Lina Khan Explains the Federal Trade Commission

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My guest tonight or one of the main government agencies responsible for enforcing antitrust and protecting consumers in America, please welcome to the program. Federal Trade Commission Chair Lina Khan, be lovely to see you. You run the Federal Trade Commission, the whole shebang, and you are in charge of it's protecting Themericans from monopolistic government company practices, but also dealing with pricing and things like that, protecting consumers.

That's right.

I mean, the short of it is, we want to make sure that the American public is not getting bullied or coerced in the marketplaced or tricked, and so we enforce the nation's anti trust and consumer protection laws.

And how is well?

Please, now, I just want to make kills right, right, you were not bullied or tricked into applauding now, I don't want to be accused of monopolistic How much pressure do these companies exert on the Federal Trick Commission? In other words, how much do they fight whatever regulation you're trying to put into place to keep them from becoming monopolies or from these types of business practices.

Well, look, monopolies are not fans of enforcing the anti monopoly laws, and so that type of pushback is baked in. But we have a fantastic team. We're a small agency, but we're mighty, and we play to our strengths being entrepreneurial, being strategic right, and getting real wins for the American people.

What are the companies? So these are separate things monopolies. The way I always view it was, oh, that's only one company. But don't we have oligopolies in this country? Aren't there industries? Consolidation has made it. For instance, the entertainment industry is controlled by like six companies. Is that considered not a monopoly but a problem.

Yeah.

Look, we've really focused on how are companies behaving? Are there behaving in ways that suggest they can harm their customers, harm their suppliers, harm their workers and get away with it. And that type of too big to care type approach is really what ends up signaling that a company has monopoly power because they can start mistreating you but they know you're stuck.

And what would be the metrics of that, Like, how would you how would you judge that? Because I know you've shooed Amazon, that's right, and that's for those practices.

So our law suit does allege that Amazon is a monopoly, that they've maintained that monopoly.

Through illegal practices. And look, there are a variety of ways that you.

Can show a company is a monopoly and has monopoly power. One is you can try to figure out what's the exact boundary of the market, what's the market share. But again, the most direct way is to look at how is the company behaving. And as we lay out in our complaint,

Wow.

And so those are just some of the behaviors that we point to to note that this company has monopoly power.

Is there anything in the company's leader that also suggests that, Like, for instance, if you were to go from being like sort of a nerdy dude who sold books out of a garage into let's say a jacked lex luthor type, does that also suggest either monopolistic practices or some type of injections.

You know, we haven't tried to make those arguments in court, but it would be interesting to see how a judge would respond.

I think quite favorable. How many lawyers do you like? For instance, So what are you up against? So you've got government lawyers. I'm assuming you've got a pretty good cadre. Like let's say you're going after Amazon, how many lawyers are they at?

I mean, you know, if they have monopoly money, they can buy as many lawyers as they want. I mean, the FTC is around twelve hundred employees. But when we're going up against some of these monopolistic companies. They can outmatch us, outgun us sometimes one to ten, just if you're looking at lawyers, if you're adding paralegals and support.

If you're just looking at lawyers, they outnumber you ten to one.

Sometimes they can.

Yeah, I mean, we have lawsuits against a whole bunch of big companies, and just in terms of sheer resources that they can pour into the litigation, we're pretty outgunned, but not outmatched, right, And this is where it comes to playing to your strengths being entrepreneurial.

You know.

So this isn't about just getting a fine.

This isn't about going after Amazon and saying so because this is what the SEC does. The SEC, I think is overmatched as a government ager saying you don't have to comment out that, but just.

Nod your head.

Utterly overmatched, So they go after groups and then they can't really prove it in court. So then they're like, how about this. You give us a cut of your profit and we'll all be done here. How do you handle that with Amazon? It's not just about a fine, that's right.

I think we've seen look over the last couple of decades, we've seen how businesses can treat fines just as a cost of doing business, right, and we need to make sure that we're actually deterring illegal behavior, and so that can mean naming individual executives.

We in our smol old.

Snap, you just did not go there. I like that. So have you had success with this?

We have had success with this.

I mean, we had a lawsuit against Martin Screlly a couple of years ago.

All suddenly it turned into a pro wrestling match. Here, let's go, and he went to jail. Do you do you have to refer things to the DOJ or do you have an enforcement arm?

So you're right, we don't have criminal authority. But the remedy we were able to get against Martin Screlly was to effectively ban him from doing business in the pharmaceutical industry.

Right now, I imagine that the practice that he did in the pharmaceutical industry, which was taking a life saving drug and like Jack and the price up, I don't know how many thousands of percent.

I mean, he did something crazy.

Right, How do you keep that as a normal practice in the pharmaceutical industry?

I mean, are they colluding as a group to keep prices high?

Why are we having so much trouble with them and prescription drug prices.

I mean, look, there are a whole set of reasons why for too many Americans drugs are unaffordable, right, I mean, I hear weekly monthly about American families who are having to ration life saving.

Drugs absolutely and shortages of those drugs.

Shortages of those drugs, and there can be all sort of tricks in monopolistic behavior that is leading to that. Just to give you one example, inhalers. They've been around for decades, but they still cost hundreds of dollars. So our staff took a close look, and we've realized that some of the patents that had been listed for these inhalers were improper, there were bogus, and so we sent

So it is their game life, So you, being an entrepreneurial is their game. We're going to see how far we can push this and get away with it, and do these different things in the hopes that we don't run up against an entrepreneurial or crafty FTC.

Are they waiting you out?

Look, it's possible.

But that's why you need to think about tactics that are going to be around to turn. And so one big area of focus for us is understanding what is the root cause of these problems? Right, Let's understand who is the mafia boss here rather than just going after the foot soldiers.

Right, And I think you'd probably there's probably a biblical sin in there that's probably the root cause of.

The whole thing. Right.

I want to talk about the tech companies because they are the new oligarchs, it would seem they are the companies that and you see this especially in Europe where they are fined considerable amounts of money for monopolistic practices. Or Apple just had to pay an enormous fine. Microsoft has always been found guilty of certain monopolistic practices.

When it comes along, how do.

You handle enforcement for these new, incredibly consolidated and enormous oligarchies.

So we have a lawsuit against Amazon, we have another ones against Facebook.

We what is the one against Facebook?

So that one was filed before I arrived at the agency. But basically it alleges that Facebook, when it was watching the transition from desktop to mobile, it realized it really couldn't survive in mobile, and so it ended up and buying out Instagram and WhatsApp. And the lawsuit alledges that those acquisitions were anti competitive, that they violated the anti trust laws, that instead of competing organically, Facebook instead bought its way to maintaining its monopoly.

Now why why is that considered all of this? Wouldn't they say, well, that's a sign of our success. We're so successful, we have extra money, and with that extra money, we make bets on certain companies and we turn those into successes.

So look, one key tenant of the anti monopoly laws is that you can't go out and buy one of your biggest competitors the whole, or you're.

Not allowed to do that.

You're not allowed to do that. In fact, can I.

Tell you something crazy?

So I had put in an offer for last week tonight I had come out.

Now it wasn't I don't want to tell you so.

Because it's Oliver I offered to him in the Blooms Is that what British people use. You have to make the decision then of whether or not they are cornering the market. They used to call it cornering the market, but couldn't you say, like Apple, Microsoft, they are kind of working together to corner markets now.

So look, we are investigating to understand whether some of the investments and partnerships that they're entering into right now in the AI space may in fact be giving them undue influence or giving them special privileges. If we get any hint that there is actual collusion happening in the marketplace, we take that extraordinarily seriously and won't hesitate to take action. One trend that we're especially concerned about is the way that algorithms maybe facility price fixing.

And so if you have a whole bunch of competitors in a.

Market, be at hotels, be at casinos, and they all decide they're going to outsource their pricing decision to the same algorithm, they may in effect be fixing their prices, even if they're not getting in the back room and making secret deal.

If that would be like if a hotel says, oh, you can get us on Expedia, or you can get us on Kayak or you can get us on. But all those companies are using the same algorithm. Would that mean that it flattens those prices and you are not getting the competitive advantage that you might get from those ten to fifteen apps that are searching for the cheapest hotel rooms.

Is that the idea that's right.

You may collectively see inflated prices because all of these companies are using the same algorithm, they're inputting the same data, and that algorithm is an effect allowing them to collectively raise their prices.

So Americans are having to pay more.

And it's not just pay more.

I mean you could look at a company like Walmart, where you would say, okay, they came into areas and they dominated all the competition. They didn't buy up the mom and pop shops, but because they had access to cheap labor and overseas goods and those types of things, they could undersell them and put them all out of business.

And even at that moment, they might not.

Raise their prices, but boy could they and boy could they exert their influence on supply chains, and boy could they depress wages and make sure that people, even if they're working long hours.

Still have to have social assistance. Is that something that you could go after.

Look, monopolies harm Americans in a whole bunch of ways. You're absolutely right that it's not just higher prices. It can be lower wages. It can be suppliers getting muscled out of the market or seeing their own payments drop.

It can also be shortages. I mean, we've seen over the.

Last two years baby formula, baby formula.

IV, bags, adderall adderall basic forums.

I see the audience says no use for baby formula but has an interesting predilection.

What do you do in that instance?

So, look, we want to understand are there dominant players here that are using their muscle to coerce in ways that's contributing to shortages. We've also seen historically when you concentrate production, that concentrates risk, and so a single disaster, a single contamination, a single shock can lead the entire supply to be wiped out.

I mean, the short of it is, don't put all your eggs in.

One basket, and then you guys are the ones that have to separate the eggs. It's curious to me that the government wouldn't have other methods of working with these corporations. To ask them to curb their excesses in exchange for what they get, which is the stability of the American system.

So look, we have a whole bunch of policies and laws in place that are actually designed to ensure our markets are more competitive and not as subject to these without killing innovation exactly.

That's the balance.

But forty years ago, under President Reagan, we've radically veered off course and undertook a much more hands off approach, and now we're living with the consequences of those disis.

Is industry more consolidated today? I mean, my gut would tell me it is more consolidated. You have larger companies that swallow up in the pursuit of growth, swallow up and consolidate. It feels that way to me. Do you have the metrics that suggest that that's actually the case on the.

Whole, Yes, I mean you always want to do a market by market analysis, But if you look at airlines, if you look at telecom, if you look at meat packers, if you look at huge parts of our economy across the board, you've see in huge waves.

Of mergers less competitive.

Do you go from dozens of companies just to a very small number, and again that hurts Americans and American communities in all sorts of ways and even leads to, for example, planes falling apart in the sky.

Wait, what.

Irish thought that was just I always thought that was all just DEI are you telling me? This gets us to our final point. So now they're saying this new algorithm, this new kind of machine learning model called AI, that's going to transform every aspect of American life, in the American economies. It's already being consolidated. Apple has bought thirty

I think they just I didn't think they cared for you. It is what happened. They wouldn't.

They didn't, they wouldn't let us do even that dumb thing we just did in the first Act on AI, like, what is that sensitivity? Why are they so afraid to even have these conversations out in the public sphere.

I think it just shows one of the dangers of what happens when you concentrate so much power and so

Want a monarch.

But then it took them.

I mean, it wasn't until the Sherman Act in what eighteen ninety some day? I mean, why when did they first decide? Was it the beginning of industrialization when they finally decided like, oh, we should probably put.

A halt to this.

That's right.

You'd initially had some state level laws, but the first federal anti trust law was the eighteen ninety Sherman Act, and it was absolutely a response to the industrial evolution and a lot of the power that that had concentrated.

Can we just hold on for one second? Why can you take the camera real quick? I want to take a single real quick If I can. Don't know which one, let me.

Take this one. Now that Sherman thing didn't.

I oh, came out of nowhere.

I think I might have learned that in like ninth grade?

Stuck.

Has that been updated since eighteen ninety.

So we had some follow on laws in nineteen fourteen, another follow on in the nineteen fifties, and then since then it's been a bit more sparse. So for the most part, our lawsuits are still based on those laws going back a century.

What would you posit?

What would you put forth to control this new AI technology that is looming?

And I'm not talking about censorship.

I'm not talking about government deciding you can't say that or you can't print that. I'm talking about in terms of business practices, these few companies controlling the entire mechanism.

Look, the first thing we need to do is be clear eyed that there's no AI exemption from the laws on the books.

We see sometimes.

Business says try to dazzle enforcers by saying, oh, these technologies are so new they're so different.

Let's just take a hands off approach. And that's basically what.

Ended up happening with Web two point zero. And now we're re from the consequences, and so we need to make.

Sure all of the was the Web two point zero is, you know, the rise.

Of social media, and you know, in the early two thousands, the initial set of companies that ended up innovating but ultimately becoming monopolistic, ultimately adopting business models that are premised on endlessly surveilling people.

And so and hoovering up data and creating algorithms that are clearly harmful not just to children but to political discourse. And there's it's it's pretty wild how they're able to do that, and they every now and again they get called in front of Congress and Mark Zuckerberg, you know, do I goes like like and subscribe?

You know, I don't know, but it.

Are you Are you optimistic that we will be able to catch up to this in time before something truly catastrophic happens through AI?

Well, look, there's no inevitable out come here.

We are the decision makers, and so we need to use the policy tools and levers that we have to make sure that these technologies are proceeding on a trajectory that benefit Americans and we're not subjected to all of the risks and harms.

Right, boy, would you stay forever? Because it's incredible.

I pass the way. You've got me so much. After sit Chat, Lupie.

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