What New Antitrust Guidelines Mean for Americans

BIANNA GOLODRYGA, HOST: A really powerful and inspiring conversation I had there with the three of them. I was really honored to be joining them. Well, back here in the U.S., there are bold new guidelines in the works to scrutinize blockbuster business deals and ensure that there in the interest of consumers and competition. Assistant attorney general, Jonathan Kanter, and chair of the Federal Trade Commission, Lina Khan, joined Walter Isaacson to discuss.

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WALTER ISAACSON, HOST: Jonathan Kanter and Lina Khan, welcome to the show.

LINA KHAN, CHAIR, FEDERAL TRADE COMMISSION: Thanks for having us.

JONATHAN KANTER, U.S. ASSISTANT ATTORNEY GENERAL FOR ANTI-TRUST: Great to be here.

ISAACSON: Let me start with you Mr. Kanter, which is for more than a century, anti-trust law has been built on two pillars, ever since the Sherman Anti-Trust Act, the Clayton Act, and U.S. v. Standard Oil, it has been harm to consumers and another standard in the balances have been harm competition in general. I want to explain the new guidelines you’ve issued and it seems to me that pretty much along the outlines of older guidelines, except for the add one component, which is harm to workers. Is that about right?

KANTER: So, the guidelines are not law, there are simply a reflection of the current modern case law. And modern case law applies to workers, but the guidelines are not just about harm to workers, it’s a central feature, but it is also about recognizing modern realities. For example, the guidelines talk about technology platforms. The guidelines talk about rollups of serial acquisitions. The guidelines talk about entrenchment of monopoly power, recognizing that sometimes a firm that has a really dominant position can acquire a competitive threat. All of those are ways in which competition presents itself.

So, when we started writing these guidelines, we had an important question. The important question is, how does competition in this market present itself? And does this merger threaten that competition? And that question is going to be different for every industry, it’s going to be different for every merger. But we have to start with the facts. We have to start with the deep, sophisticated understanding of how competition works. And it works differently than it did 50 years ago. Phones don’t have rotors. Documents are not stored in fall cabinets. And with the exception of my dad at the time, people don’t stop and ask the gas station for directions. Things have changed, and that is great, but we need to make sure we understand those changes with a deep level of sophistication and we are addressing competition as it is, not as it was.

ISAACSON: Chair Khan, you’ve talked about decades of retreat. And I think what you mean is retreat from that standard, not of harm to consumers, but of harm to competition and in general. Tell me about that decade of retreat.

KHAN: So, look, we look very closely at the empirical evidence and how markets have evolved over recent decades. We always want to make sure that we are enforcing the law in a way that is fully reflecting the reality of how businesses of today’s economy are competing and are growing There has been empirical evidence and research showing that, unfortunately, markets have become consolidated recent decades. And so, we, at this moment, have an even more important job to do to be vigorously enforcing the anti-trust laws, protecting fair competition, preserving open markets. Because Congress told us that we have a preference for competition over consolidation, competition benefits consumers through providing better quality products, lower prices, it can benefit workers by providing them more options and opportunities and better wages. And then open markets is how we have remained at the forefront, globally. Where breakthrough innovations and incredible technological feats have been produced in America in good part because of our free enterprise system of open competitive markets, and that is what we are charged with preserving.

ISAACSON: Let me ask you about the old phrase, that competition always helps consumers. The shirt I’m wearing, for example. I got it it’s Amazon Essential, so are my trousers. I used to get those shirts from Lands’ End, I used to get them from Dockers. But as I got them through Amazon, they noticed my buying habits and gave me cheaper, easier ways to do it. It seems to me that is good for the consumer even though it is really bad for Lands’ End and Dockers. Do we focus on things like a platform, like Amazon using its information to be anticompetitive or do we look at, hey, I kind of feel guilty about wearing these things, but it is good for me as a consumer?

KANTER: So, as a general matter, we look very closely at the facts and specifically whether businesses are engaging in any anticompetitive practices to maintain their monopolies in illegal ways. It is under the anti-trust laws, not illegal to be big, it’s not illegal to be dominant. What is illegal is becoming a monopoly or becoming dominant in ways that are involving illegal business practices, that can be illegal mergers, it can be illegal conduct. And so, we are very focused on whether there has any been any illegality in terms of how firms are using their market power to block out competition and make it difficult for consumers and workers to have more options.

ISAACSON: Mr. Kanter, following up on that, one of your great predecessors as the Anti-Trust Division at the Justice Department was Joel Klein, and he.   and the lawyer, David Boies, brought this landmark case against Microsoft, which is just what Chair Khan has been talking about. They use their dominance and the desktop operating system of PCs to get into the browser business, maybe even get into the search business. Tell me how that case, which I think is the last really big case to be decided by a lot of courts, how that affects what can do in the Justice  Department.

KANTER: Absolutely. That was a historic case brought by our predecessors here at the Anti-Trust Division. And it established the important principle that a platform could be a market. And in a case of Microsoft, it tells us a lot about today’s technologies. So, that case dealt with emerging threats. They called nascent threats at the time. The idea that something could come along and just disrupt the operating system and lead to a new generation of technologies that can provide benefits that we couldn’t even imagine at the time. And so, the Justice Department brought a case to protect those new innovations and give them the opportunity to reach consumers, to reach entrepreneurs, to reach businesses.

And so, Microsoft establishes the principle that if you have a dominant platform and you harm competition by squashing emerging competitive threats, emerging innovations and emerging technologies, that can be illegal under anti-trust laws, the same anti-trust laws that were used to address Standard Oil and AT&T.

ISAACSON: So, let me ask you, Chair Khan, if you look at things like what happened to Microsoft, that allowed Google to come along and do a Chrome browser and a search engine. But now, Google is bundling all of these things. How do you apply at the FTC these precedents that were set by the  Justice Department cases?

KHAN: So, we look very closely at all of the relevant legal precedents. There have been a whole set of seminal anti-trust cases over the last few decades and we’ve gotten from the courts really important legal decisions that have been applying what are, you know, century old anti-trust laws and new contexts. And that’s the beauty of our anti-trust laws, is that they establish legal principles about appropriate ways to be competing and it’s up to us as enforcers to be applying those principles in all sorts of context. So, for example, last year, the Federal Trade Commission sued two pesticide manufactures because they were engaging in this pay to block schemes that were blocking generic producers from the market. And as a result of that, farmers had to pay billions of dollars more than they would have, and we as the food paying public also ended up paying for those practices. So, we can see how when you have dominant firms that are engaging in practices that are designed to block out competition that can have very negative effects, and you can see that in digital markets, you can see that in agriculture markets. It’s really economy wide that we, as anti-trust enforces, are charged by Congress to be vigilant and be protecting and preserving open competitive markets.

ISAACSON: Chair Khan, as you know, probably full well, you’ve come a bit of a lightning rod as a symbol of much more aggressive, or at least more aggressive anti-trust enforcement. And it has become a science that your anti-business because of this, even Larry Summers, who was President Obama’s treasury secretary, you know, said that you’ve created a war on business. Those are his words. And certainly, especially Republicans but some Democrats even are trying to cut back a bit of FTC funding and guidelines. How do you respond to the fact that really does seem like you are hurting business in the way?

KHAN: So, look, anti-trust stood for — what anti-trust was really about is preserving open competitive markets. And when you have open competitive markets, that guarantees that the best ideas win. What we want is an economy and a market that Congress prescribed where, if you have a good idea, you are able to bring it to market, you are able to compete on the merits. And so, if consumers like your product, you’re actually able to succeed in the marketplace, we at the FTC here routinely form businesses, including independent pharmacists, independent grocers, people across sectors who come to us and tell us that for them as businesses it becomes very difficult to compete if they are getting muscled out of the market by monopolists who might be engaging in anticompetitive practices. And so, we make a very concerted efforts to be hearing from businesses because we understand that robust anti-trust enforcement is really the way that we’re going to see the type of competition and the type of innovation that for decades has kept America at the forefront and delivered significant  innovation. Preserving of competitive markets, as Congress has prescribed, is the way to keep doing that.

ISAACSON: Do you think these new guidelines are going to go to the Supreme Court at some point? And what do you think the outcomes could be?

KANTER: That’s the beauty of our legal system, is cases move through the courts. But the last time I checked Supreme Court cases do not expire. And  so, cases that were decided right around the time the anti-trust laws were amended, cases like Brown Shoe and cases like Philadelphia National Bank that established these core principles were designed to interpret the statute.

And guess what? Cases today cite all of those old Supreme Court cases. So, until the Supreme Court reverses itself and unless they do, we have an obligation to follow the law as it is written, and that’s as interpreted by courts. And that’s exactly what courts are doing. And so, we are going back to first principles, we’re going back to basics.

This is an exercise in law enforcement, your statues is written by Congress, and for good reason, because competition and democracy, competition and freedom, competition and economic liberty all go hand in hand, and we’re going to enforce the law as written, as interpreted by courts, when supported by the facts in order to vindicate those interest for the public.

ISAACSON: Chair Khan, one of the arguments used by — especially the technology companies that want to get together is that we are competing with China. And that without big companies and the efficiencies that come from that, we’re going to be crushed by China in terms of everything from A.I. to other technology issues. Does that enter into your calculus?

KHAN: It’s such a good question, Walter, because you’re absolutely right that these arguments that sometimes get made. And this is an area where our history can be extremely instructive. So, these are very similar arguments that we are being made during the Cold War, where there was pressure on anti-trust enforcers to hold back and protect domestic monopolies.

And at that moment, America wisely made the choice to trust our system of free enterprise and competitive markets and trust that that type of open competitive system would out innovate a centralized system of state backed monopolies. And that’s exactly what we saw. In the decades since, we have seen enormous innovation, we’ve seen American companies really at the forefront globally. And so, I take a lot of guidance from that history where when we have trusted in our open competitive markets, that is really been what’s best positioned to us to compete globally, given just to the ingenuity and innovation that American businesses have been able to provide.

ISAACSON: Let me ask both of you, starting with Mr. Kanter, to look at the next great big emerging industry and idea, which is artificial intelligence. We’re competing with China in it, we have hundreds of firms trying to enter the markets and yet, we also have the two big dominant firms, Google and Microsoft. Google was allowed to buy DeepMind, which is at the forefront of artificial intelligence. And Microsoft has made a relationship, an investment relationship and to some extent a partnership with OpenAI. Starting with you, Mr. Kanter, tell me how you all are looking at artificial intelligence and whether that’s even an economic market that is subject to anti-trust.

KANTER: Yes. So, inflection points in technology are often the most important moment to protect in terms of competition, because that’s when it become — markets become contestable. But in order to do that, we have to make sure that we understand A.I. at a level of sophistication. And so, just as in the ’80s, the anti-trust agencies rightly equipped themselves with some of the most talented economists so that we can understand markets better, and we continue to do that until this day, we need to make sure that we’re also bringing the technological expertise to understand these technologies with greater sophistication. And we’re doing that by hiring data scientists, A.I. experts. But let me also say, one of the big importance changes with A.I. is that data is no longer a byproduct of the technology, it is the product of the technology. And so, we are in a world where artificial intelligence lives and breathes massive amounts of data. And so, to the extent that markets are not contestable and competitive across the economy, including in health care, including in energy and agriculture, the A.I. technologies that are going to be built are going to tip only to the firms that have the greatest amount of data and information. So, it is extremely important that in order to usher in a competitive and vibrant revolution of new technologies for A.I. that our markets are competitive and access the data and information is something that is accessible broadly and that we don’t just allow the small number of players with the most data to tip and win those markets uncontested.

ISAACSON: Chair Khan, let me ask you to comment on that notion of data and whether or not data can be leveraged to create dominance in the field or whether it should be more open in the future?

KHAN: So, it’s certainly true than in digital markets in particular we have seen data become a critical input where you have to have access to data in order to be able to scale and in order to be able to compete. And so, just with any other input or critical resource, it is really important that we are preserving open competitive access to this data, which can be so critical to compete.

You know, Walter, we want to make sure that everybody is clear that the anti-trust laws entirely apply, even in the context involving A.I. I think sometimes we hear arguments that some of these technologies are emerging in some type of regulatory vacuum, and we think it is extraordinarily important that the market knows that existing laws prohibiting collusion still apply, existing laws prohibiting discrimination apply, existing laws prohibiting fraud apply.

And so, there is no way A.I. exemption from the existing laws on the books. And we think it’s especially important given how, revolutionary these technologies could be, that we are preserving contestability of markets and avoiding any illegal behavior.

ISAACSON: Lina Khan, Jonathan Kanter, thank you so much for joining us.

KHAN: Thanks for having us.

KANTER: Thank you for having me.

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