Lina Khan and the New Age of American Antitrust Enforcement

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In today’s digital age, tech giants like Amazon and Google offer unparalleled convenience. Their consistent customer satisfaction–along with the difficulty politicians have in understanding them–has helped these companies evade significant government intervention. However, with newfound hegemony, these titans may be sparking a new era of monopoly regulation. 

Antitrust refers to government regulation with the purpose of preventing monopoly power and promoting competition in markets. The current antitrust landscape has been largely defined by the influence of one man: Robert Bork. A product of the University of Chicago–an institution known for producing influential libertarian scholars –he thought that the systematic break-up of firms through antitrust enforcement amounted to government overreach, with no corresponding benefit for consumers. 

In many markets, scaling up can give companies a natural advantage that allows them to lower prices without illegally undercutting competition. Bork worried that those “economies of scale” were being inhibited by the government’s “irrational fears of monopolies.” Accordingly, he petitioned the government to stop breaking up monopolies as long as they provided cheap prices. As argued in his 1978 magnum opus, The Antitrust Paradox, previous antitrust interventions had been “protecting inefficient producers [or smaller companies] at the expense of American consumers.” Bork frequently outlined his doctrine in simple terms. As Barak Orbach put it: “[t]he courts, they don’t understand antitrust, but they understand his article.” By stressing that antitrust should prioritize economic efficiency over helping small businesses, Bork successfully infused neoclassical economics into antitrust. 

Since 1993, the major legal test needed to prove the existence of predatory pricing has been the Brooke Group Recoupment Test. This test involves proving that after undercutting competitors, the alleged monopoly would be able to recover its losses by increasing prices. In other words, the courts require evidence that businesses’ temporary low prices “likely permit the market power” to later make up greater profits. Since the introduction of the Brooke Test by the Supreme Court, the number of antitrust cases brought and won by plaintiffs has dropped dramatically. 

Bork also stressed that “predation through vertical merger is extremely unlikely" and championed guidelines that heavily restricted the Department of Justice (DOJ) and Federal Trade Commission’s (FTC) ability to challenge such mergers. Against the backdrop of the de facto approval of vertical deals, the agencies did not challenge a single of these mergers during President Reagan’s tenure, and only challenged 7 under Bush. 

Recently, however, the academic debate has begun to shift. In 2017, a Yale Law student named Lina Khan published Amazon’s Antitrust Paradox, potentially “reframing decades of monopoly law.” Using Amazon as an example, she showed that companies could abide by Bork’s limited restrictions while still engaging in monopolistic practices. 

Khan has not been alone in arguing that Bork’s beliefs have aged poorly. Notably, his critics have challenged the central premise of his work: that “the point of antitrust is consumer welfare.” By pointing to the fact that the inception of antitrust law predates that liberal economic thinking, while early antitrust was fundamentally about protecting small businesses. Bork’s critique of predatory pricing as being “irrational and therefore implausible” has also been undermined by extensive research, which has found it to be an “attractive anticompetitive strategy.” Industries ranging from air-travel, to telecommunications, to supermarkets, have all seen large firms drop prices in efforts to preserve control. By extension, the scope of the Brooke Test’s may be limited, as it assumes that profit maximization is the exclusive goal of predatory pricing. In reality, consumers also care about product quality, choice, and innovation.

At the core, Khan has highlighted that it is almost impossible to determine if monopoly prices are “fair,” when there is no competition left. Bork maintained that monopolies are only dangerous if they increase prices too much. Khan rebuked that, without comparison from competitors, there is no way to know what is meant by too much. In so doing, Khan stressed that the best way to identify monopoly power is not to look merely at price hikes, but to broadly analyze whether a market structure allows for competition. 

After drawing attention in the academic world, Khan was appointed as chair of the FTC in 2021. With her newfound responsibility, Khan immediately took steps to prevent more tech consolidation. She refiled a lawsuit aimed at breaking up Meta, along with attempting to block an acquisition of a gaming company by Microsoft. However, the courts have largely ruled against this trend, with one judge even jabbing at some of Khan’s legal theories. Working within the confines of Bork’s “consumer welfare,” Khan has now brought the case that may define her legacy. 

Two months ago, the FTC, in conjunction with seventeen US states, sued Amazon. They allege that it is a monopoly - one that uses “anticompetitive and unfair strategies.” The filing highlights that, while Amazon’s size is not itself a violation of the law, the tech giant’s deliberately low practices are. More specifically, Amazon is accused of gouging merchants and consumers by charging third party sellers half of their revenue for logistical costs (after a 30% increase in the past two years), along with implementing fees for those that choose to ship it themselves. To prevent transitions to cheaper shipping companies, Amazon allegedly punishes sellers while deterring online retailers from offering lower prices. For example, if Amazon finds that one of its sellers is offering cheaper goods on other websites, it buries that seller in its own search results and makes the “Buy Now” button harder to find. Such tactics have frequently led to sellers pulling their products from other websites, resulting in higher prices across the internet. Given this context, the challenge now facing the FTC is to show how consumer harm can arise even when Amazon’s prices appear to be low. 

The DOJ, along with eight US states, is simultaneously suing Google in an analogous civil antitrust suit. The case involves allegations that the company monopolizes digital advertising technologies by forcing the adoption of its tools, as well as distorting auctions for advertisements. To maintain its ironclad grip on search engine traffic, Google also pays more than 10 billion dollars every year to make it the default search engine on devices like Apple and Samsung smartphones. This dominant position is self perpetuating since Google’s massive data harvesting improves the quality of search results, in turn bringing more people to the engine.

Regardless of their outcome, challenging tech behemoths in court has historically kickstarted innovation. For example, a similar suit against IBM was dropped in 1982, but it scared the giant enough that it no longer bundles hardware and software. As a result, Apple and Microsoft have flourished. The breakp-up of AT&T’s jump-started the 1990s internet revolution by making it easier for companies to work over phone lines. Ironically, Google’s own success was only possible after a lawsuit against Microsoft (now partially overturned lawsuit) highlighted its most egregious practices. Once Microsoft was forced to stop imposing search engines within its operating system, the much more practical Google engine exploded in popularity.

Today, even Google’s search engine might be running out of steam as declining search results have been paired with increased advertisements. With a growing amount of search queries being followed by “Reddit” or other specialized websites, the trust in Google’s own results may be eroding. Nevertheless, it is still impossible to tell if Google’s lawsuit is the next step of the cyclical elimination of corporate giants. What has become certain, though, is that these transitions rely on vigilant government watchdogs.