The Meteoric Rise (and Fall) of Lina Khan

The rise of Lina Khan in antitrust circles has been meteoric. In 2017, the 27-year-old wunderkind burst onto the antirust scene with her Yale Law Journal article “Amazon’s Antitrust Paradox.” In the ensuing four years, she went from Yale law student to the youngest chair in the history of the Federal Trade Commission. Along the way, she worked as a legal fellow for former FTC Commissioner Rohit Chopra, advised the House Judiciary Committee’s investigation into digital markets, and was appointed as an associate professor at Columbia Law School.

In her law review article, Khan placed antitrust’s failure to restrain Amazon in the context of “a larger recent debate about whether the current paradigm in antitrust has failed.” And as she shot to political stardom, she used her platform to argue for a muscular new approach in which antitrust agencies would strengthen merger enforcement and initiate monopolization cases, and the FTC would aggressively exercise its rulemaking authority to regulate unfair methods of competition. She championed a more aggressive, populist approach to antitrust enforcement that would have posed real risks to innovation and economic growth. Yet, at her one-year anniversary as chair, the antitrust revival she promised appears to have fizzled. Paradoxically, current antitrust enforcement at the FTC is arguably less aggressive than before Khan was sworn in.

Merger enforcement has fallen off considerably under Khan. During her first year as chair, the FTC tallied 13 merger enforcement actions (i.e., complaints, abandonments, and final consent orders) compared to 20 actions during her predecessor Joe Simons’ last year as chair. This decrease in enforcement came amid an explosion in merger filings: There were 75 percent more in Khan’s first year than in Simons’ last year. Khan’s poor enforcement record cannot be attributed to Republican foot-dragging. During the nearly four months in 2021 in which the Democrats held a majority in the commission, the FTC had exactly one merger enforcement action. Nor can it be attributed to the transition to a new administration. Enforcement actions as a share of total merger filings were more than 30 percent lower in Khan’s first year relative to Simons’ first year. Meanwhile, Khan’s own enforcement record casts doubt on her claim that the administration must revise merger guidelines if it is to strengthen enforcement. In every merger enforcement action in which Khan’s FTC filed a complaint, the parties promptly abandoned their proposed merger.

It is an article of faith among Khan’s ideological compatriots that consolidation is rampant in the U.S. economy, yet her FTC has yet to bring a single Sherman Act monopolization case—perhaps not a coincidence, since the purported rise of monopoly turns out to be one of many myths that suffuse the antitrust crusaders’ faith—although it did enter into a final consent order with Broadcom to settle monopolization claims under the FTC Act. While Khan’s FTC filed an amended complaint to remedy deficiencies in its original monopolization complaint against Facebook, that case was brought in the waning days of Simons’ term. Importantly, Khan has yet to harpoon her great white whale—Amazon—despite public reports of an FTC investigation into the company as early as June 2019. While recent reports suggest the Amazon investigation was understaffed during the Trump administration and is now “picking up speed” under Khan, contemporary reporting suggests otherwise. Anticompetitive conduct investigations generally take longer than merger investigations, but three years is more than enough time for the FTC to put together a complaint if one is actually warranted.

Khan began making the case for the FTC to undertake “unfair methods of competition” rulemaking long before she was sworn in as chair. Prior to Khan’s arrival, Acting Chair Rebecca Slaughter began creating the institutional capacity for such rulemaking by establishing a new rulemaking group in the office of the FTC’s general counsel. And a mere two weeks after Khan was sworn in, the FTC adopted new procedural rules to eliminate “self-imposed red tape” in the rulemaking process. But even with this groundwork in place, the FTC does not appear to be any closer to crafting competition rules than it was a year ago. This is to the benefit of U.S. economic welfare, since these rules would likely harm consumers and innovation.

By any objective measure, the populist approach to antitrust that Khan leads has failed to produce more aggressive antitrust enforcement. Khan has failed by her own standards as the FTC has brought fewer merger enforcement actions, no Sherman Act monopolization cases, and has yet to engage in rulemaking on unfair methods of competition.

But while it is a good thing for welfare-decreasing antitrust populism to remain on hold, Khan’s failure also generates some costs. Procedural changes to the merger review process that Khan has orchestrated have introduced legal uncertainties and burdens for merging parties, deterring them from integrating even when there are clear economic benefits. More costly merger review will do little to dissuade acquisitions by large firms that can more easily bear the costs but will certainly impact the economics for smaller firms considering acquisitions. Acquisitions are important for innovation and economic growth, so the populist approach to antitrust is as dangerously foolish as its proponents are passionate. It is time for Chair Khan and her supporters to come back down to earth.