Lina Khan
Appearances
Freakonomics Radio
625. The Biden Policy That Trump Hasn’t Touched
After law school, I spent some time doing more research and writing, was set to clerk for a federal judge. And then a few months before my clerkship was supposed to start, the judge I was supposed to clerk for ended up passing away.
Freakonomics Radio
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Judge Reinhart in the Ninth Circuit. So then I reshuffled my plans, ended up going to work for a federal trade commissioner, Rohit Chopra, and then ended up going to work for the House Judiciary Committee's subcommittee on antitrust. which was looking to start an investigation into the large technology companies, including Facebook, Amazon, Apple, and Google.
Freakonomics Radio
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I became part of a very small team tasked with crafting a congressional investigation. So we did an 18-month investigation, ended up publishing a report summarizing our findings and issuing a set of recommendations for how to make sure that these digital markets are competitive. After that, I was going back to academia and then had the great honor of being nominated to serve at the FTC.
Freakonomics Radio
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To state the obvious, writing a law school paper is very different than being a law enforcer, especially in digital markets. You can see a monopoly lifecycle where the set of tactics that a platform is pursuing in the early stages when it's looking to scale and achieve monopoly power is
Freakonomics Radio
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will look different than the tactics that it is deploying once it has achieved that monopoly status, has locked out its rivals, and then is in extraction mode where it's now able to exploit that monopoly power. My law review article was around the first stage, and the lawsuit ended up focusing on the practices of the second stage.
Freakonomics Radio
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The lawsuit basically alleges that Amazon, after itself achieving scale, ended up in a very concerted way pursuing tactics designed to deprive other companies of similarly enjoying that scale that you need to really compete in online commerce. It did this in a few ways.
Freakonomics Radio
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One was it engaged in what we call anti discounting practices where Amazon would basically punish any business that listed its goods for a lower price on other platforms. And it was doing this even as Amazon was steadily increasing how much it charges sellers to sell on Amazon. Amazon takes as much as one out of every two dollars from some of the sellers that rely on Amazon.
Freakonomics Radio
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Even as it is increasing prices for sellers, it punishes those sellers forever. for listing goods for a lower price, even on platforms that are taking a smaller cut. We argue that this basically inflates prices across the internet. We also allege that Amazon illegally conditions access to
Freakonomics Radio
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certain prime badge services on sellers using its fulfillment services and that that has certain anti-competitive effects. And then we also allege that Amazon used this algorithm called Project Nessie that also inflated prices across the Internet.
Freakonomics Radio
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We don't know. We can only speculate.
Freakonomics Radio
625. The Biden Policy That Trump Hasn’t Touched
Well, look, the trial is slated to go forward. It is going to trial because the FTC defeated Amazon's efforts to dismiss the case. We got a resounding win where the judge said all of these counts are plausible. I feel very optimistic, but we'll have to wait and see.
Freakonomics Radio
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It's hard to say. Part of that answer will depend on what happens with this litigation.
Freakonomics Radio
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I view the stakes here as being existential for our country.
Freakonomics Radio
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Look, we ended up having resounding success in the courts, including with cases that had not been brought previously. If you tally up our wins and losses, we actually have done better than prior administrations, even while taking bigger shots and putting together more ambitious cases. Sometimes there can be analyses that are not actually matching the facts of what happened.
Freakonomics Radio
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We only filed cases where we thought there was a law violation and where the facts matched it, but we also brought cases that were responding to the harms in the modern economy. One trend that we've seen in various sectors is this issue of private equity roll-ups.
Freakonomics Radio
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or serial acquisitions, where firms will make a whole series of acquisitions, each one of which may be small or fly beneath the radar, but in the aggregate, they may have still rolled up a market and then inflated prices. That's something that's been happening in our economy for some time, and antitrust enforcers had not addressed it.
Freakonomics Radio
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We ended up filing a lawsuit taking on some of these roll-ups in anesthesiology and ended up having a successful case there. We also defeated the company's motion to dismiss. That's going to trial. We ended up successfully blocking dozens of mergers, including getting litigated wins, including in instances where enforcers in the past candidly had failed to stop
Freakonomics Radio
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Some of this consolidation, we succeeded in blocking the Kroger Albertsons merger, which would have been the largest supermarket deal in U.S. history, despite there being a fix that the companies had proposed. Previously, enforcers had allowed some of those big grocery deals to go through and the public had really lost out.
Freakonomics Radio
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If you tally up our wins and losses, we have done better than prior administrations, even while taking bigger shots and putting together more ambitious cases.
Freakonomics Radio
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Non-compete clauses have proliferated across the economy. They started off in the boardroom, but have now expanded to cover janitors, security guards, fast food workers, gardeners, journalists, health care workers. A conservative estimate is that as many as one in every five Americans have been covered by a non-compete clause. And these clauses include
Freakonomics Radio
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can really have a devastating effect on people's lives. Materially, they can depress income, not just for the workers that are directly covered by a non-compete, but actually for workers as a whole. The idea being that
Freakonomics Radio
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If a worker is not able to change jobs, there is less opportunity and churn in labor markets as a whole in ways that can deprive even those workers that don't have a non-compete from opportunities. And that overall can really have a depressive effect on wages and income. After we put out a proposal to ban non-competes, we got 26,000 comments from people across the country.
Freakonomics Radio
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Which was really striking. I mean, people live busy lives. People are not necessarily going to prioritize sitting down and submitting a comment to some obscure federal agency. But it was clear that people felt very strongly about non-competes. And we heard some devastating stories about just how these had affected people's lives.
Freakonomics Radio
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You need to place more value on feedback and input that is actually tethered to reality and tethered to facts.
Freakonomics Radio
625. The Biden Policy That Trump Hasn’t Touched
The motivation question is a good one for the businesses that are imposing these non-compete clauses. Some of the arguments that get made at a high level is that these non-competes are in theory necessary to make sure employees are not divulging trade secrets or that Employers need these non-competes to give them an incentive to train their employees.
Freakonomics Radio
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A lot of those arguments will lose their force entirely when you're talking about certain categories of workers. But even for higher income workers, we have trade secrets laws. For the vast majority of American workers, there is no good justification for these non-compete clauses.
Freakonomics Radio
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Well, I would argue and the FTC argued that it is not legal. We brought some enforcement actions, including one case where you had security guards making close to minimum wage. The security guards were based in Michigan. Under Michigan state law, these non-competes were actually illegal. But the firm still had them in place and still tried to enforce them.
Freakonomics Radio
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We had to basically sue to make sure these non-competes got dropped. Even in states where these non-competes in theory are not enforceable, firms take a shot. Oftentimes workers, their rights are chilled because they may not know that these non-competes are not enforceable. And who's going to really want to go up against their employer and risk being thousands of dollars out of money?
Freakonomics Radio
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So we ended up bringing in enforcement action. We ended up getting an order that required the company to drop its non-compete clauses with the vast majority of the security guards. And so thousands of people were freed from non-competes.
Freakonomics Radio
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It's more of a mixed picture. After we finalized the rule, we got three legal challenges. One filed in Texas, one filed in Pennsylvania, and one filed in Florida. Each of those legal challenges came out a slightly different way. The judge in Pennsylvania said the FTC's rule was lawful. The judge in Texas said it was unlawful. And the judge in Florida came out somewhere in between the
Freakonomics Radio
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The FTC, when I was still at the agency, ended up appealing both the case in Texas and Florida. We're going to have to wait to see what happens, though you're right that for the time being, the rule is not in effect. Unfortunately, non-competes are still in place right now.
Freakonomics Radio
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I can give you a couple of examples. One is a specific merger that we blocked. This was the Sanofi Maize transaction. Sanofi had a monopoly on a drug for Pompe disease, this really horrible illness that leads to muscles atrophying. Maize was this upstart that was in the process of developing a
Freakonomics Radio
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Another treatment for Pompe disease, unlike Sanofi's treatment that required regular IV shots, Mays was working on something that could be taken orally. It had the potential for dramatically improving the lives of Pompe disease patients.
Freakonomics Radio
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The FTC argued that if Sanofi bought out maize, there was a real risk that maize's innovative treatments either wouldn't make it to market or wouldn't make it to market as quickly. Because here you have a situation where Sanofi is already enjoying monopoly profits on this drug. We worried that it wouldn't have the incentives to introduce another drug that would cannibalize its existing sales.
Freakonomics Radio
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So we filed a lawsuit seeking to block this acquisition, arguing that it would allow Sanofi to illegally monopolize this area. And the companies ended up walking away from the deal. Mays ended up then partnering with another firm that ended up having as good, if not better terms for Mays and will actually bring that drug to market even more quickly.
Freakonomics Radio
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That's right. So I think that was proof of concept of the FTC's work getting it right. I think more generally, the non-competes that ended up being dropped because of the FTC's work, that means there are thousands of workers that are now free to go start their own business or freely switch employers. The mergers that we blocked, including in the context of NVIDIA ARM,
Freakonomics Radio
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My name is Lina Khan, and until recently, I served as chair of the Federal Trade Commission.
Freakonomics Radio
625. The Biden Policy That Trump Hasn’t Touched
Ended up leading to a lot of independent success for both NVIDIA and ARM in ways that also has boosted innovation, especially at a critical moment for a lot of these artificial intelligence technologies. We've also filed a whole set of other lawsuits, including one against John Deere.
Freakonomics Radio
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for illegally restricting farmers' ability to repair their own tractors and agricultural equipment, which is something we heard a lot of concern about from farmers when they're entirely dependent on John Deere for getting their agricultural equipment fixed. It can both inflate their costs as well as lead to all sorts of devastating delays.
Freakonomics Radio
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We also filed a lawsuit against Pepsi, arguing that it was engaging in illegal discrimination in ways that was squeezing independent grocers. We filed a lawsuit against the three big pharmacy benefit managers, claiming that the rebating practices they have in place have systematically hiked the cost of insulin and
Freakonomics Radio
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And then we more generally took on these illegal patenting practices where firms would illegally list patents for certain products and components of devices, including things like the plastic cap on an inhaler. Asthma inhalers out-of-pocket costs have been hundreds of dollars, even though asthma inhalers have been around for decades.
Freakonomics Radio
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Once we called out some of these illegal patenting practices, three of the four big inhaler manufacturers announced that they would drop the out-of-pocket costs to $35.
Freakonomics Radio
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You know, that's a good question. I don't remember right off the bat.
Freakonomics Radio
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No, I think they have a lot of other lucrative lines of revenue.
Freakonomics Radio
625. The Biden Policy That Trump Hasn’t Touched
The FTC's lawsuit was actually about the market as a whole, where we found that basically these pharmacy benefit managers engage in what are known as these rebating practices, where drug manufacturers have to pay these PBMs or rebate.
Freakonomics Radio
625. The Biden Policy That Trump Hasn’t Touched
We allege that the way the PBMs have structured this whole system means that the drug companies are incentivized to ultimately raise the cost of insulin rather than compete by lowering it and that this as a whole is inflating the cost.
Freakonomics Radio
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It's a really good point and I think highlights how antitrust and competition policy have a really important role to play. But there are all sorts of other economic policy decisions that are going to affect, for example, whether the junior partner even has the ability to make that acquisition that we need to be paying attention to as well.
Freakonomics Radio
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The other thing I'll note is there are all sorts of different types of private equity business models available. But it is true that one model has been the leverage buyout where a private equity firm is using the assets of the company they're buying as collateral, loading up that company with a lot of debt.
Freakonomics Radio
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Sometimes there's the 70-30 model where the private equity firm is making 30% of the investment and then using the balance sheet of the underlying company.
Freakonomics Radio
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and taking on a lot of debt, that can weaken the underlying firm, but also incentivize the private equity owner to make a lot of short-term extractions and engineer a lot of short-term returns in ways that can undermine the quality of the business as a whole. For example, we got some submissions from ER doctors. Emergency medicine is a place where we've seen a lot of private equity incursion.
Freakonomics Radio
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They mentioned that there are all sorts of financial metrics introduced into their work. I remember hearing from one ER doctor that he was sitting with a kid and this ER doctor having to think that he didn't even have the time to commiserate with this parent because he felt such significant financial pressure to meet this quota.
Freakonomics Radio
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Yeah, happy to. It is a bit of an idiosyncratic path. I spent a lot of time in undergrad interested in journalism. I graduated right after the financial crisis. Journalism jobs are pretty hard to get. I ended up instead landing with a think tank and I worked with a group where my job was to research and document consolidation across markets.
Freakonomics Radio
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That's a really interesting idea and not something I've heard proposed before. I could imagine it could make a difference.
Freakonomics Radio
625. The Biden Policy That Trump Hasn’t Touched
The merger guidelines can sound like this arcane document, but the core of it is a roadmap for how enforcers review and assess mergers that are before them. There have been guidelines going back to 1968 and and periodically these have been updated. We undertook a process starting in late 2021 to revise these merger guidelines with a couple of goals in mind.
Freakonomics Radio
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First was wanting to make sure that these guidelines were actually reflecting the law. We had seen that in some prior instances, Enforcers had actually handicapped themselves and written guidelines with very cramped or sometimes just inaccurate expressions of what the law really was, which we thought was not being faithful to Congress or the courts.
Freakonomics Radio
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We also wanted to make sure these guidelines were up to date and reflecting the realities of the 21st century economy. We wanted to make sure they were addressing things like digital markets and platforms. We wanted to make sure they were addressing labor markets, which had been a big blind spot in the past, and issues like serial acquisitions.
Freakonomics Radio
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And then we wanted to make sure that we were hearing from a broad set of market participants. Antitrust in recent decades has been quite insular You'll hear from very smart and accomplished experts, but the broader public as a whole has often been neglected. We wanted to change that and ended up getting thousands upon thousands of comments from the public.
Freakonomics Radio
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A lot of health care workers participated, including doctors, nurses, people who had seen their field and their practice change based on increasing consolidation. We heard from farmers. We heard from musicians, heard from teachers, ordinary Americans who don't spend their days practicing antitrust law, but whose life has shown them that
Freakonomics Radio
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Whether markets are extremely consolidated and monopolized or whether they're open and competitive makes a real difference.
Freakonomics Radio
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industry spans a broad set of market actors. We heard from a lot of small businesses, including independent pharmacists, independent grocers. We heard a lot from entrepreneurs and startups and founders who have seen that when you have these big gatekeepers that can shut them out of the market, that can have real problems.
Freakonomics Radio
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So even within industry and the business community, we heard a lot of interest in favor of stronger antitrust. Of course, we did also hear from existing monopolists and incumbents and dominant firms who would prefer that antitrust enforcement be quite weak.
Freakonomics Radio
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The goal of the guidelines is really to provide clarity to the public about how it is that enforcers will look at mergers and analyze them. On the deterrence question, of course, as a law enforcer, you don't want illegal behavior happening. to occur in the first instance. So if through that type of guidance, you are deterring illegal mergers, that is a net good.
Freakonomics Radio
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That's right. I had to do these deep dives into all sorts of sectors, be it book publishing or airlines or all sorts of commodity markets. And I started to get a picture of... Decades of consolidation in market after market where we had gone from dozens of competitors to increasingly a small number of firms in each sector.
Freakonomics Radio
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In terms of how you measure deterrence, it's a good question. I don't think it's a precise science. But over the years, when I was serving at the FTC, we got some data points like what senior dealmakers would be saying around how Several years ago, when they were counseling clients, they wouldn't really talk about antitrust until the very, very end of the discussion.
Freakonomics Radio
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Whereas over the last couple of years, antitrust was up front and center right at the beginning. We also heard from dealmakers and senior executives about how certain deals that were initially being discussed ended up not being proposed because there was a recognition that the legal risk was too high.
Freakonomics Radio
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We also saw deals where once they were proposed and the FTC started investigating, the firms ended up abandoning. There was a practice in the past where firms sometimes recognized that there was significant legal risk, but would kind of roll the dice and say, well, maybe enforcers will look the other way or maybe they'll miss it.
Freakonomics Radio
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Once we started taking a closer look and a more stringent approach, some of those deals abandoned as well.
Freakonomics Radio
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What we heard from startups and founders was that they wanted a chance to compete. When you have markets where the only option is to be bought up, that's not giving founders the opportunity to really scale organically. I think the story is a bit more textured here.
Freakonomics Radio
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I personally am not that surprised, in part because issues around antitrust and anti-monopoly have had a strong bipartisan current in recent years. Some of the initial lawsuits that were filed against large technology companies, including Facebook and Google, actually were initiated during the first Trump administration.
Freakonomics Radio
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It's too early to say what the big picture is going to look like in terms of whether we're going to continue to see strong enforcement. Of course, seeing other law enforcers be dismantled, including the Consumer Financial Protection Bureau, is quite troubling. But of course, the fact that at this stage,
Freakonomics Radio
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It's clear there is bipartisan support for strong merger guidelines that's going to protect more Americans from consolidation and monopolization. I think we can have some cautious optimism on that small front, even as we're going to have to wait and see what happens more generally.
Freakonomics Radio
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My job was to both document that that had happened and also document what the effects had been.
Freakonomics Radio
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That's a good question. One industry that I actually came to learn about, it was a market for basically ugly produce. I don't know how else to put it. Produce that is seen as not being attractive enough for supermarket shelves. And then it gets sent off to certain other markets.
Freakonomics Radio
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And I remember there was a merger being reviewed that was focused on that market that actually was more consolidated than I expected.
Freakonomics Radio
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Constructive engagement is always valuable, but you also have to be able to separate that from some of the hysteria.
Freakonomics Radio
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I think from a young age, I was really struck by journalists and the efforts that they undertake to hold power to account, both powerful corporations as well as powerful actors in government, especially growing up after September 11th and seeing the incredible important role that journalists were playing then really made a big impression on me.
Freakonomics Radio
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That's right. This was around 2010, 2011. There was a national conversation around economic inequality more generally, but there was not any real conversation around industry consolidation or concentration. If you went to some type of social gathering and you said, I research market consolidation and antitrust, people's eyes would tend to glaze over.
Freakonomics Radio
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you know, I'm a public servant, I serve the public. So it's absolutely important for me to be soliciting and getting feedback and input and understanding what the public response is. But of course, you need to place more value on feedback and input that is actually tethered to reality and tethered to facts.
Freakonomics Radio
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Good faith, constructive engagement is always valuable, but you also have to be able to separate that from the hysteria.
Freakonomics Radio
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I was surprised sometimes by just the factual errors. I think it does go back to this basic issue of economic reality versus theoretical assumptions that are just out of date.
Freakonomics Radio
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I think the fact that this work has gotten so much traction so quickly was entirely because it was on the side of reality. The antitrust enforcement model that had been followed for 40 years had failed to keep markets open and fair and competitive. And so it was really empiricism that drove this work forward.
Freakonomics Radio
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Well, let me say, first of all, the FTC is really fortunate to have extraordinarily hardworking, talented career civil servants that are being pitted up against some of the largest, most powerful companies in our country. My hat's off to them in terms of the grit and commitment that they bring every day.
Freakonomics Radio
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Stepping back, my arrival, understandably, I think, was received by some as some type of indictment of the agency. I had been on the outside a critic of the FTC, arguing that both the FTC and the DOJ had gotten things wrong, had taken decisions that ended up resulting in real harm to the American people.
Freakonomics Radio
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Those criticisms were really directed at political leadership, the people that are calling the shots. Understandably, there was some questioning about what my criticisms were really about. This was also a moment where you had the president say that the last 40 years of competition policy had gone astray.
Freakonomics Radio
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So these are people who were saying, look, I've been doing my job every day as a dedicated civil servant, and now I'm being told that I've been doing it all wrong.
Freakonomics Radio
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Well, there are all sorts of different factors that drive people to public service. For the most part, they want to serve their fellow Americans. It was more about the antitrust enterprise as a whole, the ways that the law had drifted, what type of analysis the law was privileging rather than any specific person or groups of people.
Freakonomics Radio
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So my job was to document consolidation and the effects of it. This really gave me a tour of all sorts of sectors across the U.S. economy.
Freakonomics Radio
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We wanted, first of all, just to make sure we had the teams that we needed to pursue some of these litigations. I mean, the agency was actually smaller than it had been in the 1970s, especially when we got a budget increase. We did hire more people, including very talented litigators. We also wanted to make sure that the way we were looking at markets was
Freakonomics Radio
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was actually reflecting the reality on the ground. And that meant broadening the type of skill sets that we had. We were not just hiring industrial organization economists, but also labor economists, accountants, people who had slightly different skill sets that would be able to give us a more 360 view. We also started a new office of technologists.
Freakonomics Radio
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wanting to make sure that we had data scientists and data engineers and AI experts, especially as more and more markets digitize. We need people who can sit alongside the economists and the lawyers and explain how are these algorithms actually working.
Freakonomics Radio
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It's hard to know. Obviously, across government, there's a lot of disruptive efforts right now that are resulting in a lot of people being laid off and let go. So it's too early to say. I will say the new administration has talked a lot about the importance of making sure our technology markets and digital markets are open and fair and competitive.
Freakonomics Radio
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I spent a lot of time understanding how the chicken farming industry works today and learned that you have tens of thousands of chicken farmers on one side, millions of consumers on the other, and they're all connected by a very small number of these chicken processing companies. The effects of that and the big picture have been that consumers are paying more even as farmers are earning less.
Freakonomics Radio
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If you are gutting the FTC by eliminating technologists and eliminating the litigating teams that are supposed to be pursuing these cases, that's going to really handicap your ability.
Freakonomics Radio
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I really loved getting to hear from people who had an issue that they thought the FTC should be focusing on. I had the chance to do a lot of listening sessions across the country. I went to Ames, Iowa to hear from farmers that were worried about this particular fertilizer merger, heard from pharmacists in Kansas City.
Freakonomics Radio
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Those types of engagements were really important in keeping me focused and underscoring the ways that Seemingly arcane agencies like the FTC have a lot of opportunity to make a real difference in people's lives.
Freakonomics Radio
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Sometimes it can take longer to get things done than is optimal. We certainly streamlined certain processes and tried to eliminate red tape. But I think there's just more of that that could be done. Of course, there's a lot of baked in pushback from monopolists and dominant firms.
Freakonomics Radio
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I have zero comparative advantage in terms of weighing in on this. I'm kind of a policy nerd, but I don't really have much to add when it comes to some of the political analysis here.
Freakonomics Radio
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Americans certainly worry that government is not always serving their best interests because large corporations have too much influence. We see that concern expressed in all sorts of ways, including concern about the role of money in elections. But I think there are all sorts of subtle ways beyond just how much money large wealthy entities can pour into elections. Intellectual capture can occur.
Freakonomics Radio
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We see it through a lot of the funding of research. And then what kinds of research is even made available to regulators and enforcers? There can be all sorts of ways that the information environment in which enforcers and regulators are operating is already skewed by those well-heeled interests.
Freakonomics Radio
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Thank you so much. This is important for people materially, but these issues also go to the core values of our country. The lawmakers who initially passed the antitrust laws viewed them as being a key safeguard against the concentration of power, that in the same way we needed checks and balances in our government to protect against the exercise of arbitrary power.
Freakonomics Radio
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That got me really interested in the antitrust laws, which were passed over a century ago, designed to keep markets open and competitive. I was really struck by how we had, on the one hand, a set of laws designed to keep markets open and competitive. And yet on the other, we had seen just wholesale consolidation and a drift away from markets that were open and competitive.
Freakonomics Radio
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There was a view that the antitrust and anti-monopoly laws would play a similar role in our economic and commercial sphere. So I view the stakes here as being enormous, as being existential for our country. And I'm really committed to continuing to work on these issues and whatever opportunity I have.
Freakonomics Radio
625. The Biden Policy That Trump Hasn’t Touched
Yeah, exactly. I had been on leave and I'm back at the law school.
Freakonomics Radio
625. The Biden Policy That Trump Hasn’t Touched
For now, just continuing to build out this work, there is a lot of enthusiasm and interest among law students and young people in general. Of course, it was a great honor to serve. And if there was another opportunity, that's, of course, something I would be open to.
Freakonomics Radio
625. The Biden Policy That Trump Hasn’t Touched
I mean, you know, that was a hypothetical, but my term ended up expiring in September. President Trump ended up nominating somebody new to fill my seat. So I, you know, had a great time getting to work alongside Andrew Ferguson when he was a commissioner and I was chair. And I do think it's important for people to serve.
Freakonomics Radio
625. The Biden Policy That Trump Hasn’t Touched
And the FTC historically has had bipartisan commissioners that have continued to serve across administrations.
Freakonomics Radio
625. The Biden Policy That Trump Hasn’t Touched
I'm a great admirer of Senator Sanders. He was a strong supporter of the FTC's work. There is a real concern that very well-heeled interests in this country are wielding enormous, not just economic power, but political power. And the antitrust and anti-monopoly laws were supposed to be a bulwark against that. I leave it to the elected officials to do what they do best.
Freakonomics Radio
625. The Biden Policy That Trump Hasn’t Touched
But of course, I'm happy to support that work however I can.
Freakonomics Radio
625. The Biden Policy That Trump Hasn’t Touched
And I was really intrigued by how this had happened. That, in turn, got me interested in the history of the antitrust laws.
Freakonomics Radio
625. The Biden Policy That Trump Hasn’t Touched
So at the federal level, the first antitrust laws trace back to 1890. This was when the Sherman Antitrust Act was passed, and it was passed against the backdrop of the Industrial Revolution, which had delivered transformative advances across the country, but it also consolidated a lot of wealth and power.
Freakonomics Radio
625. The Biden Policy That Trump Hasn’t Touched
Some of those most affected by this consolidation were farmers and entrepreneurs and small proprietors, especially when it came to the railroads. The railroads had transformed the country. You could suddenly transport your wares nationally. Farmers and others had access to national markets.
Freakonomics Radio
625. The Biden Policy That Trump Hasn’t Touched
There were enormous benefits, but it also meant that farmers and others were extraordinarily dependent on a very small number of companies, sometimes just a single company, the railroad that controlled the rails going through their town. And farmers recognize that this concentration of power could be abused.
Freakonomics Radio
625. The Biden Policy That Trump Hasn’t Touched
You had the railroads effectively picking winners and losers and whether a farmer did well or whether his business sank could just be up to this single railroad. We had discriminatory pricing, arbitrary pricing.
Freakonomics Radio
625. The Biden Policy That Trump Hasn’t Touched
So a lot of the frustrations that farmers felt ended up being channeled towards both the Interstate Commerce Act, which ended up regulating the railroads, as well as the Sherman Antitrust Act, which broadly prohibited certain forms of monopolization and illegal restraints of trade. Those laws were enforced, but it became clear pretty quickly that there were some major gaps there.
Freakonomics Radio
625. The Biden Policy That Trump Hasn’t Touched
So then in 1914, Congress passed two additional antitrust laws, the Clayton Antitrust Act, which prohibited mergers and acquisitions that may lessen competition, as well as the Federal Trade Commission Act, which created the FTC, prohibited unfair methods of competition more generally, and then
Freakonomics Radio
625. The Biden Policy That Trump Hasn’t Touched
you had over the decades different levels of activity in terms of vigor from the antitrust agencies, but broadly an approach to competition that was very focused on wanting to make sure that the market was competitive from a more structural perspective. During the New Deal, you had these two different moments.
Freakonomics Radio
625. The Biden Policy That Trump Hasn’t Touched
At one point, a more hands-off approach, and then you had the second New Deal period where where enforcers really doubled down. And then starting in the late 70s and 80s, there was this wholesale revolution where we as a country radically reoriented how we were enforcing these laws that in good part led to this consolidation.
Freakonomics Radio
625. The Biden Policy That Trump Hasn’t Touched
When I started looking at what happened in the 70s and 80s, I was struck by just how radical it was. There were certain economic assumptions that drove that change and certain ideological assumptions that drove it. There was a view that the best thing for the government to do was to get out of the way. The
Freakonomics Radio
625. The Biden Policy That Trump Hasn’t Touched
You know, monopoly power and market power in the economy is rare, but if it is ever to come about and if firms try to abuse their monopoly power, the theory went that that monopoly power would be disciplined by this rush of new entrants that would come in and limit the ability of that monopolist to exercise its power.
Freakonomics Radio
625. The Biden Policy That Trump Hasn’t Touched
And so it was better for government to err on the side of under-enforcement than over-enforcement, which could chill innovation.
Freakonomics Radio
625. The Biden Policy That Trump Hasn’t Touched
I think it was primarily driven by theories of how markets work that ended up being pretty divorced from the reality on the ground. This hands-off approach assumed that markets were more likely to self-correct, and that had bipartisan staying power.
Freakonomics Radio
625. The Biden Policy That Trump Hasn’t Touched
It was ushered in initially by the Reagan administration, but then continued by the Clinton administration and the Bush administration, and then in good part by the Obama administration. Unfortunately, the last 40 years have been a natural experiment premised on those theories. And now we have more and more empirical evidence that I think rebuts those.
Freakonomics Radio
625. The Biden Policy That Trump Hasn’t Touched
that significant consolidation can result in market power and monopoly power that firms can exercise without it immediately being disciplined in the market. And instead, what you can have is persistent monopoly power that firms can use to charge people more, reduce innovation, reduce quality. There are papers looking at markups
Freakonomics Radio
625. The Biden Policy That Trump Hasn’t Touched
beyond marginal cost, finding that in the 80s, on average, it was around 20% the markup, and now it's as high as 60%. I think one of the theories that has been rebutted is this idea that monopoly power is rare and fleeting, and if it does ever come to be exercised, it will be immediately corrected by the market. It was a kind of multi-decade consensus.
Freakonomics Radio
625. The Biden Policy That Trump Hasn’t Touched
And that consensus started to break during the first Trump administration and then further during this last Biden administration.
Freakonomics Radio
625. The Biden Policy That Trump Hasn’t Touched
I decided to both apply to law school and to apply to journalism jobs and ended up choosing between going to become a beat reporter at the Wall Street Journal or going to law school. Ended up going to law school and really tried to structure my time there by taking classes focused on the areas of the law that are shaping and structuring corporate power.
Freakonomics Radio
625. The Biden Policy That Trump Hasn’t Touched
That includes antitrust, but it also includes things like trade law or even First Amendment law. which firms had increasingly been using to try to strike down regulations. While I was in law school, I ended up using some of the research I had done around e-commerce and Amazon to write a law review article using Amazon as a vehicle to tell a broader story about the shift in antitrust law.
Freakonomics Radio
625. The Biden Policy That Trump Hasn’t Touched
Ended up publishing that, and there was a broader conversation around all of these issues.
Freakonomics Radio
625. The Biden Policy That Trump Hasn’t Touched
You know, I had just been in law school trying to get this paper out. I was impressed and surprised that anybody was reading it, let alone that it had caught some broader attention. But the background conversation was a growing recognition of the fact that market after market had become so much more consolidated and that antitrust was in need of a reboot.
Freakonomics Radio
625. The Biden Policy That Trump Hasn’t Touched
Yes, that is one of the paradoxes. To further add to that, there's a line in the paper that talks about how Amazon has actually marched towards becoming a monopoly by singing the tune of contemporary antitrust. It wasn't just that it had escaped scrutiny, but it had actually pursued its strategy in a way that was landing squarely in the very blind spots that had emerged in antitrust.
Freakonomics Radio
625. The Biden Policy That Trump Hasn’t Touched
Thank you so much for having me. Amazon, at least rhetorically, its strategy was very much focused around doing what's best for the consumer. When enforcers were looking at that through just a short term lens, I argued that they were missing some of the broader harms that were emerging.
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So one of my jobs after college was as a researcher and reporter where I was basically doing deep dives into various markets across the U.S. economy.
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And so I would do deep research into chicken farming, the aluminum market, rental cars, book publishing, and really document the ways that market after market had become so much more consolidated and how there were real gaps between how antitrust enforcers were thinking about market power and consolidation and what was really happening on the ground for everyday people.
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One of the last areas that I started looking into before I went to law school was online commerce. And I spent several months talking to two sets of market participants about how they viewed Amazon in particular. One was the set of businesses that were selling through Amazon, and the other was investors and financial analysts and people who were viewing Amazon through a more long-term proposition.
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And it became clear just through those conversations that Amazon was amassing structural power in the marketplace that was not being cognized through the antitrust prism that enforcers were using at that time, where there was, you know, a very charitable view of Amazon where, you know, people thought, well, its prices are generally low and so therefore it must be good for competition. Right.
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not fully tracking the business practices that Amazon was using to establish real structural dominance in the marketplace, both predation, predatory pricing, as you were noting, as well as vertical integration in various parts of the market that allowed them to then exploit certain conflicts of interest and certain information asymmetries.
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But I really wrote the article and really focused on Amazon more as a way to tell a broader story about the evolution in antitrust and this major reorientation and pivot that happened in the late 70s and early 80s that I believed had departed from what Congress intended when it wrote these laws, departed from what the laws actually said, and now was also creating major blind spots for
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Between how enforcers and potentially even courts were understanding what monopoly power looked like and how it was actually being exercised. And that that blind spot was especially acute in digital markets where you just have a different set of economic dynamics. And so that's really what the article was looking to set out.
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Well, chasing growth over profits is not illegal. Companies do it all the time, especially in digital markets, given the real premium of establishing scale, establishing the network effects, establishing the entry barriers that really pay off. It was specific practices that Amazon engaged in that ultimately the FTC and a whole bunch of state AGs determined were illegal practices.
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You know, I think the predatory campaign that we saw from Amazon against a whole set of companies, including diapers.com, clearly could have been in that bucket. The Supreme Court jurisprudence has come to take a much more skeptical view of what counts as predation. You know, they view predation itself as irrational and unlikely to ever exist.
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So practically, it's become very difficult to bring a predatory pricing case forward. But the lawsuit that the FTC ended up filing in 2023 laid out a whole set of business tactics where Amazon had not just become big, but they had actively blocked out competitors, which has now allowed them to actually make money.
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things worse for their customers, both the businesses that sell through Amazon as well the consumers. The complaint details some of these practices. For example, Amazon had a policy that basically punished any business for listing a lower price on a website other than Amazon.
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And it was doing this at the same time that it was dramatically hiking the fees that a business had to pay to sell through Amazon. So say you're selling coffee mugs and selling them for $10. And on Amazon's website, you have to pay Amazon $5 for every $10 you make. There's a rival website where you only have to pay that company $2 for every $10 you make.
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And you want to list your mugs for a lower price on that other website because it's cheaper to sell there. If you did that, Amazon could make you disappear from its web page or it could punish you in all sorts of ways. And that really matters for businesses because they rely on Amazon for so much volume, for so many sales.
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And it was these types of practices that basically blocked out rivals, kept rivals from ever being able to achieve the same scale and momentum forever. to really become a meaningful competitor to Amazon. Amazon does now take up to one out of every $2 from businesses who sell through it. We also uncovered a whole set of pricing practices that have been inflating how much customers pay.
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It was very deliberately littering its search page with irrelevant ads. And we uncovered documents from top executives saying basically, Yes, you could make search results worse for consumers because basically we know they don't have anywhere else to go.
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So, you know, the complaint details a whole set of specific practices that are different from just taking a long-term view or chasing growth over profits. But specific anti-competitive acts that we believe ultimately violated the law and have made Americans worse off.
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So I'll answer this in two ways. One is, you know, I think especially in digital markets, there's actually a lifecycle of being a monopolist and exploiting your monopoly power. And phase one is when you are achieving and chasing scale. And the goal at that moment is really to bring on as many sellers and as many buyers onto your marketplace as you can.
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And in that mode, your incentives are to oftentimes make your service really great for both the sellers and the buyers. And even if that's done in the goal of achieving dominance that you may later exploit, you Mode two is once you've achieved that structural power and coupled that with tactics that are blocking competitors from the market, then you can make things worse.
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And you can make things worse, yes, through higher prices, but also through coercion and bullying. And a lot of the businesses and the market participants that the FTC heard from did allege all sorts of bullying tactics, candidly, as well as customer service for them getting worse. Antitrust is not about identifying some absolute price levels that we think are good or bad.
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It's really about competition. The assumption is that competition in markets is really what's going to drive firms to make products better for people and really innovate. And that's been a key driver of America's growth and our innovation as a country. And what Amazon did when it blocked out those competitors was interfered with that free enterprise system and with that competitive process.
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The lawsuit actually does allege that people are paying more because of this. And, you You could have more innovative, say, interfaces. You could have search results that are not cluttered with irrelevant ads. And so this is more about the alternatives that were foregone and lost because of Amazon's anti-competitive tactics. And it can be difficult concretely to point to those counterfactuals.
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And Amazon's case is interesting, and the lawsuit actually points to other rivals that were on the cusp of taking off that could have taken off, but for Amazon's tactics. So it's really about what could have been and how things could have been even better for Americans with more competition.
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Well, the innovator is going to need to know that if they produce something that is better, they actually have a chance of reaping the rewards of that innovation. And that's what can get distorted when you have a monopolist that's running amok, that these monopolists often have all sorts of levers involved. that they can deploy to cut out that innovator from the market.
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And that's what antitrust is about policing. And if you don't have antitrust enforcers policing that, then that innovator may have that idea, but may not think it's worth it, right? Why take on the big investment? Why take on the risk if ultimately you're just gonna get locked out of the market?
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And at the FTC, I would frequently talk to startups, talk to founders, and we would hear them grappling with this time after time. You know, we would hear from, say, founders that were creating various types of apps that were needing to get access to the App Store on, say, Apple or Google's devices. They would have to navigate all sorts of bureaucracy.
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Sometimes there would be a conflict of interest if, say, one of these companies had their own app that they wanted to favor. And that would just create all sorts of problems for these innovators that were trying to get access to market. Similarly, you know, this is something that we see in merger enforcement. So one of the mergers that the FTC blocked was Sanofi's attempted acquisition of Mays.
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Sanofi is a major player in the pharmaceutical market, and they had been given an FDA-granted monopoly on treatments for Pompe disease. This is a really awful disease where basically your muscles degenerate. It exhibits in young kids, and you need pretty expensive medicines. Maize was coming into the market and they had an alternative treatment for this same disease.
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And whereas Sanofi's treatment required basically going and getting hooked up to an IV biweekly, Maize's treatment could have been taken orally ultimately and could have really been a game changer. And this was really good, healthy competition, right? This is the kind of competition, the kind of innovation that we expect to see in our markets. And Sanofi was trying to buy out Maize.
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And we thought that that was anti-competitive, that that clearly violated the antitrust laws, because here you had the existing monopolist that had not innovated this treatment and they were trying to buy out the company that had.
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And it would not really have the same incentive, right, because it would risk cannibalizing its own sales, maybe would slow down this alternative treatment or bring it out in a way that was much more favorable to it, but not its patients.
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Anti-competitive conduct, but also anti-competitive mergers is absolutely critical to make sure that the people who have an incentive to innovate actually have access to markets. And then ultimately, it's the public that gets to benefit from that innovation.
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Well, this is exactly the argument that the Chicago people made. They basically said that, look, monopolies are unlikely to ever be able to fully exercise monopoly power because there's so much competition in markets.
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But say even if they do, once they start exploiting that monopoly power, they are ultimately going to be disciplined in the market because you are going to see these new entrants that come in. You're going to see new innovations that displace them.
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There's just been reams of evidence over the last few decades that have shown that that's not actually how markets work in reality, that oftentimes there are actually meaningful barriers to entry in those markets, some of which are controlled by the existing monopolist. I think the other thing is,
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Even if, say, after 20 years of incumbency, a monopolist could ultimately lose its throne because there is some innovator in the market, that could have happened much sooner if the monopolist's illegal tactics were checked. And as enforcers, we have an obligation to ensure that the public is not being denied those benefits of a free enterprise system of competitive markets.
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It's been pretty low key. It's been quiet. It's been, you know, obviously I wish we'd had more time in government, but it's been nice. I have a two-year-old, so it's been pleasant to just get to be around more.
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while we sit on the sidelines and just see, hey, maybe it'll be a few decades and this monopolist will naturally meet its end.
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Well, you do see companies that enjoy monopoly status because, for example, they've been given a license from the government. So you see this in the pharma space routinely. You see this in areas like utilities where firms are given certain privileges or certain exemptions or certain licenses to operate. And you see kind of a very active market making role by the government in that instance.
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Those are monopolies that are clearly sanctioned and oftentimes that comes with other obligations or other prohibitions on their behavior that's supposed to act as the check that competition will not be serving in that instance.
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Yeah, and maybe that's an interesting question or thought experiment. I mean, as an enforcer, that's not something you need to have a view on because the law doesn't, you know, say being a monopoly itself is illegal. It's only when it's attached with certain types of monopolistic behaviors that the law kicks in.
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I'll be teaching antitrust law in the fall to law students, and my son has picked up on a lot of ambient meeting noise and that sort of thing.
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Well, I think one charge that would sometimes get levied at the FTC was that the FTC was somehow categorically antagonistic to corporate America or somehow it was anti-business, which was really surprising to me because oftentimes some of the biggest supporters of the FTC's antitrust work was the business community. And I think sometimes in D.C.
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there can be this tendency to view business as a monolith, not recognizing that, say, you know, the Fortune 100 or even the Fortune 500 are not representative of the full panoply of businesses in America.
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And so we would hear a lot of concerns from, say, independent grocers or independent pharmacists or startups and founders, really people who make up the majority of businesses in America, about how they too often felt like they were not facing a level playing field.
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that they were really struggling to compete because of the potentially predatory or coercive of abusive tactics of some of the existing incumbents.
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And so that was a disconnect that I worried sometimes was not appreciated, especially in kind of some of how the FTC was discussed or portrayed, that that strong support among businesses, both for our antitrust work, but also candidly for our consumer protection work, One example here is the FTC's work taking on Made in USA fraud. Made in USA fraud had been rampant.
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This was an area where the FTC had been keeping some of its powder dry, really not using the full set of tools. That it had to disincentivize companies from lying about their products being made in America. And this really hurt consumers who were being deceived about whether products were being made. But it also really hurt honest businesses, right?
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I think he is working on physical tying right now, but I'm sure we'll get there.
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If you're a business that wants to produce in America, you're investing in a factory here, you're taking on the additional costs of doing that. If you're then ultimately just going to lose business to a company that's shipping stuff from China or somewhere else and then just slapping a made in USA label, that's unfair.
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And so that was just one example of how the FTC's work was really about creating a level playing field in ways that benefited consumers and workers, but also honest businesses.
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Well, the president's firing of Commissioner Bedoya and Commissioner Slaughter is directly and clearly in contravention of prevailing Supreme Court precedent. And Humphrey's executor, you had FDR fire an FTC commissioner. And ultimately, that FTC commissioner sued and said, hey, look, the FTC Act says we can only be fired for fraud.
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malfeasance, inefficiency, neglect of duty, none of those things being charged here. And ultimately, the Supreme Court held that those removal protections in the FTC Act were lawful, were legal. Since then, the Supreme Court has had several
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opportunities to revisit Humphrey's executor, including cases implicating the CFPB and the removal protections of the CFPB director, which ultimately were changed. And the court has stuck by Humphrey's executor, no matter what kind of dicta they may have been in various types of footnotes. So
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The law of the land is Humphrey's executor, and the administration's decision to fire these two commissioners is clearly at odds with that. I know they have filed suit. They are contesting their firing. There are also some parallel cases involving the firing of NLRB commissioners. So we're going to have to see how this shakes out.
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But there's no debate around the fact that Humphrey's executor of the law of the land says one thing and the administration has done another.
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I don't know. I mean, you know, clearly this Roe v. Wade was a law of the land for a while.
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Yeah. The Supreme Court is very confident, comfortable revisiting precedent and, you know, throwing out the window, even a 90 year old precedent in this sort of way. So I don't know. I don't know what's going to happen. I do think there are strong arguments for why these removal protections are not only good, but but lawful. But we'll have to see what happens.
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You know, the current FTC, as well as the antitrust division, has continued with several of the initiatives that we had pursued on the antitrust front. You know, we had promulgated new merger guidelines, for example, that laid out a more rigorous strategy. to viewing whether a merger would violate the Clayton Act.
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They had kept those on the books despite a lot of speculation from the deal-making community that those would be rescinded right away. We have major lawsuits against not just Amazon but also Facebook. There's a current trial underway. There was a lot of speculation as well as reporting that Mark Zuckerberg was involved
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trying to convince the administration to pull the suit, to settle the suit on the eve of trial. They did not do that. They are still litigating that case. So again, we are seeing a whole bunch of continuity. I do worry about the consumer protection side. That is where we have seen some real retrenchment.
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And I do worry that we're going to see people suffer all sorts of unfair deceptive practices if this FTC becomes much less vigilant. For example, they just decided to delay a rule that was set to go into effect last week.
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This is a rule that would require that companies make it as easy to cancel a subscription as it is to sign up for one, taking issue with a lot of these unfair and deceptive subscription traps that have proliferated. We had finalized this rule last October.
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The rule was set to go into effect last week, and then they just announced on the eve of it that they were going to delay it by another two months. I don't know what's going on there, and we'll have to kind of monitor closely to make sure we don't see further retrenchment there too.
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Well, I'm figuring out what is the next phase of a lot of this work and movement. The speed with which a lot of this work went from kind of reformist ideas on the outside to being given the opportunity to govern was breathtakingly fast. So there is actually still a lot of work and infrastructure to be built.
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One thing that I'm really excited about is just the enormous amount of energy and enthusiasm among young people for this work.
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I get dozens of emails weekly about even from high schoolers who say they want to be a trust buster and are studying Ida Tarbell, let alone from college students and law students who really want to enter the arena and make sure we're using the laws to take on illegal monopolies and check unfair methods of competition.
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And so I'm going to be figuring out how do we make sure we can fully harness and direct that energy so that if there is another opportunity, we have a real standing army to kind of be ready to come in and help with that.
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Monopoly Isn't A Game (with Lina Khan) - Stay Tuned with Preet
Not deliberately, but- Oh my gosh, this is on your brain.
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Monopoly Isn't A Game (with Lina Khan) - Stay Tuned with Preet
In order to be able to exploit your monopoly power in Mode 2, you need to figure out how to keep out competitors, right?
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Monopoly Isn't A Game (with Lina Khan) - Stay Tuned with Preet
Well, they all profess to support for the work we were doing at the FTC and have shared real skepticism about extreme concentrations of economic power and monopoly power. So that is a through line that we've seen across people who otherwise have very different politics.
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Monopoly Isn't A Game (with Lina Khan) - Stay Tuned with Preet
Historically, we've seen pretty significant bipartisan support for antitrust, and that's gone in multiple directions. You know, Senator Sherman, who was one of the authors of the Sherman Act, was Republican. We saw, especially in the early decades of federal enforcement, strong support from both sides to take on the trusts, take on the robber barons. And as we then
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in the 80s saw a reversion from aggressive antitrust, there eventually was another bipartisan consensus, a bipartisan consensus around, you know, the view that we should be enforcing the law with a very different set of goals and values. And so we have seen significant bipartisan consensus on different sides of how you should be doing antitrust.
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Monopoly Isn't A Game (with Lina Khan) - Stay Tuned with Preet
It's an interesting question because it's too early to know what the full policy of the Trump administration is going to be on antitrust. One question for me when I was there was how long will we have? Because the last time we had seen such a sharp pivot in antitrust was during the Reagan years where we saw radical reorientation of how they approached antitrust. anti-trust laws.
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Monopoly Isn't A Game (with Lina Khan) - Stay Tuned with Preet
One of the biggest ways that we've seen anti-monopoly make such advances is because the evidence has been on our side. We had a shortage of infant formula in this country in the year 2022 from a single contamination in a single factory.
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Monopoly Isn't A Game (with Lina Khan) - Stay Tuned with Preet
And they had eight years of Reagan plus four years of Bush to really create institutional durability for the project that they were pursuing. I had three and a half years. And so there was a real question around the institutional durability of what we were going to be able to achieve.
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Monopoly Isn't A Game (with Lina Khan) - Stay Tuned with Preet
But strikingly, we have seen less of a retreat from this administration on anti-trust than we have in almost any other policy arena. They made a series of decisions to keep the merger guidelines, keep several of our major antitrust lawsuits going. So far, we haven't really seen any major break at all.
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Monopoly Isn't A Game (with Lina Khan) - Stay Tuned with Preet
Who knows if that will stay in place for the full administration or whether we'll see pretty overt weaponization of the antitrust laws so they're rewarding friends and punishing enemies. But so far, we have seen more continuity than I think anybody expected.
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Monopoly Isn't A Game (with Lina Khan) - Stay Tuned with Preet
Well, if you step back, the antitrust laws were founded on the view that extreme concentrations of economic power pose a threat to people's freedoms and liberties, much in the same way that we understand extreme concentrations of political power or state power to pose.
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Monopoly Isn't A Game (with Lina Khan) - Stay Tuned with Preet
There was a recognition that if what we really want is to create freedom for people in their day-to-day lives, you can't just have checks and balances in your sphere in governance and and then allow monopolies or autocrats of trade, as they were called, to govern.
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And, you know, there was a recognition that here Americans had overthrown a monarch and they weren't going to instead sign up to be ruled by monopolists. And so there has been a real original understanding of how antitrust, but more broadly, an anti-monopoly ethos is absolutely critical for some of our most cherished values.
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Monopoly Isn't A Game (with Lina Khan) - Stay Tuned with Preet
It was fine. You know, it's been interesting to learn.
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Monopoly Isn't A Game (with Lina Khan) - Stay Tuned with Preet
It was fine. I mean, as a board game, it was fine.
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Monopoly Isn't A Game (with Lina Khan) - Stay Tuned with Preet
Well, you know, antitrust and anti-monopoly as a philosophy fits comfortably within a capitalist system that we have, right? And so much of the productivity and the innovations and America's competitive advantage have been the results of the fact that you have an economy where people are able to pursue a good idea. bring it to market, and then enjoy great success, right?
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Monopoly Isn't A Game (with Lina Khan) - Stay Tuned with Preet
If you're undertaking the risk of bringing a product to market, you should be able to reap the reward. And so that type of motivation and thinking is absolutely critical. I do think that, and it's especially true for my generation and generations since, there has been a real disillusionment and a real question about who our economy is really working for.
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Monopoly Isn't A Game (with Lina Khan) - Stay Tuned with Preet
You know, of course, during the financial crisis, we saw an initial inflection point. And I think since then, we've seen, you know, episode after episode where for a lot of young people.
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Monopoly Isn't A Game (with Lina Khan) - Stay Tuned with Preet
What our policy and politics have shown is that our economy is really designed to work primarily for very wealthy, very well-connected people as those who are trying to make rent, trying to make sure that they're not going bankrupt for medical bills are having a much harder time.
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Monopoly Isn't A Game (with Lina Khan) - Stay Tuned with Preet
And so I do think that there is a real skepticism and questioning about who our current economic order is really serving.
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Monopoly Isn't A Game (with Lina Khan) - Stay Tuned with Preet
Well, some people actually do. Some people think monopolies are great. Who are those people? You know, they span thinkers, you know, people kind of lineage of the Chicago school that thought, you know, monopolies oftentimes would actually deliver great benefits to people. And then you have people in the kind of policy advocacy community.
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Monopoly Isn't A Game (with Lina Khan) - Stay Tuned with Preet
You could call them lobbyists or others who are often advocating for those views. So you do have a legitimate pro-monopoly camp.
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Monopoly Isn't A Game (with Lina Khan) - Stay Tuned with Preet
I mean, it's gotten much smaller over the last decade, I would say, as anti-monopoly has really made great advances in our politics and as a mode of governing. And I think one of the biggest ways that we've seen anti-monopoly make such advances is because the evidence has been on our side. right?
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Monopoly Isn't A Game (with Lina Khan) - Stay Tuned with Preet
I mean, I think we have, as a country, seen evidence after evidence about how extreme concentrations of economic power actually lead to major problems for Americans. I mean, that can range from shortages of things like IV bags or gunpowder that arise from extreme concentration of production. We had a shortage of
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infant formula in this country in the year 2022 from a single contamination in a single factory. We've seen problems around planes falling apart in the sky, right? Some of the challenges that we're seeing in Boeing, you can see trace back to a major merger that they did in the late 1990s where they were allowed to buy up their major competitor in the U.S.
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Monopoly Isn't A Game (with Lina Khan) - Stay Tuned with Preet
and that fundamentally changed their incentives. And as a general matter, we've just seen market after market become more consolidated. Prices have become higher. Wages have fallen. It's become much harder for new businesses and entrants to actually enter and compete on a level playing field.
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And so I think as that evidence has become much more difficult to ignore and contest, we have seen the pro-monopoly advocacy community grow smaller, but they're still out there.
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So there are different ways to define what a monopoly is. And in court, there are different methods and mechanisms that enforcers use. Some are primarily trying to define what is the relevant market, right? Who is in and who is out of this market? And then how do you calculate effectively the percentage that this one company has? And is it enough to trigger monopoly status? Which itself is...
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can range from, you know, 60% to, say, 90%. And courts have come out different ways on what the kind of right cutoff point is. To my mind, you know, one of the most effective ways to be able to show a monopoly is through its behavior, what we call direct evidence of monopoly power. And in short, a firm can behave like a monopoly when it's able to
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make its products worse or raise its prices for its customers without facing real consequences in the marketplace. And so you can understand this in some ways as a firm becoming too big to care, that they have amassed not just a size, but have also cut out competitors such they can get away with making decisions
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products more expensive or marking products or services worse for their customers without the ordinary checks that you would expect in a competitive marketplace. And so those are both just two ways of being able to show monopoly power, even market power. And as when we were bringing our cases, we would routinely deploy both methods.
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Monopoly Isn't A Game (with Lina Khan) - Stay Tuned with Preet
Well, there are major cases underway. We just saw a verdict from a judge in D.C. a few months ago ruling that Google had monopolized the market for generalized online search. You know, the Justice Department in that instance used both indirect and direct forms of evidence to make that showing. And so Google has now been been found to be a monopoly in online search.
The Daily Show: Ears Edition
TDS Time Machine | Jon's 2024 Interviews
I think it just shows one of the dangers of what happens when you concentrate so much power and so much decision making in a small number of companies.
The Daily Show: Ears Edition
TDS Time Machine | Jon's 2024 Interviews
I mean, going back all the way to the founding, there was a recognition that in the same way that you need the Constitution to create checks and balances in our political sphere, you also needed the antitrust and anti-monopoly laws to safeguard against concentration of economic power because you don't want an autocrat of trade in the same way that you don't want a monarch.
The Daily Show: Ears Edition
TDS Time Machine | Jon's 2024 Interviews
That's right. You initially had some state-level laws, but the first federal antitrust law was the 1890 Sherman Act, and it was absolutely a response to the Industrial Revolution and a lot of the power that that had concentrated.
The Daily Show: Ears Edition
TDS Time Machine | Jon's 2024 Interviews
So we had some follow on laws in 1914, another follow on in the 1950s. 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.
The Daily Show: Ears Edition
TDS Time Machine | Jon's 2024 Interviews
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 businesses 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 2.0, and now we're reeling from the consequences.
The Daily Show: Ears Edition
TDS Time Machine | Jon's 2024 Interviews
And so we need to make sure all of these... What was the... Web 2.0 is... You know, the rise of social media, you know, in the early 2000s, the initial set of companies that ended up innovating, but ultimately becoming monopolistic, ultimately adopting business models that are premised on endlessly surveilling people.
The Daily Show: Ears Edition
TDS Time Machine | Jon's 2024 Interviews
Well, look, there's no inevitable outcome 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.
The Daily Show: Ears Edition
TDS Time Machine | Jon's 2024 Interviews
Yeah, look, we've really focused on how are companies behaving? Are they 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.
The Daily Show: Ears Edition
TDS Time Machine | Jon's 2024 Interviews
So our lawsuit 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.
The Daily Show: Ears Edition
TDS Time Machine | Jon's 2024 Interviews
And as we lay out in our complaint, Amazon is now able to get away with harming its customers. So just to give you a few examples, over the last few years, they've littered their search results page with junk ads, ads that internally executives realize are irrelevant and unhelpful to consumers, but they can just do it and it melts them billions of dollars in money.
The Daily Show: Ears Edition
TDS Time Machine | Jon's 2024 Interviews
They've also been steadily hiking the fees that small businesses have to pay to sell through Amazon. And so now some small businesses have to pay one out of every two dollars to Amazon. It's basically a 50% monopoly tax.
The Daily Show: Ears Edition
TDS Time Machine | Jon's 2024 Interviews
And so those are just some of the behaviors that we point to to note that this company has monopoly power.
The Daily Show: Ears Edition
TDS Time Machine | Jon's 2024 Interviews
You know, we haven't tried to make those arguments in court, but it would be interesting to see how a judge would respond.
The Daily Show: Ears Edition
TDS Time Machine | Jon's 2024 Interviews
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.
The Daily Show: Ears Edition
TDS Time Machine | Jon's 2024 Interviews
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.
The Daily Show: Ears Edition
TDS Time Machine | Jon's 2024 Interviews
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. Oh, snap.
The Daily Show: Ears Edition
TDS Time Machine | Jon's 2024 Interviews
We have had success with this. I mean, we had a lawsuit against Martin Shkreli a couple of years ago.
The Daily Show: Ears Edition
TDS Time Machine | Jon's 2024 Interviews
So you're right. We don't have criminal authority. But the remedy we were able to get against Martin Shkreli was to effectively ban him from doing business in the pharmaceutical industry.
The Daily Show: Ears Edition
TDS Time Machine | Jon's 2024 Interviews
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 marketplace or tricked. And so we enforce the nation's antitrust and consumer protection laws.
The Daily Show: Ears Edition
TDS Time Machine | Jon's 2024 Interviews
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.
The Daily Show: Ears Edition
TDS Time Machine | Jon's 2024 Interviews
Shortages of those drugs. And there can be all sorts of tricks and 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 realized that some of the patents that had been listed for these inhalers were improper. They were bogus.
The Daily Show: Ears Edition
TDS Time Machine | Jon's 2024 Interviews
And so we sent hundreds of warning letters around these patents. And in the last few weeks, we've seen companies delist these patents And three out of the four major manufacturers have now said within a couple of months, they're going to cap how much Americans pay to just $35. So is it... Is their gain, like...
The Daily Show: Ears Edition
TDS Time Machine | Jon's 2024 Interviews
Look, it's possible, but that's why you need to think about tactics that are going to be around deterrence. 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.
The Daily Show: Ears Edition
TDS Time Machine | Jon's 2024 Interviews
So we have a lawsuit against Amazon. We have another one against Facebook.
The Daily Show: Ears Edition
TDS Time Machine | Jon's 2024 Interviews
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,
The Daily Show: Ears Edition
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IT REALIZED IT REALLY COULDN'T SURVIVE IN MOBILE, AND SO IT ENDED UP BUYING OUT INSTAGRAM AND WHATSAPP, AND THE LAWSUIT ALLEGES THAT THOSE ACQUISITIONS WERE ANTICOMPETITIVE, THAT THEY VIOLATED THE ANTITRUST LAWS, THAT INSTEAD OF COMPETING ORGANICALLY, FACEBOOK INSTEAD BOUGHT ITS WAY TO MAINTAINING ITS MONOPOLY.
The Daily Show: Ears Edition
TDS Time Machine | Jon's 2024 Interviews
So look, one key tenet of the anti-monopoly laws is that you can't go out and buy one of your biggest competitors.
The Daily Show: Ears Edition
TDS Time Machine | Jon's 2024 Interviews
You're not allowed to do that, in fact.
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TDS Time Machine | Jon's 2024 Interviews
So, look, we're... 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.
The Daily Show: Ears Edition
TDS Time Machine | Jon's 2024 Interviews
One trend that we're especially concerned about is the way that algorithms may be facilitating price fixing.
The Daily Show: Ears Edition
TDS Time Machine | Jon's 2024 Interviews
And so if you have a whole bunch of competitors in a market, be it hotels, be it 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, you know, getting in the back room and making secret deals.
The Daily Show: Ears Edition
TDS Time Machine | Jon's 2024 Interviews
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 in effect allowing them to collectively raise their prices so Americans are having to pay more.
The Daily Show: Ears Edition
TDS Time Machine | Jon's 2024 Interviews
Look, monopolies harm Americans in a whole bunch of ways. You're absolutely right that it's not just higher prices. Yes. 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 few years... Sure. Baby formula. Baby formula, IV bags. Adderall. Adderall. Basic forms...
The Daily Show: Ears Edition
TDS Time Machine | Jon's 2024 Interviews
So 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.
The Daily Show: Ears Edition
TDS Time Machine | Jon's 2024 Interviews
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 and getting real wins for the American people.
The Daily Show: Ears Edition
TDS Time Machine | Jon's 2024 Interviews
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 massive shots.
The Daily Show: Ears Edition
TDS Time Machine | Jon's 2024 Interviews
But 40 years ago, under President Reagan, we radically veered off course and undertook a much more hands-off approach. And now we're living with the consequences of those decisions.
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TDS Time Machine | Jon's 2024 Interviews
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 meatpackers, if you look at, you know, huge parts of our economy, across the board, you've seen huge waves of mergers. Less competitive. So you go from dozens of companies just to a very small number.
The Daily Show: Ears Edition
TDS Time Machine | Jon's 2024 Interviews
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.