Lina Khan, the youngest F.T.C. chair in history, reset U.S. antitrust policy by thwarting mega-mergers and other monopolistic behavior. This earned her enemies in some places, and big fans in others — including the Trump administration. Stephen Dubner speaks with Khan about her tactics, her track record, and her future. SOURCES:Lina Khan, former commissioner of the Federal Trade Commission and professor of law at Columbia Law School. RESOURCES:"Merger Guidelines" (U.S. Department of Justice and the Federal Trade Commission, 2023)."The Rise of Market Power and the Macroeconomic Implications," by Jan De Loecker, Jan Eeckhout, and Gabriel Unger (National Bureau of Economic Research, 2019)."US Antitrust Law and Policy in Historical Perspective," by Laura Phillips Sawyer (Harvard Business School, 2019).The Curse of Bigness: Antitrust in the New Gilded Age, by Tim Wu (2018)."Amazon’s Antitrust Paradox," by Lina Khan (Yale Law Journal, 2017)."A Tempest In a Coffee Shop," by Tanya Mohn (New York Times, 2004). EXTRAS:"The Economics of Eyeglasses," by Freakonomics Radio (2024)."Should You Trust Private Equity to Take Care of Your Dog?" by Freakonomics Radio (2023)."Are Private Equity Firms Plundering the U.S. Economy?" by Freakonomics Radio (2023)."Is the U.S. Really Less Corrupt Than China — and How About Russia? (Update)" by Freakonomics Radio (2022).
Chapter 1: Who is Lina Khan and why is she significant in antitrust policy?
Lina Khan was just 32 years old when Joe Biden appointed her to lead the Federal Trade Commission in 2021. She became the youngest FTC chair in history, and this agency goes back to 1914. Khan was also considered one of the most progressive chairs in FTC history.
While she was still in law school, Kahn published a journal article called Amazon's Antitrust Paradox, which went on to become famous and which painted a picture of capitalism gone wild, where too many firms have become too big and too powerful, posing a threat not just to consumers and employees, but to the economy itself and maybe even to democracy.
One of the signature achievements of her FTC term done in collaboration with the Department of Justice was an updated set of the government's merger guidelines. This is a 50 page blueprint for pushing back against over consolidation, for limiting both horizontal and vertical acquisitions, and for making the economy more resilient by reducing corporate power.
These are ideas we have dug into repeatedly on Freakonomics Radio. We have done episodes about consolidation in the eyeglass industry, in the pet care and dialysis industries. We made an episode called Are Private Equity Firms Plundering the U.S. Economy?, Now, with Donald Trump back in the White House, Lena Kahn is, of course, gone, replaced by a Republican chair, Andrew Ferguson.
And the Trump administration has been moving quickly to undo or wipe out any number of Biden administration policies. But not those merger guidelines. They are being retained and embraced by the Trump administration. Here's how one former Biden administration official put it to me. It's like being in your house when a tornado comes and wipes out everybody's house except for yours.
You might call this the Lena Kahn paradox. And how does Kahn herself feel about this paradox? Based on the conversation you are about to hear, I would put it this way. When it comes to antitrust policy, Kahn doesn't care who gets it done as long as it gets done.
I view the stakes here as being existential for our country.
Today on Freakonomics Radio, we review Lena Kahn's FTC track record.
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.
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Chapter 2: What are the key achievements of Lina Khan's tenure at the FTC?
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.
When you say that it rebuts those, can you put that in the form of more and more empirical evidence that what?
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
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.
And that consensus started to break during the first Trump administration and then further during this last Biden administration.
OK, so that's the context for the antitrust climate you walked into. Let's back up. You're at the open markets think tank. You're finding out everything there is to know about the history of antitrust policy and the poultry market, for instance. What happens then?
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.
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.
Ended up publishing that, and there was a broader conversation around all of these issues.
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Chapter 3: Why has the Trump administration retained Biden's merger guidelines?
And I realize it didn't have the happy ending you were looking for, but I'd love you to walk us through it so people can understand both the scope of what you identify as the problem and what you see as remedies.
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
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
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.
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.
So I have two very basic questions about it. Number one, once you get beyond the top tier employees, right? I don't want my chief blank officer going to a rival firm. I understand that. Or I don't want people with trade secrets leaving my firm and potentially going to a rival firm. Those I understand.
But beyond that, all the other people that you just named, what is the reasoning for why a non-compete would even be considered worthwhile in And then how can it be legal?
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.
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.
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