Why Lina Khan and the F.T.C. must prevail in their long-awaited lawsuit against Amazon.
The Federal Trade Commission’s chair, Lina Khan, has brought her long-awaited, audacious case against Amazon, signaling the Biden administration’s determination to restore an approach to competition law that has been in decline since the Carter administration. This will doubtless draw fresh criticism about her supposed overreach. But Amazon is precisely the kind of company that Congress had in mind in enacting America’s many antitrust laws.
Only more so: The Congress of 1890, which passed the first of those laws, could never have imagined the world we now inhabit.
The robber barons of that era hijacked the economy and politics, but they also faced the constraints of empires grounded in physical goods. They couldn’t lay a railroad or erect a steel mill without time-consuming capital and logistical hurdles. Today’s tech barons at huge platforms like Amazon, Google and Meta can deploy anticompetitive, deceptive and unfair tactics with the agility and speed of a digital system. As in any shell game, the quickness of the hand deceives the eye.
And Amazon is the apex predator of our platform era. Having first subsidized end-users, and then offered favorable terms to business customers, Amazon was able to exploit its digital flexibility to lock both in and raid them for an ever-increasing share of the value they created. This program of redistribution from platform users to shareholders continued until Amazon has become a vestigial place, a retail colossus barely hindered by either competition or regulation, where prices go up as quality goes down, and the undifferentiated slurry of products from obscure brands is wreathed in inauthentic reviews.
It’s hard to remember that the internet was originally supposed to connect producers and shoppers, artists and audiences, and members of communities with one another without permission or control by third parties. In its early years, Amazon was good to its users. It sold products affordably, and shipped them swiftly and reliably. It attended closely to the authenticity of the reviews that appeared on its site and operated an “honest search” that populated results pages with the best matches for each query.
Then Amazon started locking everyone in. Through Prime, it presold customers a year’s worth of shipping. With its digital publishing ventures, it nudged customers toward subscriptions, building a captive base of readers and deploying technology and expansive readings of obscure copyright laws to stop them from moving their books to other platforms. It opened Prime shipping at a low rate to its suppliers, relieving businesses of messy fulfillment logistics.
Meanwhile, its heavy subsidies, made possible by its investors’ appetite for backing an incipient monopoly, made it increasingly difficult for rival retail sites to gain traction, because Amazon’s seemingly bottomless coffers meant that it could sell goods below cost and extinguish any upstart that dared to compete with it. This created another form of lock-in for Amazon: It became progressively harder not to shop there.
The more locked in we were, the less Amazon needed to offer us. The customer-friendly, honest search degraded as the company began to allow retailers to buy their way to the top of listings, and by 2021, ads generated $31 billion in revenue. As sellers became increasingly reliant upon Amazon to display and deliver their goods, the company was free to drain money from them, too, piling fee upon fee and reportedly copying best-selling products.
Amazon’s army of workers also suffered: They are routinely maimed on the job, and on-site infirmaries send badly injured workers back into harm’s way. Its warehouse workers urinate in bottles to keep up with impossibly high fulfillment demands; its drivers are forced to defecate in bags. Amazon pioneered the “megacycle,” a 10.5-hour, mandatory graveyard shift at its warehouses, as well as a new kind of arm’s-length quasi entrepreneur who borrows small fortunes and hires legions of drivers kitted out in Amazon livery, only to be stuck with the bill for all those delivery vans — and risk termination at any moment.
Now we are at the final stage of monopolistic decay. The nation’s dominant online retail marketplace not only claws away much of its sellers’ revenues but also now penalizes them if they sell their products for lower prices at other retail outlets (including at its archrivals Target and Walmart). Amazon gets the American consumer coming and going, providing worse goods at higher prices while receiving vast sums in subsidies from state and local governments.
Speaking for his landmark antitrust bill of 1890, Sen. John Sherman said: “If we will not endure a king as a political power, we should not endure a king over the production, transportation and sale of any of the necessaries of life. If we would not submit to an emperor we should not submit to an autocrat of trade.”
This suspicion of corporate power died in the Reagan era, when regulators adopted a new posture grounded in the idea that monopolies were evidence of efficiency and should be nurtured, and that “consumer welfare” in the form of low prices was an absolute good of antitrust law. Amazon is surely the king of our time. Our antitrust laws were fashioned specifically to guard against this overwhelming corporate power — both its accumulation and its abuse.
This is something Ms. Khan, the F.T.C. chair, understands better than almost anyone: As a law student, she published “Amazon’s Antitrust Paradox” in The Yale Law Journal in 2017. That article launched her career as an antitrust theorist, culminating in her elevation to the trade commission just four years later. Ironically, Ms. Khan’s deep expertise on Amazon and past criticism prompted the company to seek her recusal from antitrust investigations.
Ms. Khan has taken aim at some of the largest tech companies the world has ever seen. Sometimes, she loses. The F.T.C. failed to block Microsoft’s acquisition of Activision Blizzard and Meta’s acquisition of Within. Ms. Khan’s detractors then smear her with claims of gamesmanship and insincerity. But she is engaged in the honorable and necessary business of restoring the enforcement program of the federal government. She seeks to reinvigorate the use of the longstanding — and long-dormant — powers she already has.
The best time to have fought this power was over the past quarter-century, as Amazon’s founder, Jeff Bezos, used his shareholders’ capital on predatory pricing campaigns, seemingly in plain violation of the Robinson-Patman Act of 1936, and on a string of anticompetitive acquisitions that surely violated the Clayton Antitrust Act of 1914.
The second best time to fight this power is now. Ms. Khan, who is joined by over a dozen states in taking on Amazon, has set herself a monumental, urgent, necessary task. She is fighting to win — but if she loses again, it will not signal defeat.
The calcified edifice of expensively purchased pro-monopoly precedent is hard, but it appears brittle. With our support, Ms. Khan — and her colleagues on the commission as well as Jonathan Kanter, her opposite number at the Justice Department’s antitrust division — will continue to hammer away at this yellowing old shell until it shatters.
Cory Doctorow is the author of the newsletter Pluralistic and of “The Internet Con: How to Seize the Means of Computation.” This article originally appeared in The New York Times.