Micah Loewinger: This is the OTM Midweek Podcast. I'm Micah Loewinger. As we've discussed on the show many times, most recently with Cory Doctorow in our series Enshittification, Amazon has been inserting itself into seemingly every facet of our lives, all while using its status as a monopoly in the market to squash competition, take advantage of its users, and skew prices for everyone. At the end of our series, Doctorow described how he has placed his hope in Lina Khan, the chair of the Federal Trade Commission.
In this midweek episode, we are airing a conversation our colleague and host of the New Yorker Radio Hour, David Remnick, had with Lina Khan about her plan to sue Amazon for violating antitrust laws. Here's David.
David Remnick: You've been involved in investigating, thinking about Amazon and antitrust for a very long time, and I wonder if there's a historical analogy for Amazon's position in the market now, whether it's in the 19th century or the 20th century.
Lina Khan: You're absolutely right that there have been moments over the last century where the United States has similarly confronted monopolies that have captured control over key distribution channels or key arteries of commerce. If you look at the various antitrust lawsuits that the FTC or the Department of Justice have brought over the last century, you can think about Standard Oil, you can think about AT&T. There are various companies that similarly have established a monopoly position that ultimately the United States determined was unlawful.
Amazon is now using this monopoly power in ways that hurt both sets of customers, both the consumers as well as the merchants. Amazon has steadily been hiking the fees that it charges merchants, that's effectively a 50% Amazon tax. We also allege that Amazon has actually quietly been hiking prices for consumers in ways that is not always so clearly visible, but at the end of the day, can result in consumers paying billions of dollars more than they would if there was actually competition in the market.
David Remnick: Give me an example of that, if you wouldn't mind.
Lina Khan: One of the practices that the FTC's lawsuits alleges are illegal or what we call it anti-discounting practices. For merchants, it's more expensive to sell on Amazon, but their price on Amazon has to be lower than it is anywhere else. Practically, what that means is that merchants raise their prices everywhere other than Amazon. In effect, Amazon's practices have actually been inflating prices across the internet. We also note that Amazon has actually been degrading the quality of its service over the last few years, in particular, and Amazon's search page is now polluted with all of these advertisements.
What our investigation revealed is that these ads are not always relevant to consumers, but Amazon has determined that it can make more money by showing these users ads, even when those ads are not useful to people, even when those ads are actually steering people to higher-cost products. Amazon has now been able to exercise its monopoly power in unchecked ways, and in a way that means the American public is losing out.
David Remnick: Let's go back a little bit. How did Amazon get to this position and what prevents anyone from competing against Amazon? What's illegal about it?
Lina Khan: What our lawsuit lays out is that in some ways you can see how there is a monopoly life cycle. In earlier stages, the tactics that a company uses to become a monopoly may in the short term be good for consumers, but what we now see with Amazon is that it's become so powerful, it now enjoys the monopoly, and it's extracting and exploiting that monopoly in ways that is harming both sets of customers, and in a competitive market, it would be disciplined because it would be hiking prices for merchants, and merchants would actually have options for selling elsewhere, but that's just not what we see in this market, and we allege that's because of Amazon's anti-competitive practices.
David Remnick: I'm curious, you're 34 and you have an incredibly influential position. I'd just love to know how at law school you became attached to this issue. Why this issue?
Lina Khan: It's an interesting question, and I actually became interested in this issue before law school when I was a business reporter and was doing economic research, and my beat was market consolidation, and I was assigned to do a deep dive in all sorts of sectors of the US economy, including chicken farming. This is a market that's basically shaped like an hourglass. You have millions of consumers on one end, millions of farmers on the other end, and they're all connected by a handful of chicken processors.
If you're a chicken farmer, you're oftentimes actually just dependent on a single company to get to market. That asymmetry of bargaining power has led to all sorts of abusive practices. That overall made me aware of the ways in which consolidated power, concentrated economic power can threaten fundamental liberties and freedoms in the same ways that we've long recognized concentration of political power can undermine democracy.
That's really what got me interested in the antitrust laws which go back a century and were similarly animated by a fear of concentrated economic power. Lawmakers believe that in the same ways that our constitutional system creates checks and balances in our government sphere, we needed antitrust and anti-monopoly laws to create checks and balances in our commercial and economic sphere to similarly safeguard against concentrations of power.
David Remnick: You faced a crossroads in your life between becoming a journalist, going to the Wall Street Journal, and going to law school and pursuing the path you did. Why did you choose honest work?
Lina Khan: [laughs] It was a tough call, and the Wall Street Journal job would have been a commodities beat reporter, and at that point, I was really interested in commodities markets, but ultimately, I thought it would take me away from antitrust and anti-monopoly issues. At that time, I thought the moment was ripe for reinvigorated antitrust, and so law school would be the way to go.
David Remnick: Do you use Amazon?
Lina Khan: Occasionally. I'm not a Prime user, but once in a while if there's something I need.
David Remnick: What do you use it for?
Lina Khan: I recently had a baby, and so once in a while, if I need something, be it diapers or wipes or whatnot, I've used it.
David Remnick: When Amazon first came along, I'm a book reader and I live in New York City. There are plenty of bookstores, although they're diminishing, and I made the obvious discovery, I can get anything on Amazon, whereas I can't get anything, even if I try, in bookstores, and it had a certain allure. I think this goes with other products as well. How do you deal with that problem? In other words, it's enormously popular as well as a gigantic conglomerate.
Lina Khan: What this lawsuit is ultimately about is wanting to make sure we have the open competitive markets that allow the next set of Amazons to come along. What our lawsuit finds is that because Amazon has insulated itself off from those competitive pressures, it's able to actually hurt its customers with impunity.
It's not always going to be visible because Amazon is using these secret pricing algorithms that are raising prices without people often detecting it, but I think on the quality dimension, people can see how, if you're searching for a product, the first dozen maybe for irrelevant products, you may have to scroll down a whole bunch to even find what you're looking for.
Then for the merchants as well, I mean we're consumers, but a lot of people are also entrepreneurs, are also small businesses, and Amazon's own documents reveal that it recognizes that these merchants live in constant fear of Amazon's punishments and punitive tactics. Ultimately, our antitrust laws are about preserving open markets, but also making sure people have the economic liberty to not be susceptible to the dictates of a single company.
David Remnick: What's an example of a would-be competitor to Amazon getting crushed under the wheels of Amazon's tactics?
Lina Khan: It can be difficult to fully capture the competition that's been lost, the innovation that's been lost, all of the benefits that have been foregone because these are entire trajectories that have been lost to us because of Amazon's practices.
David Remnick: Now, what is Amazon arguing in the case? They say that Amazon is highly entrepreneurial, it's responsible for nearly 40% of e-commerce sales and allows 500,000 independent sellers to sell their products online, whereas they might have languished without the rise of Amazon. What do you say to that?
Lina Khan: Ultimately, this is about wanting to make sure we have the market conditions for the next set of successful companies to be able to enter the market and compete on the merits. What you really want in an open competitive market is for companies to fail or succeed based on whether customers like their product, based on whether they have savvy business strategies.
Unfortunately, we've seen in this market that even if a retailer was more efficient, even if a retailer had better prices, because of Amazon's anti-competitive restraints and the anti-competitive tactics, those firms would not be able to get a fair shake in the market.
David Remnick: What can Amazon do to be less anti-competitive and how would consumers benefit?
Lina Khan: Our lawsuit identifies two sets of practices. One is the set of anti-discounting practices that I described, all of these tactics that they use to basically elevate prices on Amazon but also on other retail channels. We also note that Amazon basically prohibits and makes very difficult, what's known as multi-homing, where they effectively require that if you're a merchant that wants to make a whole bunch of sales in Amazon, you have to also use what's known as Fulfillment by Amazon. What this effectively does is makes it much more difficult for sellers to also sell on other platforms.
There was a moment in time when Amazon actually relaxed this coercive tie, and this program was enormously popular, but Amazon quickly recognized that allowing merchants to use other fulfillment providers could actually also empower other retailers and other platforms because you would basically have a platform-agnostic fulfillment provider that sellers could use to build up business elsewhere.
Ultimately, Amazon recognized that that was a competitive threat, and so it shut it down. If you're Amazon, the biggest threat to you competitively would be if a different platform also built up a critical mass of customers, a critical mass of merchants, and started benefiting from the accelerated growth that digital markets can provide. Once Amazon itself developed and established that enormous scale, it's undertaken a whole set of tactics to make sure nobody else can become even remotely as big.
David Remnick: In the history of antitrust law, you've had instances where dominant and domineering companies have been broken up, whether it's in the oil industry, the railroads, and so on. Do you want to see Amazon broken up?
Lina Khan: When you think about effective remedies, you want to make sure that the competition that's been lost is fully restored, and when you have digital markets, the relationship between the anti-competitive practice and the harm is not one-to-one. It's exponential. The harms in these markets accumulate, they aggregate in exponential ways, and at the end of the day, that means you may need a more significant remedy. We want everything to be on the table, including breakups.
David Remnick: I think you're telling me the answer to my question is yes, you want to see it broken up.
Lina Khan: Well, look, again, I don't want to get ahead of the lawsuit, but historically, there have been all sorts of remedies, including breakup, but including other types of commitments that the firms have to make. In this instance, we're really focused on whatever addresses the problem. The important thing here is we need to be sensitive to the particularities of digital markets, and so we're going to want to make sure that we're fully explaining to the judge how these markets work and help the judge reach a determination about what an effective remedy would look like.
David Remnick: Do you think the tech companies benefited by the fact that unlike the robber barons and their top hats and their big bellies and the kind of cartoonish, rapacious imagery that surrounded them, that these guys in khaki pants and polo shirts, and a very different set of imagery, and also people were very taken with the tech revolution. Do you think that made the government slow to look hard at these companies and monopolistic practices?
Lina Khan: I think it's certainly true that when we saw the advent of digital markets, there was a sense that these markets are so new, they're so fast-moving, they're so dynamic, that the best thing for the government to do is to step back and get out of the way. I think, unfortunately, we've come to regret that. We've seen all sorts of instances in which there were missed opportunities to stop illegal acquisitions or to stop illegal or predatory business models from getting a hold.
I think as we see from Congress, there's a lot of concern about people's privacy and the way about how some of these business models incentivize the endless hoovering up of people's sensitive data, be it their geolocation data, be it their health data, it's undermining people's privacy, it's hurting kids. I think we're now reeling from that. I think the government's attention on AI is also now informed by some of those missed opportunities and there is a great sense that we don't want to repeat the mistakes of Web 2.0 and the social media companies.
David Remnick: What's the biggest mistake we could be making where AI is concerned?
Lina Khan: Well, I think we need to be very vigilant about whether we are again going to have a system in a market where a handful of companies control all of the relevant inputs, all of the relevant tools and technologies, be it cloud computing, be it the relevant base models and all of the data, especially if AI becomes essential to a whole set of markets. What we don't want is for the rest of the economy to be dependent on the decisions of a handful of gatekeepers.
David Remnick: Now, we're talking a lot about Amazon here, but other tech companies like Google and Meta have been in the crosshairs of federal agencies too. The FTC dropped an antitrust case against Meta, but this month, 41 states sued Meta for a different reason, that their social media platforms are addictive and harm kids in some ways. It's rare that we see this kind of bipartisanship in federal regulation. What do you make of that?
Lina Khan: I think you're absolutely right that there is just a deep sense in a bipartisan way that some of these companies are now exercising unaccountable power in ways that's really hurting us. It's hurting our pocketbooks but it's also hurting our privacy. The state lawsuit that you mentioned really takes after some practices that the states allege are hurting kids, including hurting their mental health. I think we are really at a crossroads where there's a bipartisan recognition that unchecked monopoly power is bad for Americans. There's a long and rich American history of us taking on unchecked monopoly power and making sure our markets are open and fair and competitive.
David Remnick: Do you have similar bipartisan support around the Amazon case that we've seen in the Meta case? Where do you think the politics come down?
Lina Khan: Our lawsuit was we were joined by a whole set of state attorneys general, including a few Republican states, so we've been pleased with that Republican support for the lawsuit. I'll also note that in Congress, there are various efforts to be legislating in ways that would address Amazon and all sorts of other companies, and those efforts are bipartisan as well.
David Remnick: Do you find that there's a sophistication about the tech companies in Congress? I say that in a leading sort of way, because I watch sometimes public hearings, committee hearings about tech, the level of cluelessness among members of Congress can sometimes be stunning.
Lina Khan: Look, I had the great honor of working for a congressional antitrust subcommittee that undertook investigation into Google, Amazon, Facebook, and Apple. The members on our subcommittee were enormously sharp, they enormously understood the very real risks, and we're very proud of the work that came out of those efforts.
I think more generally, members of Congress are now hearing directly from their constituents, concerns about kids' privacy, concerns from merchants, concerns from startups and entrepreneurs that have been locked out of markets, and so I think in a very real sense, they're seeing and learning and hearing directly about the power of these companies. I think that's driving a lot of the forward movement.
David Remnick: Finally, in the history of trust-busting, you saw real breakthroughs during the Progressive Era and then again during the New Deal era, do you think we're on the cusp of that kind of situation?
Lina Khan: I think this is certainly a historic moment in antitrust. President Biden has identified reinvigorated antitrust and anti-monopoly as a key objective of this administration. We at the FTC are really proud to be on the front lines of that effort, but it's really a whole of government effort right now to be reinjecting fair competition. I think all too often people feel like they don't get a fair shake in our economy, and reinvigorated antitrust is a key part of fixing that.
David Remnick: Lina Khan, thank you so much.
Lina Khan: Thanks for having me.
Micah Loewinger: Lina Khan is the chair of the FTC. That interview was produced by the New Yorker Radio Hour. Join us this week for the big show to hear Brooke and I dissect some of the week's media issues. I'm Micah Loewinger.
New York Public Radio transcripts are created on a rush deadline, often by contractors. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of New York Public Radio’s programming is the audio record.