What’s 40 pages long and spells trouble for the behemoths of the internet? Hint: the author has just been sworn in as the Chairperson of the US Federal Trade Commission.
If you answered Lina Khan’s opinion on Amazon’s anticompetitive behaviour, you get a gold star.
Khan is a 32-year-old former Associate Professor of Law from Columbia University who has written extensively on antitrust matters. One article that caught the eye of commentators and lawmakers alike was “Amazon’s Antitrust Paradox”, published in the Yale Law Journal (YLJ).
In the YLJ piece, Khan writes that Amazon “has positioned itself at the centre of e-commerce and now serves as essential infrastructure for a host of other businesses that depend upon it. Elements of the firm’s structure and conduct pose anticompetitive concerns — yet it has escaped antitrust scrutiny.”
She points out that Amazon has engaged in a systematic pricing pattern below cost, leaving it in a prime position to benefit from every aspect of the cyber economy.
The key to understanding Khan’s approach is her suggestion to take a more holistic view of the consumer welfare test, rather than rely on judging whether the consumer is better or worse off in a standalone market segment. Khan suggests examining the boarder market structure when ascertaining whether a business has built a model that acts against the consumer’s interests.
Khan reasons: “Critically, consumer interests include not only cost but also product quality, variety, and innovation. Protecting these long-term interests requires a much thicker conception of ‘consumer welfare’ than what guides the current approach. But more importantly, the undue focus on consumer welfare is misguided. It betrays legislative history, which reveals that Congress passed antitrust laws to promote a host of political-economic ends — including our interests as workers, producers, entrepreneurs, and citizens.”
If you take Khan at her word, such a test will apply to Facebook, Google and Amazon immediately. The legal test, once established, would have a secondary effect on Linkedin, Apple, Twitter and a small number of others. The key is good legislation, and to get the courts to loosen the grip of the case law built up from the 1960s through to the Reagan Administration.
Which-50 readers will note that our recently published piece on the Ohio v. Google public utility lawsuit looked at Justice Clarence Thomas’s concurring decision, in which he laid out a roadmap to how States might dilute the mega-techs’ monopolistic tendencies. Khan’s canon of work may act in concert with Thomas’s judgment to provide governments with a new toolbox full of options to dilute the power of the major tech companies. Amazon, because of its position vis-a-vis the consumer, would be the obvious first test.
Businesses would be well advised to follow Chairwoman Khan’s path over the next four years. If she puts into practice her ideas, it’s likely to open gaps and opportunities in the market. What would happen if Amazon were to be broken up like Standard Oil, or Bell Telephone?
Perhaps that question is about to be answered?