Amazon’s antitrust adversary: What Lina Khan’s Senate hearing reveals about Big Tech’s future

A decades-long policy of lax regulation of the technology industry could be coming to a close — and Lina Khan is ready to usher in a new era.

The rising star of the progressive antitrust movement offered glimpses into her vision for Big Tech regulation Wednesday during a Senate Commerce Committee hearing on her appointment as commissioner of the Federal Trade Commission. Khan’s nomination was widely viewed as a signal that President Joe Biden is serious about reining in the technology industry, which is taking heat on a wide range of issues including alleged monopolistic behavior and privacy abuses.

Sen. Amy Klobuchar praised Khan as “a pioneer in competition policy” who “will bring a critical perspective to the FTC.”

“For too long mergers have gone unchallenged and dominant firms have accumulated levels of market power that we have not seen in a century,” Klobuchar said at the hearing.

Although Khan was measured in her responses to senators on Wednesday, she doubled down on her view that the rules governing technology companies — Amazon, in particular — need to be revisited. If confirmed to the FTC and given license to run with her ideas, Big Tech’s ability to consolidate power and snuff out competition could be curtailed for the first time in years.

Khan, 32, is an associate professor of law at Columbia Law School and an antitrust expert. She gained national attention while still in law school when Yale Law Review published her article, “Amazon’s Antitrust Paradox.” In it, Khan argued that the so-called “consumer welfare standard” —  in which regulators look narrowly at prices to determine whether a company has behaved monopolistically — is insufficient for the digital economy. Khan believes that a company like Amazon can abuse its market power, even if it uses that power to lower prices for consumers, rather than raising them.

The article made a big splash. Major publications began covering Khan and politicians with Big Tech in their crosshairs enlisted her for advice.

“With a single scholarly article, Lina Khan, 29, has reframed decades of monopoly law,” wrote the New York Times in 2018.

Senator Orrin Hatch meanwhile derisively dubbed the movement Khan represents “hipster antitrust.” He’s one of several critics in D.C. who question Khan’s experience and approach to regulation.

Before Biden tapped Khan for the FTC job, she advised the House Judiciary’s antitrust subcommittee in its investigation into Amazon, Apple, Facebook and Google. With her help, the committee published a 451-page “Gatekeepers” report last fall detailing the ways those companies capitalize on and allegedly abuse their market power to benefit themselves.

The report focused more on Amazon than any other company. Amazon, which has yet to face formal U.S. antitrust charges, slammed the House report as fundamentally flawed, saying it was based upon “fringe notions” about antitrust law and policy.

In addition to advising the House Judiciary Committee, Khan has worked closely with FTC commissioner Rohit Chopra, a frequent antagonist of Big Tech who Biden plans to nominate as chair of the Consumer Financial Protection Bureau.

During the hearing Wednesday, Khan once again held the tech industry up as an example of the shortcomings of current antitrust enforcement. She argued that the consumer welfare standard is not well equipped to deal with companies that offer “free” services or depress prices to beat competitors.

“I’ve questioned whether it really is a good proxy for competitiveness, especially in the context of digital markets,” she said. When asked about the Amazon article she wrote, Khan said, “if we recognize that perhaps there are certain economies of scale … that are going to lead these markets to stay dominated by a very few number of companies, then we need to apply a different set of rules.”

Khan could push the FTC to go after companies like Amazon for “predatory pricing,” Bloomberg Intelligence analysts Jennifer Rie and Sophia Isani explained in a recent white paper. Antitrust law allows the government to sue companies for abusing their power by offering below-cost pricing. Khan’s research argues that Amazon engaged in that type of behavior to drive competitors like Diapers.com out of business and artificially lower e-book prices.

“Such a viewpoint could push the FTC’s reported Amazon probe to carefully scrutinize any instances of price-cutting, we believe,” wrote Rie and Isani. “Though case law in this area is defendant-friendly, a progressive-led FTC could seek to use a legal challenge to Amazon as a test case.

Related: FTC Commissioner Rohit Chopra on Big Tech’s antitrust reckoning, and implications for investors

Experts predict the wave of lax regulation of tech mergers could be coming to an end with Khan’s nomination, depending on the makeup of the rest of the cabinet. It could become more difficult for deals like Facebook’s landmark acquisition of Instagram to go through in this new era.

“We have to be much more vigilant relating to these acquisitions,” Khan said during the hearing. Of the deals authorized under previous administrations, Khan said that “in hindsight there’s a growing sense that some of those merger reviews were a missed opportunity.”

Khan’s nomination shows that the Biden administration is serious about antitrust regulation on Big Tech and other heavily consolidated industries, like food and agriculture. But her aggressive antitrust position could be tempered by whomever Biden picks to chair the FTC. Khan is essentially replacing the ideologically-aligned Chopra, which may not push the commission very far to the left.

“She’ll have one vote of five,” explained Rie and Isani in their white paper. “A majority is required for FTC action.”

“As a swing vote, a new progressive chairperson could usher in significant enforcement changes, but a more moderate leader may have a neutralizing effect,” they added.

The Commerce Committee will allow members to continue submitting written questions to Khan until May 5, before referring her nomination to the full Senate for confirmation.