Friday, September 14, 2018

Amazon’s Antitrust Antagonist Has a Breakthrough Idea

In early 2017, when she was an unknown law student, Lina Khan published “Amazon’s Antitrust Paradox” in the Yale Law Journal.CreditCreditBrandon Thibodeaux for The New York Times

Amazon’s Antitrust Antagonist Has a Breakthrough Idea

With a single scholarly article, Lina Khan, 29, has reframed decades of monopoly law.

In early 2017, when she was an unknown law student, Lina Khan published “Amazon’s Antitrust Paradox” in the Yale Law Journal.CreditCreditBrandon Thibodeaux for The New York Times
The dead books are on the top floor of Southern Methodist University’s law library.
“Antitrust Dilemma.” “The Antitrust Impulse.” “Antitrust in an Expanding Economy.” Shelf after shelf of volumes ignored for decades. There are a dozen fat tomes with transcripts of the congressional hearings on monopoly power in 1949, when the world was in ruins and the Soviets on the march. Lawmakers believed economic concentration would make America more vulnerable.
At the end of the antitrust stacks is a table near the window. “This is my command post,” said Lina Khan.
It’s nothing, really. A few books are piled up haphazardly next to a bottle with water and another with tea. Ms. Khan was in Dallas quite a bit over the last year, refining an argument about monopoly power that takes aim at one of the most admired, secretive and feared companies of our era: Amazon.
The retailer overwhelmingly dominates online commerce, employs more than half a million people and powers much of the internet itself through its cloud computing division. On Tuesday, it briefly became the second company to be worth a trillion dollars.

If competitors tremble at Amazon’s ambitions, consumers are mostly delighted by its speedy delivery and low prices. They stream its Oscar-winning movies and clamor for the company to build a second headquarters in their hometowns. Few of Amazon’s customers, it is safe to say, spend much time thinking they need to be protected from it.
But then, until recently, no one worried about Facebook, Google or Twitter either. Now politicians, the media, academics and regulators are kicking around ideas that would, metaphorically or literally, cut them down to size. Members of Congress grilled social media executives on Wednesday in yet another round of hearings on Capitol Hill. Not since the Department of Justice took on Microsoft in the mid-1990s has Big Tech been scrutinized like this.
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Amazon has more revenue than Facebook, Google and Twitter put together, but it has largely escaped sustained examination. That is beginning to change, and one significant reason is Ms. Khan.

At the S.M.U. library in Dallas, Ms. Khan was finding inspiration from books that predated the price-based era of monopoly law.CreditBrandon Thibodeaux for The New York Times
In early 2017, when she was an unknown law student, Ms. Khan published “Amazon’s Antitrust Paradox” in the Yale Law Journal. Her argument went against a consensus in antitrust circles that dates back to the 1970s — the moment when regulation was redefined to focus on consumer welfare, which is to say price. Since Amazon is renowned for its cut-rate deals, it would seem safe from federal intervention.

Ms. Khan disagreed. Over 93 heavily footnoted pages, she presented the case that the company should not get a pass on anticompetitive behavior just because it makes customers happy. Once-robust monopoly laws have been marginalized, Ms. Khan wrote, and consequently Amazon is amassing structural power that lets it exert increasing control over many parts of the economy.
Amazon has so much data on so many customers, it is so willing to forgo profits, it is so aggressive and has so many advantages from its shipping and warehouse infrastructure that it exerts an influence much broader than its market share. It resembles the all-powerful railroads of the Progressive Era, Ms. Khan wrote: “The thousands of retailers and independent businesses that must ride Amazon’s rails to reach market are increasingly dependent on their biggest competitor.”
The paper got 146,255 hits, a runaway best-seller in the world of legal treatises. That popularity has rocked the antitrust establishment, and is making an unlikely celebrity of Ms. Khan in the corridors of Washington.
She has her own critics now: Several leading scholars have found fault with Ms. Khan’s proposals to revive and expand antitrust, and some have tried to dismiss her paper with the mocking label “Hipster Antitrust.” Unwilling or perhaps unable to accept that a woman wrote a breakthrough legal text, they keep talking about bearded dudes.
Ms. Khan was born in London to Pakistani parents who emigrated to the United States when she was 11. She is now 29, an Amazon critic whose Amazon account is largely inactive, newly married to a Texas doctor who uses his Amazon Prime account all the time. Ms. Khan was supposed to move this summer to Los Angeles, where she had a clerkship with Stephen Reinhardt, the Ninth Circuit Court of Appeals judge and liberal icon, but he suddenly died in March. Instead, Ms. Khan is set to start a fellowship at Columbia this fall, and is considering other projects as well. There is no shortage of parties that want her advice on how to reckon with Big Tech.
“As consumers, as users, we love these tech companies,” she said. “But as citizens, as workers, and as entrepreneurs, we recognize that their power is troubling. We need a new framework, a new vocabulary for how to assess and address their dominance.”
At the S.M.U. library in Dallas, Ms. Khan was finding that vocabulary. These dead books, many from an era that predated the price-based era of monopoly law, were an influence and an inspiration. She was planning to expand her essay into a book, she said in an interview here in June.

Then her life shifted, and she abruptly went from an outsider proposing reform to an insider formulating policy. Rohit Chopra, a new Democratic commissioner at the Federal Trade Commission, pulled her in as a temporary adviser in July, at a time when urgent questions about privacy, data, competition and antitrust were suddenly in the air. The F.T.C. is holding a series of hearings this fall, the first of their type since 1995, on whether a changing economy requires changing enforcement attitudes.
The hearings will begin on Sept. 13 at Georgetown University Law Center. Two panels will debate whether antitrust should keep its narrow focus or, as Ms. Khan urges, expand its range.
“Ideas and assumptions that it was heretical to question are now openly being contested,” she said. “We’re finally beginning to examine how antitrust laws, which were rooted in deep suspicion of concentrated private power, now often promote it.”
Genuinely original voices are rare in Washington policy circles, and Mr. Chopra is pleased to have Ms. Khan in his camp. “It’s rare to come across a legal prodigy like Lina Khan,” he said. “Nothing about her career is typical. You don’t see many law students publish groundbreaking legal research, or research that had such a deep impact so quickly.”

Jeff Bezos, the founder of Amazon.CreditDavid Ryder/Getty Images

Then: Rockefeller. Now: Bezos.

Ida Tarbell, the journalist whose investigation of Standard Oil helped bring about its breakup, wrote this about John D. Rockefeller in 1905:
“It takes time to crush men who are pursuing legitimate trade. But one of Mr. Rockefeller’s most impressive characteristics is patience. … He was like a general who, besieging a city surrounded by fortified hills, views from a balloon the whole great field, and sees how, this point taken, that must fall; this hill reached, that fort is commanded. And nothing was too small: the corner grocery in Browntown, the humble refining still on Oil Creek, the shortest private pipeline. Nothing, for little things grow.”
When Ms. Khan read that, she thought: Jeff Bezos.
Her Yale Law Journal paper argued that monopoly regulators who focus on consumer prices are thinking too short-term. In Ms. Khan’s view, a company like Amazon — one that sells things, competes against others selling things, and owns the platform where the deals are done — has an inherent advantage that undermines fair competition.

“The long-term interests of consumers include product quality, variety and innovation — factors best promoted through both a robust competitive process and open markets,” she wrote.
The issue Ms. Khan’s article really brought to the fore is this: Do we trust Amazon, or any large company, to create our future? In think tanks and universities, the battle has been joined.
“It’s one thing to say that antitrust enforcement has gotten far too weak,” said Daniel Crane, a University of Michigan scholar who doesn’t agree with Ms. Khan but credits her with opening up a much-needed debate. “It’s a bridge much further to say we should go back to the populist goal of leveling playing fields and checking ‘bigness.’ ”
As Mr. Crane writes in a forthcoming law review article: “Antitrust law stands at its most fluid and negotiable moment in a generation.”
The resistance is fierce and prominent. Herbert Hovenkamp, an antitrust expert at the University of Pennsylvania Law School, wrote that if companies like Amazon are targeted simply because their low prices hurt competitors, we might “quickly drive the economy back into the Stone Age, imposing hysterical costs on everyone.”
Timothy Muris, a former chairman of the F.T.C., and Jonathan Nuechterlein, a former F.T.C. general counsel, published a paper in June that was a response to Ms. Khan and the antitrust reform movement. Called “Antitrust in the Internet Era,” it was about the A.&P. grocery chain.
A.&P. essentially invented the modern supermarket in the 1920s. With its low prices, wide range of products and penchant for disruption, the chain became the leading retailer of its era. It owned 70 factories and eliminated middlemen, which allowed it to keep costs down. Yet, Mr. Muris and Mr. Nuechterlein wrote, “A.&P.’s very popularity triggered a backlash.” The government pursued A.&P. on antitrust grounds during the 1940s, egged on by competitors that could not compete. After decades of decline, A.&P. shut its doors for good in 2015.

The analogies with Amazon are explicit. Don’t let the government pursue Amazon the way it pursued A.&P., Mr. Muris and Mr. Nuechterlein warned.
“Amazon has added hundreds of billions of dollars of value to the U.S. economy,” they wrote. “It is a brilliant innovator” whose “breakthroughs have in turn helped launch new waves of innovation across retail and technology sectors, to the great benefit of consumers.”
Amazon itself could not have made the argument any better. Which isn’t surprising, because in a footnote on the first page, the authors noted: “We approached Amazon Inc. for funding to tell the story” of A.&P., “and we gratefully acknowledge its support.” They added at the end of footnote 85: “The authors have advised Amazon on a variety of antitrust issues.”
Amazon declined to say how much its support came to in dollars. It also declined to comment on Ms. Khan or her paper directly, but issued a statement.
“We operate in a diverse range of businesses, from retail and entertainment to consumer electronics and technology services, and we have intense and well-established competition in each of these areas,” the company said. “Retail is our largest business today and we represent less than 1 percent of global retail.”

“As consumers, as users, we love these tech companies,” Ms. Khan said. “But as citizens, as workers, and as entrepreneurs, we recognize that their power is troubling. We need a new framework, a new vocabulary for how to assess and address their dominance.”CreditLexey Swall for The New York Times

‘We’re at the Very Beginning of Solutions to This’

The first time Ms. Khan held power to account involved a Starbucks in suburban New York that was banning students from sitting down. Ms. Khan decided to write an article about the policy; Starbucks wouldn’t answer her questions, but she managed to interview the employees. The New York Times picked up on the tempest, leaning on her reporting. Ms. Khan was 15, a correspondent for her high school newspaper.

Her father was a management consultant; her mother an executive in information services. Ms. Khan went to Williams College, where she wrote a thesis on the political philosopher Hannah Arendt. She was the editor of the student paper but worked hard at everything.
“We were routinely emailing each other on separate floors of the library as it was closing at 2 a.m.,” said Amanda Korman, a classmate.
Like many a wonkish youth, Ms. Khan headed to Washington after graduating in 2010, applying for a position at the left-leaning New America Foundation. Barry Lynn, who headed the organization’s Open Markets antimonopoly initiative, seized on her application. “It’s so much easier to teach public policy to people who already know how to write than teach writing to public policy experts,” said Mr. Lynn, a former journalist.
Ms. Khan wrote about industry consolidation and monopolistic practices for Washington publications that specialize in policy, went to Yale Law School, published her Amazon paper and then came back to Washington last year, just as interest was starting to swell in her work.
In the summer of 2017, Open Markets was ejected from New America amid messy accusations that it displeased Google, a prominent funder, after the company was rebuked by European regulators for anticompetitive behavior. The think tank is now independent.
“Polls show huge concerns about concentrated power, corporate power, but if people are asked, ‘Do we have a monopoly problem?’ they answer, ‘I don’t know,’ ” said Mr. Lynn. “They don’t have the language for it.”
Amazon’s $14 billion purchase of Whole Foods in the summer of 2017 — a startling move into physical retail — was almost a watershed, but not quite. Rep. David Cicilline of Rhode Island, the ranking Democrat on the Subcommittee on Regulatory Reform, Commercial and Antitrust Law, called for hearings but did not get them.

“The whole country has been struggling to understand why the economy is not operating in the right way,” Mr. Cicilline said. “Wages have remained stagnant. Workers have less and less power. All we’re trying to do is create a level playing field, and that’s harder when you have megacompanies that make it virtually impossible for small competitors.” He added, “We’re at the very beginning of solutions to this.”
Somewhere in the midst of all this, Ms. Khan found the time to marry Shah Ali, a doctor now doing a cardiology fellowship in Dallas, which explains why she was camping out at the S.M.U. law library. The honeymoon was in Hawaii. Dr. Ali took Jane Austen’s “Persuasion,” because he hadn’t reread it in a while. Ms. Khan brought a book on corporations and American democracy.

“It’s rare to come across a legal prodigy like Lina Khan,” said Rohit Chopra, a new Democratic commissioner at the Federal Trade Commission. “Nothing about her career is typical. You don’t see many law students publish groundbreaking legal research, or research that had such a deep impact so quickly.”CreditLexey Swall for The New York Times

‘The New Brandeisians’ Lacks a Certain Something

The battle for intellectual supremacy takes place less these days in learned journals and more on social media, where tongues are sharp and branding is all. This is not Ms. Khan’s strong suit. She is always polite, even on Twitter. One consequence is that she didn’t give much thought about what to call the movement to reboot antitrust. Neither did anyone else.
That presented an opening for the reformers’ critics, who have tried with a limited degree of success to popularize the term “Hipster Antitrust.” Konstantin Medvedovsky, an antitrust lawyer in New York, came up with the label last summer in a tweet that was responding to a tweet that was responding to a tweet by Ms. Khan.
“Antitrust Hipsterism,” he wrote. “Everything old is cool again.”
Mr. Medvedovsky, who calls Ms. Khan’s article “the face of this movement,” said the term was designed to be “playful rather than pejorative.”
Admirers of Ms. Khan and her fellow reformers have sometimes called them the New Brandeis School or the New Brandeisians, after Louis Brandeis, the Progressive Era foe of big business. As brands go, these are somewhat less catchy than “Hipster Antitrust.”

The April issue of the journal Antitrust Chronicle, edited by Mr. Medvedovsky, features a drawing of a bearded man on the cover right above the words “Hipster Antitrust.” In the middle of an article by Philip Marsden, a professor of competition law and economics at the College of Europe in Bruges, there’s a photograph of a bearded man taking a selfie next to the chapter heading “Battle of the Beards.” It is perhaps relevant that only one of the 12 authors or experts in the issue is female.
The Hipster issue was sponsored by Facebook, another sign that Big Tech is striving to shape the monopoly-law debate. The company declined to comment.
Things are moving fast, so there is a lot to write papers about.
Mr. Chopra, with Ms. Khan’s assistance, pushed the argument further on Sept. 6 with a 14-page official comment that suggested the F.T.C. bring back a tool buried in its toolbox: the ability to make rules.
Contemporary antitrust regulation, the commissioner wrote, is conducted in the courts, which makes it numbingly slow and dependent on high-paid expert witnesses. He called for the agency to use its authority to issue rules that would “advance clarity and certainty” about what is, and what is not, an unfair method of competition.
These rules would not be “some inflexible prescription” but standards, guidelines, pointers or presumptions, he wrote. Since everyone affected by a proposed rule would have the opportunity to weigh in on it, the process would be more democratic.
There is more than an echo here of Ms. Khan’s notion that the past can help rescue the future.
“These are new technologies and new business models,” Ms. Khan said. “The remedy is new thinking that is informed by traditional principles.”

Antitrust Foot Soldiers

Big Tech’s great strength is that it is everywhere. Hardly anyone can live without it. But that omnipresence can be a weakness too. Just ask Facebook. It was the only global social media network, an enviable position — until it wasn’t. Ideas for regulating Facebook that were once unimaginable are now on the table.

Ms. Khan was not the first to criticize Amazon, and she said the company was not really her target anyway. “Amazon is not the problem — the state of the law is the problem, and Amazon depicts that in an elegant way,” she said.
From Amazon’s point of view, however, it is a problem indeed that Ms. Khan concludes in the Yale paper that regulating parts of the company like a utility “could make sense.” She also said it “could make sense” to treat Amazon’s e-commerce operation like a bridge, highway, port, power grid or telephone network — all of which are required to allow access to their infrastructure on a nondiscriminatory basis.
Ms. Khan put those ideas out there, which is how Rachel Tsuna found them.
Last fall, the Barnard College senior was casting about for a subject for her senior thesis. “What is really interesting to you?” her adviser asked. Ms. Tsuna, now 22, had worked for a chewing gum start-up — yes, there are such things — that sold through Amazon, and knew firsthand the retailer’s tight grip. “Amazon is scary!” she exclaimed.
This impulsive declaration suggested a topic: Did the F.T.C. have the grounds to move against Amazon? Ms. Tsuna made little progress until she came across Ms. Khan’s paper.
“I finally felt like I was pursuing something valid,” Ms. Tsuna said. “Lina Khan gave me the confidence I needed.” The thesis, which is quite fair to Amazon, got an A minus.
That’s the way movements begin. Little things grow.
“This is a moment in time that invites a movement,” said Ms. Khan. “It’s bigger than antitrust, bigger than Big Tech. It’s about whether the laws serve democratic ends.”
It was late at night in late July, and she was eating a burrata concoction at a popular restaurant near the Washington apartment she uses when not in Texas with her husband. After the death of Judge Reinhardt, her options opened up. She had the Columbia fellowship. Maybe she would also write the book. Or go back to the F.T.C. full time. Or somehow do it all.

“Amazon is a monopoly, and I worry that it monopolizes Lina,” said her husband, Dr. Ali. “I learn about what she is doing from looking at her Twitter feed.”
“I throw myself into things,” Ms. Khan agreed. “My life is spread out now.”
With some cajoling, she revealed her Amazon account. There were just three purchases in 18 months. An altimeter for her father, who has taken up hiking, is the only one she will agree to have mentioned, although the other two are incredibly benign. One attribute Ms. Khan shares with Amazon is a strong desire to control the flow of information.
Somewhat to her surprise, she is becoming a public figure. Before beginning her stint at the F.T.C., she said the news of her working there might be no more than a sentence or two at news sites that cover policy intensively. Instead it was a full-fledged story. The Information, a tech news site, declared: “Amazon Antitrust Push Slowly Gains Ground.”Politico just named her one of the Politico 50, its annual list of the people driving the ideas driving politics.
Balancing the attention and the achievement, the expectations and the demands, is difficult, perhaps impossible.
“I don’t think of my work in grandiose terms. I feel an urgency but I’m also wary of hubris,” Ms. Khan said. “Nobody has been expecting this to succeed. I’m awed by the challenge.”

Follow David Streitfeld on Twitter: @DavidStreitfeld.
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A version of this article appears in print on , on Page BU1 of the New York edition with the headline: Be Afraid, Jeff Bezos, Be Very AfraidOrder Reprints | Today’s Paper | Subscribe
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