: [POST-PUBLICATION CORRECTION: A previous version of this story said the FTC had paused its action against Microsoft's acquisition of Activision Blizzard. The FTC has paused one legal approach, but still has an appeal pending with a second legal approach.]
SYLVIE DOUGLIS, BYLINE: NPR.
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DARIAN WOODS, HOST:
The other day I went to the Economic Club of New York for a lunch.
LINA KHAN: Good afternoon, everybody. Thanks so much to Barbara and the whole economics...
WOODS: Lina Khan was speaking. She's the chair of the Federal Trade Commission, and Lina was speaking in this exclusive Manhattan building. It had this opulent painting covering the ceiling. It had a strict dress code. Security even warned a guest for wearing the wrong shoes.
KHAN: The FTC is firing on all cylinders, using all of our tools to promote free and fair competition in the modern economy.
WOODS: There was this palpable tension in the room because this is where the big deal-makers and business executives socialize. And many of them aren't happy with Lina's new, tougher approach on corporate America. I mean, just listen to the financial media.
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UNIDENTIFIED JOURNALIST #1: Lina Khan has thrown away the core mission of the Federal Trade Commission.
UNIDENTIFIED JOURNALIST #2: She's against what's good for customers, what's good for the consumer.
UNIDENTIFIED JOURNALIST #3: This is the third time this week that we've talked about Miss Khan.
WOODS: Over a third of our staff surveyed last year did not have a high level of respect for senior leadership. Critics argue the FTC is bringing cases to court that it can't win and that it's on this losing streak.
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WOODS: This is THE INDICATOR FROM PLANET MONEY. I'm Darian Woods. As Lina Khan and her colleagues rewrite the rules for how business is done in America, how is the FTC doing? Like, what's its scoreboard? We try to find out, and along the way we learn just how messy leading this competition watchdog can get.
The Federal Trade Commission is the sheriff for big businesses. It has two main functions, and one is to penalize companies that behave badly, like by lying to consumers. And the other is to stop companies from buying up other companies in a way that hurts competition. And that's been going way up under Lina Khan. The year she took on her role as chair in 2021, letters of investigation for mergers and acquisitions nearly doubled. And to walk us through whether this new, broader approach against big business is working, we spoke to Tara Reinhart. Tara worked for the FTC as the chief trial counsel for its Bureau of Competition.
TARA REINHART: For all of us antitrust nerds, it's definitely an intellectual wonderland and full of supportive people and big thinkers. It's a wonderful place.
WOODS: Tara is now a partner at the law firm Skadden, and Skadden is on the other side of the ring to the FTC. It represents the companies that want to merge. But Tara says the FTC is still near and dear to her heart, and she says at the core of that intellectual wonderland has been what's known as the consumer welfare standard.
REINHART: Business should be permitted to go out and grow through acquisitions as they see fit unless the deal is likely to hurt consumers.
WOODS: The FTC and also the Justice Department are now rejecting that view, even though it's been the dominant principle for about 40 years.
REINHART: They want to reestablish the view that if a merger pretty much causes harm in any sector, including just to your competitors, then the businesses should not be able to merge.
WOODS: You might have heard that Microsoft is trying to acquire the games company Activision Blizzard. Europe's FTC equivalent eventually allowed this deal. But over in the U.S., the FTC has been trying to stop it through multiple approaches. It paused one of those approaches after losing in court in July, and is appealing another. But there have been some victories for the FTC. In early 2022, the semiconductor chip company Nvidia called off its planned purchase of another chip company after the FTC filed a complaint. So is it true that the FTC is on a losing streak? - because when you're driving towards a complete overhaul of how we think about monopolies over the last four decades, Tara says maybe we should expect some bold punts.
REINHART: When I was at the FTC, my boss was fond of saying that if you win all of your cases, then you're not bringing enough cases. So let's start with that. But the FTC has been bringing cases based on novel theories, cases where the courts have not had much experience with the theories of harm that are being thrown out there.
WOODS: One of the novel theories the FTC is pursuing is the idea of potential competition. That's what they argued when Meta was acquiring the digital fitness company Within. Now, Meta is not a fitness video provider. It's primarily known for Facebook. But the FTC under Lina Khan argued that if Meta does stake a claim in some kind of virtual reality world like it's trying to do with the so-called Metaverse, then owning Within could stifle competition in digital fitness services in the future. But to win that, the FTC needed a lot of evidence.
REINHART: There simply was not evidence that Meta had made plans, was considering plans and that it was too speculative to find that just because Meta is big and they have the ability to go into that market that they ever would.
WOODS: The FTC ended up losing in court, and Lina Khan was asked about this at the Economic Club of New York. And she framed that loss as actually a win because the judge left open the door to that argument of potential competition. Lina Khan also pointed to mergers and acquisitions that were abandoned before a final court decision, like Nvidia when it withdrew plans to buy that other semiconductor company. Lina includes these as indicative of the success of the FTC. But Tara Reinhart is skeptical of this as a benchmark.
REINHART: The problem with including those in your win numbers is that you - as the FTC, you don't know why the merger has been abandoned. There are lots of reasons companies will, for commercial reasons, not want to go forward. It's not necessarily a fear of the litigation risks.
WOODS: It's impossible to have one objective scorecard for the FTC. It is clear the FTC has managed to instill a degree of fear in the business community about new mergers. You just have to look at the opinion columns for that. But where the FTC has yet to land a killer blow is against big tech platforms. While Lina Khan declined our interview request through a spokesperson, we did speak to Matt Stoller. Matt is a friend and former colleague of Lina's, and he's the director of research at the American Economic Liberties Project, which is an organization that tries to take on monopolies. Matt argued that to the extent that the FTC is losing any cases, you can blame the judges.
MATT STOLLER: The judges really don't understand antitrust law. They're often lazy. They have a really hard time being anything but deferential to business executives like a lot of...
WOODS: So I'll just stop you there. That sounds like a big claim that the judges don't know the law. (Inaudible) their qualifications.
STOLLER: They don't know - they're not trained on antitrust law. You know, there aren't really many antitrust experts on the courts.
WOODS: And it's true. Federal judges are generalists, and this is a common complaint. Antitrust law is complex, but Tara Reinhart doesn't see that as being too problematic.
REINHART: Every single merger challenge and any other kind of antitrust case that I have seen, the judges have taken them extremely seriously. They're very curious about the law, the theory, the evidence. They're very active from the bench. They ask a lot of questions of the witnesses. So I don't agree with that criticism.
WOODS: To Tara, it's all about the evidence the FTC is bringing, which she thinks just hasn't been strong enough in these big tech acquisition cases. But for Matt, this whole question of Lina Khan's scorecard misses the big picture of corporate power in America.
STOLLER: And it is, like, just offensive that the only way the media looks at this is to say, oh, let's take the narrowest view and see whether this one official in this one agency is dotting their I's and crossing their T's. It's, like, missing the point and playing into the game of monopolists and Wall Street who want to keep things the way they are, even though everyone acknowledges it's a disaster.
WOODS: Either way, with tech giant Amazon next in the scope of the FTC, the agency's got its homework cut out for it.
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WOODS: We're working on a listener questions episode, so hit us up with your most burning economics question, and we might answer it on the show. Our email address is indicator@npr.org. And please include your name and phone number. This episode was produced by Julia Ritchey with engineering by Maggie Luthar. It was fact-checked by Sierra Juarez. Kate Concannon edits the show. And THE INDICATOR is a production of NPR.
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