Cool Media.
Hello, and welcome's a Better offline. I'm your host ed zietron.
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I am joined by the Chair of the Federal Trade Commission, Lena Cohn. Lena, thank you so much for joining me.
Great to be here.
So on a simple level, what does the FTC actually do?
So, the FTC enforces America's anti trust and consumer protection laws, and so these are the laws that try to ensure that our markets are fair and honest and competitive, and so that means we're looking to protect people from illegal monopolies. We're trying to protect people from all sorts of frauds and scams. We're trying to protect people's privacy and wanting to make sure that they're not subjected to all sorts of unfair practices. We were created one hundred and ten
years ago, and so it's a pretty big mandate. We have oversight across markets across the entire economy for the most part, with some exceptions like in areas such as banks and airlines. So it's a really big job that this agency does and it's been thrilling to get to do it.
And it feels like you're a lot more aggressive than perhaps anti monopoly and anti consolidation has been in the past, what led to them.
So I came into this job wanting to make sure that we were a fully using the tools that Congress gave us. As I noted, this agency has been around for o first century. Our agency was given some pretty important authorities and tools, but over the decades there had been a drift away from fully using all of the tools that we have, from fully embracing the law on
the books. And so the first thing we did was kind of come in and just make sure that we are mapping out what are all the tools we actually have and how do we make sure we're faithfully using those. The second thing that's been important is wanting to make sure that we're enforcing the law and taking action in response to how markets actually work today, and that meant
making sure we were having top expertise Internally. We started a new Bureau of Technologists that you know, brought data scientists, data engineers, people who fully understand the ins and outs
of how algorithms work. Previously, companies would view lawsuits as just a cost of doing business, and especially in digital markets where there's such a focus on chasing scale and chasing growth, you know, there was a bit of a ask for forgiveness later mentality, rather than everybody abiding by the law and making sure Americans were getting their rights on the front end.
So how do you curtail that instinct where they have so much money that they can just kind of absorb the fee, sorry, the fine.
I mean, yeah, it's a good question, and it's especially important because a few months before I came into this role, the courts had actually further limited the FTC's ability to get money. We mitigated that in a couple of ways. First, we used the tools we did have to their full
extent to still get record breaking sums. We also made sure we were looking at things like individual accountability, and so if a specific individual executive was involved in directing or participating in the law breaking, the lawsuit can be brought not just against the company but also against the individual executive. And so we've done that in several instances where we had evidence that high level execs knew what was going on, had the ability to stop it, and didn't.
And there's been a lot of empirical work that shows that actually holding individual executives accountable is really important for deterring law breaking in the first instance. So we've done that. We've also made sure that when companies, for example, have used illegal practices to hoard people's data, that they're having to actually get rid of that data or get rid of the models that we're trained on the data. So we're actually getting remedies that make sense for today's markets.
So you file the case against Amazon? What is the case? What's going on over there? Because I know you have some history when at Yale Law School you wrote that the antitrust paradox. I believe it, like, what's the case against Amazon?
So just to step back, what we see with digital platforms in particular is that there can be a life cycle. Right initially, when a digital platform is entering the market, they're really focused on chasing scale and building up a large customer base on one side of the market, so then they can also attract a big customer base on the other end, and they want to basically achieve, you know,
the flywheel of accelerated growth in them. Mentum that, especially in digital markets, once you've kind of hit that sweet spot of sufficient scale, there can be enormous acceleration. But what we've seen is that once firms achieve that accelerated growth, and if they're successful at knocking out their arrivals, we can see a different phase kick in where the platform starts looking to milk the monopoly right, and we can see that in a few ways, the company can start
charging higher prices. Sometimes they can make service worse. Corey doctor Rowe has coined this term and shoitification around just the degradation of the services that you see. And so the lawsuit that we've brought is about Amazon as it is in this second phase, where basically we alleged they have height prices for both buyers on Amazon's platform as well as the small businesses that sell through its platform, where Amazon now collects one out of every two dollars.
We also note that Amazon has kind of cluttered its search results page with irrelevant ads as a very deliberate strategy to be able to basically milk more ad revenue from the platform even when it's not serving shoppers and serving consumers. And so we allege that Amazon's only been able to make things worse in this way for people because they've architected this anti competitive scheme to block out rivals through illegal tactics. And so that's what the lawsuit
is about. It's going to go to trial in a couple of years, and we brought it with a whole bunch of state attorneys general as well.
Lovely So some one of the core thrusts you made in your paper. Amazon's antitrust paradox is that they prioritized growth over being a profitable company. This feels like a problem across the tech firms, all of them, they all seem to be growth hungry. I feel do you feel that this is anti competitive at its core because growth doesn't seem to be about better, just seems like more.
Yeah, it's a really good question. And the antitrust laws in no way say that chasing scale or chasing growth is illegal, or even that being big is illegal. It really comes down to what are the mechanisms of chasing that growth or the mechanisms of becoming big? Right, and so in the same ways that we would recognize, hey, like going across You know, if you have a pizza shop that goes across the street and sets fire to its rival pizza shop, you know that's not fair competition.
That's an extreme example, but there are all sorts of other mechanisms that the law say are not fair means of competing, and so that's what the law does. It tries to distinguish what is fair play versus not when you're looking to, you know, compete and grow and get big. And so chasing scale and growth is not in any way by itself illegal and instead is a really kind
of core part of what incentivizes business. Is What we have seen though, is if law enforcers are not effective and are not timely, chasing growth can happen through playing fast and loose with the rules, especially if companies know that, Okay, sure I might get hit with a lawsuit in five years, but guess what, I will have hit my targets by then, I'll be the biggest firm. I'll have achieved dominance, and
so I can worry about that later. From a business perspective, it's actually better for the company to play fast and loose with the rules so that they gain that dominance and then deal with it later. That's really problematic as a mindset for law enforcement, and so that's something that we've been trying to figure out. How do we devise strategies to be much more assertive, be much more forward leaning, be much more timely, So that we're not having to do that clean up five years, ten years after.
The fact, How does the FTC have to actually tackle anti trust violators? And indeed within those shortened time scales.
So we oversee various facets of firms behavior. One is if they are looking to merge or pursue an acquisition, if it's above you know, one hundred and nineteen million dollars, it gets reported both to the FTC and to the Anti Trust Division, and we can figure out is this an anti competitive transaction? Is this basically going to reduce competition?
And then we can also look at companies business tactics, especially you know, if they've become monopolies or are kind of using their dominance in illegal ways, and so we can bring lawsuits. We can also issue rules, and we've been very active in issuing rules, including in areas like fake reviews, you know, taking on things like government impostors. We just finalized a rule taking on junk fees in
the economy. These you know, hidden fees that companies just show at the very end that you don't know what you're exactly paying for, but suddenly the price of the ticket is almost doubled and you have no choice, and so we've issued a series of rules, we've brought a series of lawsuits. We can also do various studies of the market, including in areas where things are moving very quickly.
So we a few months ago launched a study into surveillance pricing, this idea that firms could be charging every single individual a standalone price based on the data they have on you. So these are just some of the tools and authorities we have.
So let's still call official intelligence. From a regulatory perspective, what are your major concerns.
So the biggest concern for me, just right at the beginning was making sure we were making very very clear to the market that there was no AI exemption from
the laws on the books. And this can sound like a basic point, but it seemed incredibly important because we have seen, especially when new technologies come onto the market, we can see an effort by firms to say, Okay, sure you have these age old laws on the books, but this new technology is different, and that means these laws don't apply or they have to apply in dramatically
different ways. And it's really important for enforcers to hear out those arguments, you know, make sure we understand how the technologies are working, but not get so dazzled by the novelty to say, okay, well, I guess we can totally abandon our core laws and suddenly we're saying, okay, fraud is illegal, but if you do fraud with AI sometimes somehow that's okay. Right, That's not a position we want to be in.
Companies are making like that kind of argument. They were attempted to sites that, not that specifically, but they trying to dodge.
Yeah, we do see arguments that, you know, the traditional laws around unfair practices or deceptive practices applied differently. The other big thing is, you know, America has been so fortunate to be such a key home of breakthrough innovations historically, and to my mind, a key ingredient of that has been making sure we have fair competitive markets where you actually do have somebody with a great new idea, an upstart that's able to come in, that's able to fairly
compete and knock out the incumbents. That's how historically we have gotten real major technological progress in our country. And what I wanted to make sure we were being very clear eyed about is the risk of a few large dominant incumbents locking in the market in a way that shuts out a lot of that innovation and a lot of that next generation breakthrough that historically we've seen come
purely from fair competition and open markets. So it was about wanting to make sure that companies are not using their existing heft to immediately lock up the market and shut out the innovation that we should be able to see.
So, with that in mind, are you worried about the consolidation we're seeing right now in the generative AI market? Because to build these models, the foundation models like Claude three or GPT or LAMA or what have you, it requires financial heft. How do you avoid the monopoly that naturally comes out of the fact that you need billions and billions of dollars to even make one of these.
Yeah, it's a key question, and one approach that we've taken is making sure that we are actually going layer by layer in the market. Right, And so you want to understand, Okay, what's happening with chips, what's happening with
cloud and compute, what's happening with the models. You want to understand what are the key economic properties of each point in the stack and then understand, Okay, do we see this consolidation purely because they're such high fixed costs and you know, that's just going to be the state
of the market. And how do we make sure that the degree you do have dominant players in some of these layers, they're not using that dominance to then squelch out competition in a layer where you should actually be able to see more innovation, more competition. And so we're looking at, for example, some of the partnerships and investments between the big cloud providers and some of the newer firms. Famously,
you know, the Microsoft Open Ai partnership. Amazon and Google have also made some investments, and we want to understand, you know, are these truly kind of independent companies. Are these able to be independent firms in terms of the competitive decision making some of the key strategic calls when so much investment is being made. What is the structure of the contracts, What are some of the key requirements? Are there kind of interlocking director it's here in ways
that create conflicts that are problematic? Are there contractual you know, tying provisions here? So that's just the universe of what we're looking at, But of course, it's a fast moving market and we're very fortunate to have just top tier technological talent in house to be letting us push forward here.
So consolidation is a concern though in general of AI, it's.
Certainly something we have to be vigilant about to make sure that to the degree we do see you know, monopolies or firms with enormous market power, we want to make sure a that that's not being achieved through illegal tactics, or that it's not being used illegal to snuff out competition somewhere else. So that's incredibly important.
How about the training data situation, because that feels like a mixture of different parts of the government be involved, but that also feels like a massive anti competitive issue. Is this something the FTC is looking into or would have to partner with other parts of the government potentially, So.
We are looking into it. Actually, last year we convened a roundtable with creators from all sorts of different sectors. So we had you know, artists, authors, graphic designers, even people who work in fashion sharing how their core creations had actually already been scraped in many instances and suddenly they were waking up where their life's creation having been ingested by this machine and spitting out outcomes that they had never consented to and suddenly felt like they had
no control over. And so that's something we've heard a lot about. Interestingly, these creators, many of them were acknowledging that these technologies could be quite fruitful for them as well.
They're not kind of reflexively and viscerally anti AI. It's really about wanting to make sure that the terms on which their creations are being used, that those are actually fairly negotiated and it's not some type of opt out model after the fact that they actually should be able to consent, that they should actually be getting compensation that's you know, can measure it with the value of what they're getting. So that's a lot of concerns we've heard.
The FTC submitted a comment to the Copyright Office, which is considering some of these issues, kind of relaying what we had heard, and so it's certainly a live issue, and to the extent the FTC can share expertise on it, we've been looking to do that.
So Generati is being crammed into every tech product. Do you see any potential for consumer homes from this happening.
Well, generally, we've brought a set of lawsuits that fall into a few categories. One of the big categories is around this idea of AI hype. So as more and more products are adopting generative AI services, they're making oftentimes commitments or promises about what these services can actually deliver,
and sometimes we see that those claims are inflated. And so you know, for example, the FTC a few months ago brought a whole sweep of enforcement actions against for example, a company that was claiming to be the world's first robot lawyer. Do not pay, but the product fail to live up to its claims that the service could substitute for the expertise of a human lawyer. Now, don't get me wrong. To the extent that these types of services and advances can bring things like way low cost legal
services to people, that's a great thing. But just we want to make sure companies are not inflating or hyping or falsely overstating what those services can actually do. So that's been a big strain of the cases that we've brought so far in this area.
So do you see any anti competitive issues in the cloud in the compute industry in general, even outside of AI, because it really is just a few big players.
It is. Yeah, it is a relatively small number of firms. The FTC did do a inquiry here. We got a lot of comments and some of the complaints that we heard about focused on things like how easy is it to exit the cloud service and transfer your data elsewhere? And are you having to play pay these egress fees to the cloud providers in ways that inhibits, you know, switching.
We also heard just more generally about some of the software licensing practices, where some people suggested that some of the cloud providers limit their ability to use certain software in other cloud infrastructure provider environments, so that you can imagine could lead to lock in, or if one cloud provider is effectively degrading the ability to use other third party softwares on that cloud, you could see some issues there.
And then we also heard some concerns that some provisions in cloud computing contracts could be incentivizing customers to consolidate their use of cloud services to just one provider that could further hasten consolidation. More generally, we looked at this not just from the competition lens, but also from a
resiliency lens. I think we've all seen how when you have extreme centralization that can also create a lot of fragility where you have a single point of failure, right, And we've seen how if a single data of a center somewhere goes out, sometimes a corner of the Internet also goes out. And so how do we make sure we're also thinking about the resiliency element here. And then they're kind of similar data security concerns as well that we heard about.
So you've been a nonmeditorializing here attacked I would describe some of the clammiest men alive. A lot of people in bench capital and within tech have come for you. How do you deal with that? How's that affected you?
So as a general matter, you know, I focus on making sure we're hearing from Americans across the country. And sometimes it's very easy in these jobs to actually become very insulated and only hear from the people who have access us to power or kind of know you know, where to be ranting in a way that it gets to public enforcers very easily. So it's really about just making sure that you're keeping good perspective, keeping a broad
purview of who it is that we serve. So we've done listening sessions across the country, for example, going to places like Baraboo, Wisconsin or Aimes, Iowa, hearing from you know, the gig drivers that use some of these ride sharing platforms to understand what are they seeing, what is their experience.
We talk to a lot of farmers who are concerned about the ability to repair their own tractors and why there's been you know, increasing friction there and so keeping just a broader set of voices in mind as we're making our decisions, I think has been incredibly important to just keep a north star that's properly focused on, you know, the public as a whole, rather than a handful of of well resourced, well connected individuals that can sometimes have an outsized role in policy decisions.
So what do you think, what are some of the big wins? What the ones you're most proud of in your time?
Well, because of the FTC's work, Americans saw the cost of inhalers go down from hundreds of dollars just just thirty five dollars. In the digital space, you know, we've really helped set new rules of the road. I mean, one trend that we've seen is as more companies have become reliant on service based revenues, they've introduced subscriptions and become much more reliant on subscription revenue, and so we see firms make it very easy to sign up for
a subscription, but then extraordinarily difficult to cancel. We brought a whole bunch of lawsuits, including against Amazon, including against Adobe for their illegal subscription practices that were awarding Americans from being able to cancel in ways that resulted in people, you know, overpaying for months and months. We had people tell us the only way I could cancel my subscription was to cancel my credit card, right, I mean, just
deeply anti anti consumer practices. We also finalized a rule that will go into effect next year such that all companies would have to make it as easy to cancel a subscription as it is to sign up for one. We've also been very active in taking on data brokers. You know, there's been a wild wild West out there and how people's personal information is bought and sold, and we've brought a whole set of law enforcement actions when data brokers are illegally using or collecting people's health data.
People's precise geolocation data, sensitive data like browsing data. Just to make clear that the default assumption is not that all of this sensitive data can be bought and sold even if people have not affirmative given permission. We just brought the other week two cases against significant data brokers Mobile Walla and Gravy Analytics for some of their illegal
practices involving geolocation data. The Mobile Walla case was especially interesting to my mind because it involved account about real time bidding data, and there's been all this research suggesting that the online auctions of real time bidding end up exposing people sensitive data, and we brought a case noting that that exposure could be you know, and companies using the real time bidding data unlawfully is problematic. And so those have been, you know, some of the advances that we've made.
So you were confirmed with broad bipartisan support. Jadie Vance spoke fondly of you. Do you have hope that your kind of your legacy continues in some level?
Well, I can't predict what the future holds. I do know that there has been strong bipartisan support for taking on unchecked private power. That's true in technology markets. That's been especially true when it involves people's privacy, when it involves kids privacy. I think we've seen, you know, people recognize that if you're freaked out by unlawful surveillance when the government does it, you should also be freaked out by surveillance when private companies do it, because the the
you know, the line there can be quite porous. And so I do think there are a set of areas where there is strong bipartisan concern and commitment to taking on corporate law breaking, and so I hope that will continue.
All right, One last question, So right now, I would describe the mood is not great out. I think the people are feeling a little dark. Feels like the ultra wealthy are kind of gating speed and seeping into the government. What would you tell people to give them hope?
Ooof's a that's a tough one. I mean, you know, I'm a patriot, you know, I really believe in America. I think there have been moments before where the path
ahead was not clear. And one approach that I've taken to this job is there are no inevitable outcomes, right, be it in terms of how our markets evolve, be it in terms of what our government does or doesn't do, and how people in positions like at the FTC at have huge consequences for you know, whether you have markets that are premised on on check surveillance or whether you
can imagine people's data and privacy being protected right. There can sometimes be an effort to say, well, there's just this inevitable march of technological progress where outcomes are sort of already baked, and I don't believe that. I think how we use our laws, how we use our policies,
is incredibly important. A priority for me at the FTC has been to engage with the public and that's partly so that we hear from them, partly so that we share with them what we're doing, but it's also to me make sure that people know that they can hold future people at the FTC accountable as well for what decisions are not being made. So I think we've seen you know that having a strong government that's focused on protecting people is important and people should be expecting that.
Lena, thank you so much for joining me. It's been such a pleasure to have you. Thank you for doing this.
Thanks so much.
You've been listening to better Offline, Neil, You've got to name my own podcast day. Lena Khan, Chair of the FTC, thank you so much for listening. Everyone, Thank you for listening to Better Offline. The editor and composer of the Better Offline theme song is Matasowski. You can check out more of his music and audio projects at Matasowski dot com, M A T T O S O W s ki dot com. You can email me at easy at Better Offline dot com or visit offline dot com to find
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