The Corner

Regulatory Policy

Lina Khan Just Got a Lot More Powerful

FTC Commissioner nominee Lina M. Khan testifies during a Senate Commerce, Science, and Transportation Committee hearing on Capitol Hill in Washington, D.C., April 21, 2021. (Graeme Jennings/Pool via Reuters)

Lina Khan has made waves at the Federal Trade Commission for her aggressive moves on antitrust policies. Capitalizing on the bipartisan trustbusting trend, Khan is pushing a radical agenda that few before her even tried. In a series of 3–2 votes along party lines, Democratic appointees led by Khan have gutted a number of long-standing regulatory rules at the FTC that limited its power. In response, the Wall Street Journal editorial board has alerted conservatives to the threat Khan poses to ordinary businesses.

Khan rose to prominence for her critique of traditional methods of measuring monopolistic power. Specifically, she argued that Amazon presented an antitrust paradox that needed to be rectified through more aggressive regulatory action. The Wall Street Journal editorial board warns that Khan’s efforts are not confined to Big Tech companies, though. They write

The agency eliminated the long-standing role of the agency’s chief administrative law judge in presiding over fact-finding and rule-making. Now Ms. Khan, or someone of her choosing, will preside. The Democrats also killed the requirement that the FTC staff get a majority vote of the commission to start an investigation. Now only a single commissioner can sign off. Subpoenas can also fly at Ms. Khan’s discretion.

The Journal continues, 

This is a sure signal that the three Democrats are planning to dump the consumer-welfare standard for antitrust that has prevailed for decades. Instead the agency will replace it with some new standard it hasn’t specified. Also on the chopping block is the “rule of reason” the Supreme Court has applied to antitrust law for more than a century.

Striking down the “rule of reason” as a test would be a massive change in antitrust policy. The “rule of reason” test is the most rigorous level of scrutiny in the courts and is the test most antitrust cases fall under. Business conduct that is not illegal per se (which covers the most obvious forms of monopolistic practices, such as cartel price-fixing) falls under this level of scrutiny. 

In a “rule of reason” analysis, potential anticompetitive behavior is analyzed for its effect on consumers within a larger context. Courts are tasked with figuring out the net benefit or harm of an allegedly anticompetitive contract. Factors such as market size, geography, and relative power play a role in a “rule of reason” test. 

The main idea of the test is to figure out if a contract unreasonably restricts trade. However, it seems that Khan may be looking to use the “Quick Look” test more often, which would truncate the FTC’s economic analysis and allow for more ideological results. As the Wall Street Journal points out, moving beyond the “rule of reason” standard would greatly expand the regulatory powers of the FTC. 

These Republicans may be under the illusion that Ms. Khan has only Big Tech in her sights. But the new powers she is claiming will give her authority to shoot at business in all directions. The FTC is supposed to be mainly an enforcement agency that polices bad practices, but Ms. Khan and her fellow Democratic commissioners want to expand its regulatory powers as well.

Regulatory action often ends up hurting ordinary businesses unintentionally. In this case, though, the FTC’s message is clear: American companies will not be given deference. If Khan decides to expand and use the FTC’s newfound powers, consumers, employees, and employers will all be worse off because of it.  

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