust enforcement. In particular, his administration was very cozy with Big Tech, as detailed further below.
With the appointment of Lina Khan as Chair of the Federal Trade Commission (“FTC”), President Joe Biden sent a message to big business that they should not expect more of the same. Khan may be young (32), but anyone who reads her note in The Yale Law Journal, Amazon’s Antitrust Paradox, knows she means business when it comes to scrutinizing anticompetitive activity. The rest of her scholarship is equally impressive, as was her work at the Open Markets Institute.
The glory days are over for Big Tech in the antitrust arena. In fairness to President Donald Trump, his administration challenged these titans of industry, although most of their scrutiny was misplaced. It’s hard to argue that Big Tech discriminates against conservatives when The Daily Wire dominates Facebook.
Antitrust is one of many areas that PolisPandit plans to analyze when it comes to the intersection of money, power, and technology. Last week we examined MyLife.com and consumer data privacy. It is more important than ever to hold Big Tech accountable. Otherwise, an unchecked and powerful minority will dominate our daily lives.
The Obama Revolving Door to Big Tech
Speaking of daily lives, many Obama administration alumni now find themselves working for Big Tech firms. While regulatory capture is not unique to Obama, his administration was arguably far too cozy with the industry heavyweights they were charged with regulating. Take a look at where some of them are now:
Jay Carney - formerly President Obama’s Press Secretary, he has been the Senior Vice President of Global Corporate Affairs at Amazon since March 2015.
David Plouffe - served as a Senior Advisor to the President Obama. Since September 2014, he has held various roles at Uber and joined on an initiative led by Mark Zuckerberg.
Tony West - oversaw the largest litigating division of the Department of Justice during part of the Obama years, and is now the Chief Legal Officer of Uber.
Lisa Jackson - served as the Administrator of the Environmental Protection Agency under Obama, and is now the Environmental Director at Apple, reporting directly to Tim Cook.
This revolving door with Big Tech looks even worse when you consider the disastrous FTC enforcement decisions against the industry during the Obama years. In particular, the FTC’s 2011 settlement with Facebook over user privacy violations was filled with empty promises and zero accountability for any individual executives. What did it lead to? Cambridge Analytica.
There’s a New Sheriff In Town
Her name is Lina Khan. She has already made waves—just six months on the job—by pushing forward with antitrust scrutiny of Amazon’s cloud computing business. In 2020, Amazon held 41% of the cloud computing market, followed by Microsoft at 20%. Bigness is not necessarily badness under antitrust laws, but Amazon’s vast structure could pose issues as it may be incentivized to discriminate against software companies that sell their products but also compete with the e-commerce giant.
Khan’s scrutiny of their practices will likely have more similarities with the European Union’s Margarethe Vestager than Obama or even Trump-era enforcement. The EU fined Google $2.7 billion for antitrust violations long before U.S. regulators even thought to look. Greater global coordination is needed if these global Big Tech companies are going to be held to account for global anticompetitive practices.
The real test for Khan will be convincing the courts—particularly SCOTUS—that the old ways of assessing antitrust issues under the “consumer welfare standard” are misguided in a modern globalized world. While her argument that we need to more holistically assess certain practices—such as predatory pricing (i.e., deliberately selling at a loss to push out competitors)—it will be an uphill battle. Courts have historically honed in on how practices impact consumer pricing. If pricing remains unchanged, no problem, right?
What this standard fails to assess is the other societal ills caused by too much concentrated economic power. For example, Amazon may beat competitor pricing, but the societal cost is an e-commerce giant that drives out smaller competitors, uses third party seller data from its platform to replicate products, and spreads its tentacles to other industries.
This concentration of economic power in one company gives Amazon outsized political power as well. Moreover, less competition arguably leads to worse working conditions, less wage growth, and numerous other undesirable economic and societal outcomes beyond any impact to consumer pricing. Assessing consumer welfare alone is too myopic in a globalized economy.
A Legal Wrecking Ball For Individual Executives and Big Tech Companies
It is unclear, however, whether Khan will hold individual executives accountable for inappropriate and illegal practices. Unless directors, officers, and employees face potential criminal and civil liability, Big Tech behavior will not change. The FTC (under Trump) may have hit Facebook with a $5 billion fine in 2019, but it also agreed to give immunity to executives for “known and unknown violations.”
Wall St. regulators ran into this same issue in the wake of the financial crisis when no banking executives were individually charged with anything. The Department of Justice and financial regulators have since changed course in the last few years. Multiple individual traders and firms have been charged with the crime of spoofing. It has sent shockwaves throughout the industry and put traders on notice. I would know - I recently worked on a Wall St. trading floor.
In addition to individual liability, Khan’s FTC should consider breaking up the Big Tech companies. Facebook’s acquisitions of Instagram and WhatsApp in particular warranted extra scrutiny at the time, but as noted, these acquisitions were consummated during the Obama years of lax antitrust oversight. There is no compelling reason for a company of Facebook’s magnitude to own these former competitors when Facebook’s platform shares many of their same features (posts, stories, and messaging). Instead of competing, they all work for the same shareholders.
It’s safe to say that Lina Khan has her work cut out for her. Whether she can live up to the rhetoric of her scholarship remains to be seen. For now, we can take solace in the possibility that technology markets may become more competitive.
Big Tech: you’re on notice.
Elsewhere in Technology
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Jack Dorsey blocked on Twitter by Marc Andreessen after Web3 comments
Apple Faces $56.6 Million Fine in the Netherlands for Breaking Competition Laws
TikTok Diagnosis Videos Leave Some Teens Thinking They Have Rare Mental Disorders
Lawmakers Want Biden to Play Bigger Role Pushing Tech Legislation
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