Today marks the third anniversary of President Joe Biden nominating Lina Khan as a commissioner of the Federal Trade Commission (FTC), before a surprise appointment to chair the agency. Over her tenure so far, Chair Khan has systematically eroded retailer well-being and Americans’ trust in the FTC.
Through her various overreaches of power, Khan has made clear that she prioritizes her ideological agenda – not the consumers she has promised to protect. As a result, retailers and businesses large and small are suffering.
- Blocking Mergers and Acquisitions
Under Khan, the FTC has returned to the misguided idea that large businesses are inherently bad. Even when the two companies do not compete with each other, Khan has tried to prevent larger businesses from acquiring or merging with smaller businesses.
In 2022, the FTC sued to block Meta’s acquisition of the virtual reality platform Within, then to block Microsoft’s acquisition of the gaming company Activision Blizzard.
No surprise: the FTC lost both challenges in court. As Carl Szabo of NetChoice noted about the Meta lawsuit, the FTC should have listened to its own experienced staff, who advised against the case. Szabo told CNN Business that “the effects of [Khan’s] actions just happen to produce bad outcomes,” such as discouraging innovation and undermining startups.
The same concern arises with the FTC’s 2023 announcement of its proposed updates to its merger guidelines. By seeking to limit mergers and acquisitions, Khan is discouraging innovation and ignoring the benefits for consumers: low barriers to acquisition incentivize new market entrants, thus increasing competition.
As Noah Phillips noted while serving as an FTC commissioner, “The fact is that mergers are a way for smaller firms to join forces to compete more effectively and efficiently against larger rivals.” Some companies choose to partner through acquisitions, while others continue to compete and grow on their own. This varied market activity is good for consumers and businesses alike.
To stop what Khan sees as “big business,” the new merger guidelines make it more expensive for American companies to conduct normal business practices But as CNBC’s Jim Cramer said on his show in 2023, this strategy will backfire: “Lina Khan wants to stop corporate consolidation, yet she’s created a situation where only the largest, wealthiest companies can afford all the litigation that now comes with making acquisitions.” The Meta and Microsoft cases demonstrated that companies with the deep pockets to defend against misguided antitrust claims can still win in court. Smaller companies trying to compete will struggle more.
Unfortunately, the Khan FTC’s attitude toward mergers and acquisitions is likely to continue to be hostile, undermining American businesses and economic growth.
- Decreased Morale
In June 2022, polling by the Office of Personnel Management found that staff morale at the FTC nosedived since Chair Khan took over. The FTC’s ranking on the “Best Places to Work in the Federal Government” list of midsize agencies plummeted from 2nd to 22nd.
Then, in February 2023, FTC Commissioner Christine Wilson announced her resignation in a scathing op-ed in The Wall Street Journal. “Lina Khan’s disregard for the rule of law and due process make it impossible for me to continue serving,” Wilson wrote, citing various abuses of power. Her resignation coincided an exodus of experienced FTC staff, with lawyers leaving at the fastest rate in years. Multiple FTC staff noted that Khan seems more concerned with headlines and celebrity than with actually winning court cases.
Decreased morale at the FTC directly impacts both retailers and consumers. The FTC is supposed to champion the interests of American consumers and provide – in its own words – “plain-language guidance to help businesses understand their responsibilities and comply with the law.” When it strays from this mission, the FTC causes confusion and chaos in the American economy. Small businesses are collateral damage in this scenario. Whenever the economic and regulatory climate is unstable and unclear, small retailers suffer.
- Throwing Small Businesses Under the Bus
Instead of focusing on consumer welfare, Khan’s agenda has been a witch hunt against successful American businesses.
This crusade has been particularly harmful to small businesses, which use services such as targeted advertising to reach interested customers at a very low cost compared to traditional advertising. In fact, prices for online advertising have significantly declined over the past decade. As NetChoice’s Carl Szabo noted in comments to the U.S. Senate Judiciary Committee, “Smartphones, e-commerce platforms and connected devices have made it possible for virtually any business to target customers with digital ad messages, thus expanding the number of companies challenging traditional leaders in this space.”
Szabo continued:
“For America’s small and mid-size businesses, the bigger the platform the better for reaching larger audiences. Consider the local custom furniture store. Just fifteen years ago businesses like this could barely afford to place an ad in a local newspaper, let alone on TV or radio. Thanks to large online platforms, for less than ten dollars a small business can reach thousands of potential customers and target them more accurately than ever. Large online platforms have given new growth opportunities to America’s small businesses.”
But in 2022, Khan moved for the agency to make rules around “Commercial Surveillance and Data Security.” This not only went beyond the FTC’s congressionally-delegated authority but also intervened in every sector of the American economy and harmed the beneficial and benign data practices discussed above in the advertising space. These overbroad restrictions on data in advertising most hurt small businesses that have lower marketing budgets—undermining the very competitors Khan purports to uplift.
Before her tenure at the FTC, Khan became famous for a paper lamenting that Amazon’s prices were too low. “Antitrust doctrine views low consumer prices, alone, to be evidence of sound competition. By this measure, Amazon has excelled; it has evaded government scrutiny in part through fervently devoting its business strategy and rhetoric to reducing prices for consumers,” she wrote. “It is as if Bezos charted the company’s growth by first drawing a map of antitrust laws, and then devising routes to smoothly bypass them. With its missionary zeal for consumers, Amazon has marched toward monopoly by singing the tune of contemporary antitrust.”
After she became chair, the FTC sued Amazon for its Prime subscription service, which 168 million Americans have embraced for free shipping, video streaming and more.
The complaint was that Amazon encourages people to use Amazon Prime. As NetChoice said at the time, “This is like going after Kroger for promoting its rewards program or Costco for its membership club.”
Then, in 2023, Khan’s FTC sued Amazon again, this time over its selling and marketplace practices. If successful, the suit would likely ban Amazon from offering quick shipping for small-business sellers who use its fulfillment program – severely undermining their potential customer base. Another likely outcome would be that Amazon’s retail, fulfillment and marketplace arms are forced apart, ripping up a service that many Americans love.
Khan’s crusade against Amazon is especially harmful because it sets a precedent for an approach to business that harms small retailers the most. Amazon has expanded access and provided a platform for any business of any size to be a seller and reach customers all over the world. More than half (61%) of Amazon’s sales are through third-party sellers. Not only is Khan sending the message to small retailers that growth and innovation will be punished, but she is threatening the welfare of entrepreneurs who want to use Amazon’s platform to succeed.
- Disregarding What Consumers and Businesses Say They Want
Khan’s actions go directly against the views of the majority of American consumers. NetChoice polling, for example, found that 84% of Americans and 92% of Republicans think the FTC’s lawsuit against Amazon is a waste of resources. A recent Harvard/CAPS opinion poll shows Amazon is one of the most favored institutions in America. In the 2023 American Customer Satisfaction Index, Amazon tied for first for its selection, value and online shopping experience.
Public trust in government is at an all-time low; people trust businesses far more than political institutions. In a 2023 Goldman Sachs survey, more than two-thirds of small business owners said that the federal government is failing to meet their needs.
Americans want institutions they can trust to look out for their best interests – not leaders who will tear apart the very businesses the American public appreciates.
FTC staff have repeatedly cited their concerns over Khan’s ethics, as when she refused to recuse herself from the FTC’s case against Meta even though an ethics official recommended that she should.
Gary Shapiro, the head of the Consumer Technology Association, has concerns as well. “I don’t think the chairwoman or most of the Democrats understand the depth of the harm that she is causing by creating uncertainty around virtually every merger and acquisition in the country,” he told the Washington Examiner.
Former assistant secretary of the Treasury Department Bruce Thompson noted Khan’s impact as well in a piece at the Washington Examiner: “While big corporations could afford the added compliance costs and legal challenges, government regulators would be in a position to bully smaller companies and block them from expanding to survive.”
In the midst of national economic uncertainty after the Covid-19 pandemic, Khan went after the very businesses that were positioned to play a strong role in our country’s recovery. She undermined healthy market competition by giving the government the power to pick winners and losers in the marketplace.
Since Khan took over, consumer financial losses to imposter scams have skyrocketed 300%. American businesses of all sizes—large and small—are under tremendous strain and chaos.
Ultimately, Khan’s agenda doesn’t prioritize consumer needs and preferences, especially in the retail marketplace. Consumers are the ones who are and will continue to be harmed the most by it.
Image created by NetChoice using ChatGPT’s DALL-E.