S1: You probably don’t think all that much about the Federal Trade Commission, I don’t, but Matt Stoller he does. The thing is he doesn’t think very highly of it, really.
S2: They haven’t done anything for 30, 40 years. And people were OK with that.
S1: I mean, haven’t done anything for 30, 40 years. That’s like that’s harsh. That is a harsh take.
S2: Well, OK. So it’s a little unfair to say they haven’t done anything for 30, 40 years. They’ve done a lot of bad things.
S1: Matt works at a place called the American Economic Liberties Project. He advocates against monopolistic business practices. So if he had his way, the FTC would be preventing businesses from getting so big they distort the market, jack up prices. But that’s not what’s happening. Hasn’t happened for decades now.
S2: OK, so let me give you an example. What is the most costly, inefficient and basically predatory sector of the economy? Health care? I mean, it’s the prices are insane. The quality is bad. So the Federal Trade Commission is supposed to be dealing with things like a hospital consolidation practices in the pharmaceutical industry, really the medical supply chain. Right. They have never stopped, for example, as single pharmaceutical merger or at least not in the last 40 years. Right. One of the things they’re supposed to do is they’re supposed to oversee mergers and stop, you know, mergers that create monopolies. And so in the pharmaceutical industry. Right. The most price gouging industry, I think that most people know of in America, like they haven’t stopped a single one.
S1: So given everything you’ve just said. How big of a change is it that. This woman, Lina Khan, has been put in charge,
S2: I think it’s a really massive shift.
S3: President Biden will be nominating Lina Khan to serve on the FTC
S1: Lina Khan as the new chair of the FTC. She was sworn in last week, 32 years old, on her appointment. That’s the real reason I wanted to talk to Matt because she sees this agency the same way he does. Only now she’s running it.
S3: Now, Khan was just confirmed by the Senate to be a commissioner at the FTC today by a vote of sixty nine to twenty eight, but now a source telling us that she would actually lead the agency.
S4: First of all, Sean, I want to say this is a surprise.
S2: Yeah, I think I think like worldwide, the reaction among the antitrust world was explosive.
S4: After she’s confirmed, then the Bush administration makes her the chairperson. That’s a little bit unusual there. And you wonder if some Republicans may feel a little baited and switched.
S2: The big thing to know is that it’s not that the FTC has done a good or bad job of the last 40 years. I don’t think they’ve done a good job, but they haven’t been relevant. Right. They haven’t mattered. And now you’re seeing people in Europe, you’re seeing antitrust lawyers all over the country, and you’re seeing investment analysts and big tech people kind of freaking out that they actually picked somebody that wants to govern.
S1: So before I came into this conversation, I was trying to remember the last time I knew the name of a chairperson of the Federal Trade Commission. I imagine you probably know the names a little while back, but are you used to hearing them spoken about in the way that you’re hearing now?
S2: No. I mean, there’s no reason for people to know the names of the FTC until, you know, Lina Khan because it’s like, you know, knowing the name of a of a of a cop who doesn’t do anything all day. Well, you know, it’s you wouldn’t know it and you wouldn’t need to.
S1: Today on the show, can the new head of the FTC turn the agency around and in the process, is she going to bust up companies that all of us have come to rely on? A Mary Harris, you’re listening to what next? Stick around. The thing to understand about the Federal Trade Commission’s new chair, Lina Khan, is that she’s got this big idea about the way companies wield their power and why large companies monopolies have remained unregulated for so long, especially tech companies. She explained all this in an interview with Slate back in 2017.
S5: One of the principles animating our work is that monopolies are bad, not simply because they threaten to lead to higher consumer prices or even necessarily undermine productivity and growth. But monopolies are bad because they’re bad for democracy. The companies that acquire a lot of power are able to use that power to shift debate, to squelch research, to steer ideas and information.
S1: Lina Khan came to these ideas in a nontraditional way. She’s young. She doesn’t have a Ph.D. in economics, Matt Stoller says that’s important.
S2: So another way to put it, which I think is good, you know, Simone Biles, the gymnast. The gymnast. Yeah. That Lina Khan is like the snow mobiles of the antitrust world to kind of give you a sense of who she is. So so Lina Khan was a journalist. She was a business journalist. That’s how she learned about the economy. So in the early twenty teens, right after the financial crisis, she was covering a bunch of different industries, everything from chicken farming to Amazon’s book division to chocolate to seeds and chemicals airlines, just small business formation in general. And she was talking to business people who are facing monopolies. And she wrote a bunch of stories about what it was like to deal with monopolies and why these monopolies existed and market regulation problems. And and so that’s how she learned. She’s not an economist, right? She didn’t learn it through through the this kind of theoretical mindset. She talked to business people who were dealing with monopolies and she talked to monopolies like what’s your strategy here? And and then she went to law school and while at law school, she kind of used her journalistic skills. Right. Her ability to tell stories, her her understanding that it’s really important to have an empirical foundation for what you’re thinking and evidence. Right. But evidence not from weird, opaque models, but evidence from talking to people that are in these markets. And she wrote a law review article she called the Amazon Antitrust Paradox, which was a way of saying we have these laws against monopoly power. How is a firm like Amazon so powerful and so dominant? And in that a law review article, she described the way that Amazon was invisible to the antitrust laws. And it was this remarkable attack on the way we’ve organized antitrust over the past 30, 40 years. And it was that was an explosive. Laurie Oracle, you don’t usually think of law review articles as going viral, but this one did. And here’s this law student who reshapes the debate over antitrust. And I mean, in her 20s, like, that’s that’s crazy.
S1: I want to I want to dig into what she talked about in that article because I want to make sure I understand it right. My understanding is that the article basically argues that Amazon wasn’t being regulated because most regulators had this consumer framework for antitrust. Like if a company is negatively impacting consumers, that’s why you step in. But of course, Amazon is helping consumers at the moment. For the most part, it’s bigness means that it can give a lot of people free shipping. And that meant it was kind of in this invisibility cloak for regulators. Is that fair?
S2: Almost so, yeah. The framework that enforcers have is what’s called consumer welfare rights. So you have two ways of understanding antitrust enforcement. The traditional way is market power. Are these firms powerful and big? Are they using coercive practices to bully their competitors, suppliers, customers, whatever? And price is one aspect of that, but not the only aspect of it. The other way to understand antitrust is the efficiency or consumer welfare model. And in that model, what you say is the only thing we really care about is, is consumer prices. Are consumer prices low? If they’re low, then then there is no antitrust violation going on. And what Amazon was doing is they were engaged in below cost pricing. They were charging less than the item cost so that they could drive their competitors out of business, but then eventually raise prices later.
S1: Did show in the paper basically like it looks like it’s cheaper, but here are the ways they pass that cost on of making this product cheaper to you and actually raise the prices.
S2: Yes. So there’s one part of the of the paper where she showed that Amazon bought a firm called Diaper’s Dotcom, as it was known, and the way that they were able to force diaper’s dotcom to sell out to them is they lowered their prices of diapers lower than diapers, dotcom, and lost hundreds of millions of dollars a month and went to diaper’s dotcom and said. Sell out to us or we’ll just drive you out of business. So then they got they sold out to them and then they raised prices on diapers afterwards.
S1: And is the argument that this is also bad for workers?
S2: Well, so it’s not that it’s bad for workers or good for any particular stakeholder. It is bad for workers. You know, it’s also bad for consumers. It’s also bad for competitors, for a whole set of other actors. But the fundamental dynamic that Con is driving at is that it’s bad for democracy. Right. So that the entire monopoly tradition in America was a tradition that was rooted in the idea that you don’t want to have concentrations of economic power because they become concentrations of political power. The way to check big business is to make sure that they have rivals so they have to compete with each other instead of fighting to just take over the government, which is what they’re doing now. And that’s what the point of antitrust is and was. And price is only part of that story. This came out in twenty seventeen and it really was explosive. And you see a lot of skepticism around big tech right now. But the reason is largely because of the movement that Lina Khan has been leading. So that’s what’s so important about her, is she’s reoriented the intellectual foundations of antitrust and the political foundations of antitrust and basically how we do business in America.
S1: You’re talking about how Lina Khan is sort of reorienting to an earlier idea of antitrust. And I was reading that she found a quote from 1995 from a journalist named Ida Tarbell who was writing about John Rockefeller. And when she read this quote, which basically describes Rockefeller as patient, like a general who looks out at the field and it’s like, OK, I need to capture that tiny little hill over there and that tiny little hill. And if I do all that, I’m going to get the whole field. She looked at this and she thought, this is exactly what Jeff Bezos is doing. Like he’s just capturing all these little pieces of the market and all of a sudden he’s going to be running the whole thing.
S2: Yeah, it’s funny. I remember when she was she was working on that article and she you know, she just was like, it’s amazing. You know, you read about Rockefeller and it’s like you’re reading about Bezos. You know, in many cases they use some of the same tactics, fighting the same political battles. You know, it’s it’s pretty much all the same. There really are no new scams or no new ways to monopolize. It’s always the same thing. It’s always acquiring bargaining power, surveillance, rebates, kickbacks, bribes, a lot of the coercive practices. You know, you have new things like data, but but you’re basically using the same techniques to to acquire power with whatever technology is lying around.
S1: Can we talk about why the idea of what antitrust was or could be changed over the course of the 20th century? You’ve alluded to that a little bit about how the idea of antitrust went through this evolution. So can you explain why we ever moved away from what we had back in the 30s?
S2: Sure. So so the Antimonopoly tradition actually really goes back to the foundation of the country, although antitrust is a late 19th century thing having to do just with the formation of of industrial corporations. But the antimonopoly tradition goes back much further. And from the moment that big business appeared, big industrial corporations appeared in the 80s to all the way to a kind of like the nineteen thirties. There were kind of debates about what do you do? How do you have a liberal democracy, a republic, an American state and society consistent with these big businesses? We’ve never had that kind of concentration of power. The only thing it looked like to Americans of that day was sort of some of the aristocratic elements that America had broken off from and kingdoms. And that’s how John Sherman justified the Sherman Act in 1890. He talks about autocrat’s of trade and kings of commodities. So, you know, there were a bunch of fights about what to do about people like Rockefeller and the firms that they had formed and by the 1930s in the New Deal. And what what ultimately happened is, is that FDR smashed the power of the financiers. And while there were big businesses, they were they were forced to compete for network systems like AT&T. They were heavily regulated by the government. And then for a lot of industries like banks, retail stores, a lot of light manufacturing farms, it was family size or slightly bigger. And that was kind of the way that we organize the economy. And antitrust was a key part of that. Antitrust prevented big business from merging it, prevented them from cramming down on their suppliers. It protected retail stores from distributors.
S1: Did that look like just constant fines and lawsuits and approvals of mergers? What would it look like?
S2: It looked like a bunch of lawsuits. And, you know, and then lawyers, you know, knew that this is what you can do and this is what you can’t do because the laws were. The rules were pretty clear, they were interpreted through the courts, but there were lawsuits and there were a lot of ups of firms, and then also you had private litigation. So if someone is screwing me, I can sue them and it’s possible to bring a case and and win that case. And so you had an incentive system to prevent coercion.
S1: Things began to change in the 1970s to academic schools of thought started having an argument about concentration of economic power. On the left, scholars were happy to see businesses grow dominant as long as the government taxed them and redistributed some of that wealth on the right. Scholars saw hegemonic business as a natural outgrowth of skill, and needless to say, the right didn’t think such businesses should be highly taxed for their success. But Matt Stoller, he says, both sides agreed monopolies were not inherently bad.
S2: If something looks unfair, you know, that’s just maybe your perspective. But if a big company is doing something that looks unfair, that’s just because the big company is good at what it’s doing and you don’t really understand it. Let’s let’s let those economists kind of the scientists figure it out. And so I’m getting some
S1: real Gordon Gekko vibes here.
S2: Yeah. I mean, that’s, you know, Gordon Gekko, the the movie Wall Street was filmed and written in the nineteen eighties, which was kind of just after this ideological transformation had happened. That idea greed is good.
S1: So liberal and conservative agreement like let’s just not do this anymore.
S2: Yeah, that’s right. I mean, the liberals, the left and the right still hated each other, but the whole antimonopoly tradition fell away.
S1: This agreement between the left and the right, you really see it take hold. During the presidency of Ronald Reagan, he started dropping antitrust cases, firing lawyers, relaxing laws and appointing judges who didn’t believe in antitrust enforcement. The crucial point, though, is this. This attitude continued. You can see it in decisions of both conservative and liberal Supreme Court justices. You can see it guiding the policies of the Clinton administration. And Matt Stoller says you can see it during President Obama’s term, too.
S2: I mean, the Obama administration was actively bad on this stuff. So what’s really difficult, I think, for most people to understand about the monopoly problem is that it’s really not a partisan issue and that these ideas came from both the right and the left and they came from both political parties. So, you know, the FTC under Obama had evidence of monopolization by Google and instead of bringing a case and they decided to drop the suit in twenty thirteen a month after Obama’s re-election, when Google CEO Eric Schmidt was sitting in Obama’s election war room overseeing voter turnout. I mean, conflict
S1: of interest much
S2: well, there’s just like tremendous there was a lot of suspicions about deep corruption. But I think also the philosophical point I’m making, you know, that these guys really don’t believe in decentralizing power because they think, oh, let’s concentrate power and put our friends in charge and put the experts in charge. They know how to do stuff right. That’s really their philosophy. And so I think it’s it’s really hard for, I think Democrats to internalize that. It really is. And I’m a Democrat, but it really is our fault. And same thing with Republicans. It really it really is kind of their fault, too. And so it’s it’s just weird because everyone’s looking for, you know. Oh, well, it’s the other guy that did it. And we just need to invest more in the FTC. And, you know, Obama was good. People didn’t go far enough. And it’s like, no, actually, what happened is there was this ideological revolution that happened and Reagan to Obama, even to Trump somewhat. That ideological revolution just continued. And now we are reversing it or going back to a traditional, more traditional American view of the danger of monopolies.
S1: So how long will it counter-revolution and antitrust take? Matt Stoller has got some ideas. Back in a minute. You’ve said that part of what’s hard for people to kind of get about what’s happening at the FTC right now is how much what’s going on there is really about Democrats and Republicans. And what’s interesting to me about that is the fact that the confirmation of Lina Khan was bipartisan as well. And it seems like both parties have kind of come together to maybe not say oops out loud, but to realize that there’s a problem here and they need to take a different tack. I’m wondering if watching her confirmation hearings, you sort of saw Democrats and Republicans working through this live on air.
S2: Yeah, I mean, it’s been happening for a few years. What is fascinating is that Lina Khan is a progressive and she’s not shy about it. She’s aggressive, too, like. So during her confirmation hearings, she said there’s potential criminal activity and she was alluding to price fixing between Facebook and Google in ad markets.
S5: Some of the lawsuits that were filed last year, I think underscore these issues as well as potential criminal activity as well. So I think it will be important to continue seeing how those lawsuits play out.
S2: You would think just a few years ago if you had somebody in one of these positions making allegations about some of the most powerful firms in the country, you would think, oh, they’re going to really have a rough road, right. For confirmation to put someone progressive. The Republicans are going to hate her and the moderates are going to feel all squishy. But what’s interesting is that, in fact, what happened is that the moderates are the ones on the ropes because the moderates are the ones who led us to the status quo, which everybody hates. The fact that seventy five percent of industries in America have gotten more concentrated over the last 20 years. And of the top five tech companies, they bought a thousand firms and nobody you know, they didn’t stop a single one there. Everyone’s really angry about that. And so Lina Khan gets up there and says, you know, here’s my philosophy, here’s my track record. And then she gets 22 Republican votes in the Senate. And that’s just it’s just astonishing and a real sea change in how we understand politics.
S1: I wonder if there’s kind of a sense of relief in Washington bringing someone like Lina Khan in, because having Lina Khan allows them to feel like, OK, she’s going to handle it for us. We don’t need to solve this one right now. You know, we’re putting this person in place. And hopefully that’ll right. The ship here,
S2: there’s definitely some of that. I think that, you know, when you write a letter to the FTC and you’re a senator and you’re like, hey, we passed this law asking you to do this thing, the FTC usually takes those letters and ignores them. And so senators and members are really frustrated because because FTC staff and and leaders really don’t believe in governing. They really don’t want to interfere in the business world. They feel like that’s inappropriate. And so to have someone who’s going to govern, who’s going to start using the authority, the latent authority, the FTC, I think is a relief. And I think it’ll be interesting to see what happens when, you know, when and if Lina Khan is able to start governing and start and start to say we are going to start restructuring these industries and banning unfair practices and not letting monopolies run the show, what happens then? And that’s kind of that’s kind of an open question.
S1: Yeah. I mean, you’ve written about how even when FTC does do something, it’s often not enough. And they don’t seem to be sort of taking charge of their role like they find Facebook five billion dollars, which sounds massive for being careless with user’s personal information. But the FTC didn’t even announce it. Facebook announced it on an earnings call. And the five billion dollars, it’s just not even that much for Facebook.
S2: Facebook’s stock went up by 40 billion dollars when they announced it. So it’s just kind of like a joke. And that’s what I think the FTC is perceived as, you know. I think so. Commissioner Rohit Chopra, who’s a different FTC commissioner, he said that having a consent decree from the FTC is seen now kind of as a rite of passage by Silicon Valley firms. Right. So it’s it’s it’s pathetic. But there’s a broader issue here. And this is, I think, why Lina Khan is so important, which is that you have a crisis of the rule of law more broadly. So if you look at something like the Sackler family and Purdue Pharmaceuticals, which is the whole opioid crisis, you know, these guys are drug dealers and they really should have been in jail for what they did, you know, but the the DOJ and the government let them off the hook. And you saw this with the financial crisis where not a single banker of any importance went to jail. And, you know, you see this over and over there is simply lawlessness in our economy writ large. And the FTC is a big part of it. It’s not the only agency that’s proven to be, you know, feckless. But I think having. Somebody who’s going to really focus on fairness in competition in America can really change that dynamic, not just at the FTC, but I think kind of across the government in general. And that is actually what the people want. It’s increasingly, I think, what Congress wants. People are very confused. They’re very afraid of the idea of wielding power to govern, but I think they’re open to it.
S1: Here’s what I think is going to be a little bit interesting about what happens with Lina Khan. Like when she gets going, you say the people are behind what she wants to do, but once you start to corral big companies. I just wonder if prices are going to go up for people and if that will then become a big stick that can be used politically against whoever’s in power to say, listen, people, your prices are going up because these people are being regulated more. And that’s the way the cookie crumbles. And we’re already seeing we’re already seeing this happen with inflation when it comes to stimulus money going out the door. So I wonder if you think about that, too.
S2: Yeah, I mean, what you’re essentially saying in in different words is that these firms are so powerful that they are ungovernable. Yeah, and I think that that is an open question. The idea that we the people, through our governing institutions, with people that we elect, cannot touch these firms. Leads us to the question, I mean, I don’t necessarily believe that that’s true, but I don’t know that it’s not true. But I think it does lead to the question of do we really live in a democracy if our government can’t touch the corporate sector?
S1: What does the history tell you about how long this work takes, this kind, of course, correction?
S2: I think it will take a generation. I mean, every generation gets its chance to secure freedom or to give up on freedom because freedom liberty is a scary thing, right? Because it means that that governing you have to govern yourself fundamentally as a human being. And what the monopolist ultimately promises is, don’t worry, I’ll take care of you. All you have to do is surrender your liberty to me. And it requires a sense of confidence among the people, among policymakers in our democratic institutions. And it’s a never ending struggle. If you stop fighting for your own freedom, if you stop having courage that you can be a free person and live in a free society, you lose that free society. So we are in a pretty deep hole. So I think it will take 20 to 30 years. But, you know, we can have awesome stuff almost immediately. But to get back to where we were in terms of like our institutions, like, yeah, we can. We can. It’ll take a while, but it could be fun. That’s the other thing is this stuff is really fun and really innovative.
S1: Matt Stoller, thank you so much for joining me.
S2: Hey, thanks a lot. Thanks for having me.
S1: Matt Stoller works at the American Economic Liberties Project. He’s also the author of the book Goliath The 100 Year War Between Monopoly Power and Democracy. You can go check out his Substack. It’s called big and that’s the show. What Next is produced by Mary Wilson Carmel Delshad, Lina, Schwarze Danielle, Hewitt and Davis Land. We are led by Allison Benedikt and Alicia Montgomery. And I’m Mary Harris. You can find me on Twitter at Mary desk. And if you want to make us the most dominant monopoly of a daily news podcast, go leave us a review. Go do that on iTunes or wherever you listen. In the meantime, I will catch you back in this field tomorrow.