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Lina Khan has her own antitrust paradox

A poisoned goblet isn't exactly the most welcome gift for a new chairman of a major federal agency. But that's exactly what legal scholar Lina Khan got when she arrived at her office at the Federal Trade Commission (FTC), with media coverage going to a rock star rather than a regulator. She is breathlessly described as a legal prodigy and her “Amazon’s Antitrust Paradox” is likely to be the most-discussed note in the history of the Yale Law Journal. Even Senator Ted Cruz said he looks forward to working with her – and that brings her to a very select club. The clock is ticking on her very first assignment – re-filing an antitrust complaint against Facebook and convincing a federal judge to reconsider a complaint he so quickly dismissed. Khan has less than 30 days.

The best Khan can do? Nothing.

Congress should take the next step and take responsibility by sitting down and reaching an agreement on a number of laws that it has argued over to create a modern regulatory infrastructure for today's technology. US lawmakers should stop cheering Khan on the sidelines and driving them into legal battle. Instead, they have to do the hard work of thinking longer – getting antitrust law into the digital age before filing another complaint. Unless our lawmakers create the right framework and agency to regulate the digital industry, Khan's FTC – and US consumers – will be drawn into short-term battles while the real war continues.

Here is the storyline so far and what to do.

The antitrust revision of Facebook that Khan is being pushed into is fraught with problems. The FTC launched a lawsuit against Facebook under the previous administration in December 2020 alleging that the company's acquisitions of Instagram and WhatsApp were anti-competitive. Regardless of the pros or cons of buying Facebook, a federal judge didn't buy it. He offered a 30 day period to review and resubmit.

Antitrust lawsuits may have to overcome high hurdles and take time to wind their way through the courts, but the speed of this rejection has been staggering. Unsurprisingly, there is now hopes that Khan is the very person to rise to the challenge – and there is advice on how to return for round two. Some have argued that the agency just needs to clarify its definition of the market and the data it relies on.

It should be recalled that in dismissing the complaint, the judge also ruled that “the FTC's inability to provide any indication of the metric (s) or method (s) it used to calculate Facebook's market share , their vague & # 39; 60% -plus claim is too speculative and too conclusive to go on. ”Defining“ market ”and“ market share ”and comparing data against them are not easy in the case of Facebook.

Since access to the social media platform is free for users, identifying the “market” could mean taking into account the advertisers who actually pay for the space there. Here, the share of Facebook is as small as in all US American online advertising. The proportion rises to 60 percent if you limit yourself to US social media advertising, but then drops again when the social media advertising market is viewed globally. In addition, “social networking” is itself a flowing category. A study commissioned by Facebook found that 90% of Facebook app users also use YouTube and 25% Twitter. To further complicate matters, Facebook is classified as a "social network" in the Apple App Store, but YouTube is classified as "video, music and live streaming" and Twitter is classified as "news". Other measured values, e.g. Time spent with the apps or the total number of user interactions, for example, are not reported regularly. Regardless of how the FTC redefines the market and market share (and even if accepted by the judge), the definitions will face numerous challenges that are sure to lengthen the legal process and give the defendant the upper hand.

One could argue that traditional metrics for demonstrating monopoly power – “market share” and related metrics – are out of date and require a different approach. Instead, the FTC could formulate the lawsuit against Facebook differently: The company used its dominance to play with user data quickly and easily. For such an argument to be valid, however, it must be linked to the impact on consumer welfare – the prevailing antitrust standard that has been in use since the 1960s. But how do you prove that consumers are being harmed by Facebook collecting their data? Some of the data collected provides users with services that are clearly tailored to their interests and that many users find useful. This raises other questions: Are users being asked for more data than is strictly necessary? Is the information collected in an intrusive or abusive way? Ultimately, the FTC and the courts should have decided whether customers were getting good value in exchange for their data.

Regardless of how they talk about consumer protection, Khan in particular shouldn't allow himself to be forced into this straitjacket; Finally, she has argued that antitrust standards based on consumer welfare are not suitable for measuring competitiveness in the digital economy. In order to put her ideas into action, she should be free to bring up a case based on the argument that a company's influence on the structure of the market stifles competition.

Naturally, since Khan has written energetically about revising antitrust standards, it is to be expected that this case would be their chance not only to rewrite the indictment against Facebook, but to change those standards in general. There is no doubt that your thoughts are here. The FTC, under her leadership, voted to repeal a 2015 policy statement that limited the agency's reach and gave it scope to frame cases beyond the two fundamental limits of antitrust law in the United States: the Sherman Antitrust Act and the Clayton Antitrust Act.

But the FTC's leverage is limited.

While Khan can reformulate the basics of the antitrust complaint, without an adequate regulatory infrastructure – which only Congress can provide – there will likely be insurmountable barriers as the game of chess between the law and Facebook unfolds. No matter how brilliantly Khan's FTC paraphrase the case against Facebook, the agency's powers, budget and resources are still limited. Ad hoc budget adjustments to the FTC's budget, as envisaged in one of the bills in Congress, and makeshift measures to expand its powers, cannot avoid the fundamental fact that the FTC was not established to address the range of novel issues and political trade follow. Offs that create digital industries.

Antitrust law in digital industries cannot be viewed in isolation. It is also very different from antitrust law in other industries as there are industry-specific issues. A holistic view of digital antitrust law means linking antitrust concerns with numerous broader questions, such as: These include securing users' data rights, the responsibility platforms should have for the content they host, and criteria that help differentiate the benefits of network effects from network abuse. The FTC is too much of a general-purpose entity to delve into this complexity. As former Federal Communications Commission Chairman Tom Wheeler noted, “The vast scope of the FTC's current responsibilities – as diverse as funeral home practices, robocalls, and hockey puck labeling – mean that oversight of regulation is more digital Platforms have to compete with the existing diverse responsibilities of the agency and have limited resources. "

Meanwhile, Facebook is stepping up its defense. Even while the FTC is rounding up its moves and reconsidering its complaint, Facebook is busy integrating the back-end infrastructure that supports its popular apps: Facebook Messenger, Instagram, and WhatsApp. This probably makes it impossible to take the apps apart. In addition to the technical aspects of integration, which offer the company many advantages, Facebook advocates that consumers also benefit from it. It tests a unified “account center” that shows the user all apps that the user has opened; Facebook Messenger and Instagram users can send messages and access functions across apps. Most importantly, this could also enable end-to-end encryption across all apps, which would hugely bolster Facebook's argument that its changes are intended to improve user privacy.

It is conceivable that even if the FTC's rewritten complaint were accepted, antitrust proceedings would take a long time. In the meantime, Facebook will have already achieved a fait accompli, making it difficult to move on with the current narrow core of complaints. Indeed, Khan's predecessor, Joseph Simons, admitted that Facebook's plan to integrate its apps would challenge every step in the company's dissolution.

So what is to be done? I would recommend three packages of measures.

Khan and the FTC need help from Congress and the White House. It is not enough, as proposed in a bill, to increase the FTC's funding for antitrust enforcement. Budgets are only part of what prevents the agency from taking a holistic approach to regulating the digital industry.

All parties concerned need to look longer-term and stop engaging in short-term skirmishes, either with the courts or even between members of the US House of Representatives fighting over tight bills to be passed. This should be an opportunity to look at the various topics of the digital industry in their entirety: data protection versus the use of data for better services, platforms as media companies with editorial responsibility versus platforms as “public spaces”, network effects versus networks as entry barriers and potential sources of abuse of power .

The digital industry needs its own regulator to solve these problems. As I argued in Foreign Policy, Congress needs to create a new agency – perhaps called the Federal Digital Commission – modeled on the Securities and Exchange Commission to handle the unique complexities of the financial services industry separately from the FTC. This authority can be empowered to set antitrust rules on a broader basis than the FTC can pursue. Congress is keen to find ways to define antitrust law more broadly, and it needs an agency that can fulfill such a broader mandate.

The holistic view will be a long-term project. In the meantime, Congress can bring several of its priorities together by linking a few more points. With several bills up for discussion, it's impacting big tech in general and Facebook in particular. It can make some short-term gains: It is desperately looking for ways to fund US President Joe Biden's infrastructure plan – an essential part of which is to close the country's digital divide. Why not get Facebook to shut down broadband with its high capacity fiber optic lines already installed in many parts of the country (North Carolina is a good example) and its Terragraph technology that can deliver fiber-optic speeds in urban environments? Close the loopholes and save US taxpayers a lot of money?

To create the new agency, Congress must end its political bickering and unite. The problem is that while there appears to be bipartisan support for action against big tech, unity is a mirage; Republicans and Democrats have different reasons for wanting to curtail the powers of tech companies. When the new agency is up and running, it is important to involve fresh-thinking and innovative executives. Leave that to a reformer like Khan. Your talents are needed more in an agency that focuses on the digital industry than on "funeral director practices, robocalls and hockey puck tagging".

Well worth waiting for the bigger price. The federal judge did the Americans a favor by giving Congress a chance to press the restart button on its antitrust crusade against big tech. The worst thing you can do is provide the author of the Yale Law Journal's most famous note with a hasty task that will end up as a forgotten footnote in the annals of tech antitrust law.

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