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Can Amazon Withstand the Wrath of Khan?

Can Amazon Withstand the Wrath of Khan?

Monday, 17 May, 2021 - 04:15

Federal Trade Commission nominee Lina Khan is an exceptionally vocal critic of Inc. If confirmed, the legal scholar would play a big role in shaping the agency’s antitrust enforcement policy — which makes her current social media presence all the more interesting.

It’s been nearly two months since the Biden administration nominated her for the position, and yet the tweet pinned to the top of her Twitter profile remains her seminal 2017 Yale Law Journal article “Amazon’s Antitrust Paradox,” which calls Amazon’s behavior anticompetitive. That could be a very bad sign for the company.

On Wednesday, the Senate Commerce Committee is set to vote on Khan’s nomination, which will move on to the full Senate at a later date. Given Democrats’ control of the Senate and the congenial bipartisan reception she received at her confirmation hearing, it’s highly likely that Khan will be confirmed. Tellingly, Republican Senator Ted Cruz has already said he looks forward to working with her.

What does that mean for tech companies? Khan’s body of work shows she prefers a tough approach on tech. When she served as counsel to the House Antitrust Subcommittee, she helped write the 449-page report that accused the technology industry of monopolistic conduct and pushed for aggressive remedies like the structural separation of businesses. Khan also worked as an adviser to the FTC commissioner’s office, where she co-authored a paper that advocated for the expanded use of the agency’s rulemaking authority for antitrust purposes.

But it’s Amazon that should be most concerned. Khan has noted that the company’s power over large sections of the economy — from e-commerce and logistics to television production and cloud computing — has only accelerated in recent years, though Amazon has avoided any serious antitrust lawsuits from the government thus far. That may be hard to avoid the bigger it gets: Amazon’s quarterly sales passed the $100 billion mark for the first time last December, putting it on track to surpass Walmart Inc. in revenue by next year.

A look at Khan’s previous work could help give an indication of the thrust of any Biden administration action. In her 2017 Yale Law Journal paper, she wrote how the traditional antitrust framework focused on pricing was deficient in dealing Amazon, given its ability to squeeze out competitors in adjacent areas by exploiting its informational advantages and its size. At the time, Khan argued that dominant marketplaces like Amazon should be prohibited from favoring their own products by using the extensive data they collect from seller partners.

Conventional wisdom around antitrust has migrated in Khan’s direction, with evidence appearing to confirm her arguments about Amazon’s power. For example, last month, Politico reported a 2015 internal audit at Amazon that revealed thousands of its employees had unauthorized access to proprietary sales data of its third-party seller partners, specifying at least one case where an employee used the information to favor Amazon’s own product lines.

Amazon won’t be alone in facing Khan’s scrutiny. During her confirmation hearing last month, she laid out detailed critiques for some of Apple Inc.’s and Facebook Inc.’s business practices as well. She promised to look closely at Apple’s App Store rules that restrict links to cheaper deals on external websites and also vowed to investigate Facebook’s content algorithms and consumer data privacy safeguards.

Ultimately, the technology industry should anticipate an increasingly assertive FTC with Khan as a commissioner, including more lawsuits, probes and a harder line on approving any mergers or acquisitions. But at least, it won’t come as a surprise.


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