Khan, Lina

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The Trustbuster Who Has Apple and Google in His Sights

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Shortly after Jonathan Kanter took over the Justice Department’s antitrust division in November 2021, the agency secured an additional $50 million to investigate monopolies, bust criminal cartels and block mergers.To celebrate, Mr. Kanter bought a prop of a giant check, placed it outside his office and wrote on the check’s memo line: “Break ’Em Up.”Mr. Kanter, 50, has pushed that philosophy ever since, becoming a lead architect of the most significant effort in decades to fight the concentration of power in corporate America. On Thursday, he took his biggest swing when the Justice Department filed an antitrust lawsuit against Apple. In the 88-page lawsuit, the government argued that Apple had violated antitrust laws with practices intended to keep customers reliant on its iPhones and less likely to switch to competing devices.That lawsuit joins two Justice Department antitrust cases against Google that argue the company illegally shored up monopolies. Mr. Kanter’s staff has also challenged numerous corporate mergers, including suing to stop JetBlue Airways from buying Spirit Airlines.“We want to help real people by making sure that our antitrust laws work for workers, work for consumers, work for entrepreneurs and work to protect our democratic values,” Mr. Kanter said in a January interview. He declined to comment on the Google cases and other active litigation.At a news conference about the Apple lawsuit on Thursday, Mr. Kanter compared the action to past Justice Department challenges to Standard Oil, AT&T and Microsoft. The suit is aimed at protecting “the market for the innovations that we can’t yet perceive,” he said.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    An Emboldened F.T.C. Bolsters Biden’s Efforts to Address Inflation

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    With few unilateral options and little hope of legislation from Congress, the president’s early investment in competition policy could pay a political dividend.An independent federal agency has become one of the most reliable executors of President Biden’s attempts to fight inflation, at a time when the White House has few weapons of its own to quickly bring down stubbornly high prices of consumer staples like groceries.The Federal Trade Commission filed a lawsuit on Monday, joined by several state attorneys general, to challenge a merger between the supermarket giants Kroger and Albertsons. The agency’s rationale in many ways echoed Mr. Biden’s renewed attempts to blame corporate greed for rising prices and shrinking portions in grocery aisles.“If allowed, this merger would substantially lessen competition, likely resulting in Americans paying millions of dollars more for food and other essential household goods,” agency officials wrote in a legal complaint. Because grocery prices have risen significantly in recent years, they added, “the stakes for Americans are exceptionally high.”That is true for consumers, and it is true for the president. More Americans disapprove of his handling of the economy than approve of it. Consumer confidence, while improved in recent months, remains relatively weak for an economy with low unemployment and solid growth like the one Mr. Biden is presiding over.An internal analysis by White House economists suggests that no single factor is weighing more on consumer sentiment than grocery prices. Those costs soared in 2022 and have not fallen, though their rate of increase has slowed.White House officials concede that there is little more Mr. Biden can do unilaterally to reduce grocery prices and even less chance of legislative help from Congress. That is why Mr. Biden has resorted to the bully pulpit, calling on stores to reduce prices and chastising snack makers for engaging in “shrinkflation” — reducing portions while raising or maintaining prices.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Can a Tech Giant Be Woke?

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    The December day in 2021 that set off a revolution across the videogame industry appeared to start innocuously enough. Managers at a Wisconsin studio called Raven began meeting one by one with quality assurance testers, who vet video games for bugs, to announce that the company was overhauling their department. Going forward, managers said, the lucky testers would be permanent employees, not temps. They would earn an extra $1.50 an hour.It was only later in the morning, a Friday, that the catch became apparent: One-third of the studio’s roughly 35 testers were being let go as part of the overhaul. The workers were stunned. Raven was owned by Activision Blizzard, one of the industry’s largest companies, and there appeared to be plenty of work to go around. Several testers had just worked late into the night to meet a looming deadline.“My friend called me crying, saying, ‘I just lost my job,’” recalled Erin Hall, one of the testers who stayed on. “None of us saw that coming.”The testers conferred with one another over the weekend and announced a strike on Monday. Just after they returned to work seven weeks later, they filed paperwork to hold a union election. Raven never rehired the laid-off workers, but the other testers won their election in May 2022, forming the first union at a major U.S. video game company.It was at this point that the rebellion took a truly unusual turn. Large American companies typically challenge union campaigns, as Activision had at Raven. But in this case, Activision’s days as the sole decision maker were numbered. In January 2022, Microsoft had announced a nearly $70 billion deal to purchase the video game maker, and the would-be owners seemed to take a more permissive view of labor organizing.The month after the union election, Microsoft announced that it would stay neutral if any of Activision’s roughly 7,000 eligible employees sought to unionize with the Communications Workers of America — meaning the company would not try to stop the organizing, unlike most employers. Microsoft later said that it would extend the deal to studios it already owned.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    The Upshot of Microsoft’s Activision Deal: Big Tech Can Get Even Bigger

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    President Biden’s top antitrust officials have used novel arguments over the past few years to stop tech giants and other large companies from making deals, a strategy that has had mixed success.But on Friday, when Microsoft closed its blockbuster $69 billion acquisition of the video game publisher Activision Blizzard after beating back a federal government challenge, the message sent by the merger’s completion was incontrovertible: Big Tech can still get bigger.“Big Tech companies will certainly be reading the tea leaves,” said Daniel Crane, a law professor at the University of Michigan. “Smart money says merge now while the merging is good.”Microsoft’s purchase of Activision was the latest deal to move forward after a string of failed challenges to mergers by the Federal Trade Commission and the Justice Department, which are also confronting the big tech companies through lawsuits arguing they broke antimonopoly laws. Leaders at the two agencies had tried to block at least 10 other deals over the past two years, promising to dislodge longstanding ideas from antitrust law that they said had protected behemoths like Microsoft, Google and Amazon.But their efforts ran headlong into skeptical courts, largely leaving those core assumptions untouched. In the case of Microsoft’s Activision deal, the idea that the F.T.C. questioned was a “vertical” transaction, which refers to mergers between firms that are not primarily direct competitors. Regulators have rarely sued to block such deals, figuring that they generally do not create monopolies.Yet “vertical” deals have been especially common in the tech industry, where companies like Meta, Apple and Amazon have sought to grow and protect their empires by spreading into new business lines.In 2017, for instance, Amazon bought the high-end grocery chain Whole Foods for $13.4 billion. In 2012, Meta acquired the photo-sharing app Instagram for $1 billion and then shelled out nearly $19 billion for the messaging service WhatsApp in 2014. Of the 24 deals worth more than $1 billion completed by the tech giants from 2013 to mid-August of this year, 20 were vertical transactions, according to data provided by Dealogic.The sealing of the Microsoft-Activision deal has buttressed the notion that vertical deals generally are not anticompetitive and can still go through relatively unscathed.“There continues to be the presumption that vertical integration can be a healthy phenomena,” said William Kovacic, a former chair of the F.T.C. The F.T.C. is proceeding with its challenge to the Microsoft-Activision deal even as it has closed, said Victoria Graham, a spokeswoman for the agency, who added that the acquisition was a “threat to competition.” The Justice Department declined to comment. The White House did not immediately have a comment.The idea that vertical transactions were less likely to harm competition than combinations of direct rivals has been ingrained since the late 1970s. In the ensuing decades, the Justice Department and F.T.C. took no challenges to vertical deals to court, instead reaching settlements that allowed companies to proceed with their deals if they changed practices or divested parts of their business.Then, in 2017, the Justice Department sued to block the $85.4 billion merger between the phone giant AT&T and the media company Time Warner, in the agency’s first attempt to stop a vertical deal in decades. A judge ruled against the challenge in 2018, saying he did not see enough evidence of anticompetitive harms from the union of companies in different industries.Mr. Biden’s top antitrust officials — Lina Khan, the F.T.C. chair, and Jonathan Kanter, the top antitrust official at the Justice Department — have been even more aggressive in challenging vertical mergers since they were appointed in 2021.That year, the F.T.C. sued to stop the chip maker Nvidia from buying Arm, which licenses chip technology, and the companies abandoned the deal. In January 2022, the F.T.C. announced it would block Lockheed Martin’s $4.4 billion acquisition of Aerojet Rocketdyne Holdings, a missile propulsion systems maker. The companies dropped their merger.But judges rejected many of their efforts for lack of evidence and denied Ms. Khan and Mr. Kanter a courtroom win that would have set new precedent. In 2022, after the D.O.J. sued to block UnitedHealth Group’s acquisition of Change Healthcare, a judge ruled against the agency.Lina Khan, the chair of the Federal Trade Commission, challenged Microsoft’s deal for Activision last year. Tom Brenner for The New York TimesThe F.T.C.’s move to block Microsoft’s purchase of Activision last year was a bold effort by Ms. Khan, given that the two companies do not primarily compete with one another. The agency argued that Microsoft, which makes the Xbox gaming console, could harm consumers and competition by withholding Activision’s games from rival consoles and would also use the deal to dominate the young market for game streaming.To show that would not be the case, Microsoft offered to make one of Activision’s major game franchises, Call of Duty, available to other consoles for 10 years. The company also reached a settlement with the European Union, promising to make Activision titles available to competitors in the nascent market for game streaming, which allowed the deal to go through.In July, a federal judge ultimately ruled that the F.T.C. didn’t provide enough evidence that Microsoft intended to forestall competition through the deal and that the software giant’s concession eliminated competition concerns.The agencies are “facing judges who have said 40 years of economics show that vertical mergers are good,” said Nancy Rose, a professor of applied economics at M.I.T. with an expertise in antitrust, who is among a group of scholars who say vertical deals can be harmful to competition. She said the agencies should not back down from challenging vertical mergers, but that regulators would need to be careful to choose cases they can prove with an abundance of evidence.Ms. Khan and Mr. Kanter have said they are willing to take risks and lose lawsuits to expand the boundaries of the law and spark action in Congress to change antitrust rules. Ms. Khan has noted that the F.T.C. has successfully stopped more than a dozen mergers.Mr. Kanter has said that challenges to mergers from the Justice Department and the F.T.C. have deterred problematic deals.“There are fewer problematic mergers that are coming to us in the first place,” he said in a speech at the American Economic Liberties Project, a left-leaning think tank, in August.Still, bigger companies that have the resources to fight back will probably feel more confident challenging regulators after the Microsoft-Activision deal, antitrust lawyers said. The aggressive posture by regulators has simply become the cost of doing business, said Ryan Shores, who led tech antitrust investigations at the D.O.J. during the Trump administration and is now a partner at the law firm Cleary Gottlieb.“A lot of companies have come to the realization that if they have a deal they want to get through, they have to be prepared to litigate,” he said. More

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    Amazon to Meet Regulators as U.S. Considers Possible Antitrust Suit

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    Amazon’s meetings with the Federal Trade Commission, known as “last rites” meetings, are typically a final step before the agency votes on filing a lawsuit.Amazon is scheduled to meet with members of the Federal Trade Commission next week to discuss an antitrust lawsuit that the agency may be preparing to file to challenge the power of the retailer’s sprawling business, according to a person with knowledge of the plans.The meetings are set to be held with Lina Khan, the F.T.C. chair, and Rebecca Kelly Slaughter and Alvaro Bedoya, who are F.T.C. commissioners, said the person, who spoke on the condition of anonymity because the discussions are confidential.The meetings signal that the F.T.C. is nearing a decision on whether to move forward with a lawsuit alleging that Amazon has violated antimonopoly laws. Such discussions are sometimes known as “last rites” meetings, named after the prayers some Christians receive on their deathbed. The conversations, which are usually one of the final steps before the agency’s commissioners vote on a lawsuit, give the company a chance to make its case.If the F.T.C. files suit, it would be one of the most significant challenges to Amazon’s business in the company’s nearly 30-year history. Amazon, a $1.4 trillion behemoth, has become a major force in the economy. It now owns not just its trademark online store, but the movie studio Metro-Goldwyn-Mayer, the primary care practice One Medical and the high-end grocery chain Whole Foods. It is also one of the world’s largest provider of cloud computing services.The F.T.C. has investigated Amazon’s business for years. The company’s critics and competitors have argued that the once-upstart online bookstore has used its retailing clout to squeeze the merchants that use its platform to sell their wares. U.S. officials have grown increasingly concerned about the influence and reach of giant tech companies like Amazon, Google and Meta, which owns Facebook and Instagram. The Justice Department has filed several antitrust lawsuits against Google, with two scheduled to go to trial next month. The F.T.C. has also sued Meta over accusations that it snuffed out young competitors by buying Instagram and WhatsApp.Some of those efforts have stumbled in the courts. Federal judges declined this year to stop Meta from acquiring a virtual reality start-up and Microsoft from buying the video game powerhouse Activision Blizzard, dooming F.T.C. challenges to both deals. In 2022, the Justice Department also lost its bid to challenge UnitedHealth Group’s plan to buy a health tech company.Stacy Mitchell, a co-executive director of the advocacy organization Institute for Local Self-Reliance and an Amazon critic, said she hoped the F.T.C. would pursue a sweeping case against the tech giant. She said the agency should focus on how Amazon’s control of the retail business — from its store to its logistics network that delivers packages — let it hurt competitors and merchants.“It’s a watershed moment,” she said. “What we need to see from the F.T.C. is a case that targets the core of Amazon’s monopolization strategy.”Amazon has said that it competes aggressively with other retailers and that efforts to regulate its business would only hurt consumers and the businesses that sell products through its site.Under the leadership of Andy Jassy, Amazon’s chief executive, the retailer has recently been in retrenchment mode. The company has cut costs, laying off thousands of workers as growth slumped after a soaring period fueled by the pandemic. Last week, Amazon announced that its revenue in the second quarter of the year had increased 11 percent, to $134.4 billion, beating analysts’ expectations.In June, the F.T.C. sued Amazon in a separate case that accused the company of tricking users into subscribing to its Prime fast-shipping membership program and then making it difficult for them to cancel.Amazon has also faced scrutiny from states and regulators in other countries. The District of Columbia’s attorney general filed a lawsuit against the company in 2021, arguing that it had used unfair pricing policies against merchants on its site. The lawsuit was thrown out by a judge, though the attorney general has tried to revive the case. California filed a similar lawsuit last year that is moving forward. In December, Amazon also reached a deal to end a European Union antitrust investigation by agreeing to change some of its practices.If the F.T.C. sues, it would formally pit Ms. Khan — who has been one of Amazon’s most prominent detractors — against the company.While a law student at Yale, Ms. Khan had argued that Amazon’s growth represented a failure of American antitrust laws, which she said had become myopically focused on consumer prices as a measure of whether businesses were violating the law. Amazon’s prices were often low, she wrote in a widely read 2017 paper, but that failed to account for other ways it could bully players across the economy.The paper’s success supercharged a debate in Washington about the power of the tech giants. In 2019, federal antitrust regulators decided to investigate some of the companies. In keeping with a longstanding practice of dividing responsibilities, the Justice Department agreed to look at Google and Apple while the F.T.C. examined Facebook and Amazon.President Biden named Ms. Khan chair to oversee the F.T.C. — giving her control of the Amazon investigation — roughly two years later. More

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    Biden Administration Unveils Tougher Guidelines on Mergers

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    The proposed road map for regulatory reviews, last updated in 2020, includes a focus on tech platforms for the first time.The Biden administration’s top antitrust officials unveiled tougher guidelines against tech mergers on Wednesday, signaling their deepening scrutiny of the industry despite recent court losses in their attempts to block tech deal-making.Lina Khan, the chair of the Federal Trade Commission, and Jonathan Kanter, the top antitrust official at the Department of Justice, released draft guidelines for merger reviews that for the first time include a focus on digital platforms and how dominant companies can use their scale to harm future rivals.The guidelines — which generally provide a road map for whether regulators block or approve deals — show the Biden administration’s commitment to an aggressive antitrust agenda aimed at curtailing the power of companies like Google, Meta, Apple and Amazon.The guidelines, which aren’t enforced by law, follow a losing streak in the courts. A ruling last week prevented the F.T.C. from delaying the closing of Microsoft’s $69 billion acquisition of the video game maker Activision Blizzard. In January, a court sided against the F.T.C. in its lawsuit to stop Meta’s purchase of Within, a virtual reality app maker.The forceful antitrust posture is a pillar of President Biden’s agenda to stamp out economic inequality and encourage greater competition. “Promoting competition to lower costs and support small businesses and entrepreneurs is a central part of Bidenomics,” a senior administration official said in a call with reporters.The new guidelines would apply to all deals across the economy. But they highlight obstacles to competition among digital platforms, including how an acquisition of a nascent rival may be intended to kill off future competition. Such deals, known as killer acquisitions, are prevalent in the tech industry and at the heart of an F.T.C. antitrust lawsuit against Meta, which owns Facebook, Instagram and WhatsApp. The agency has accused Meta of buying Instagram in 2012 and WhatsApp in 2014 to prevent future competition.The F.T.C. and Justice Department also said they would look at how companies used their scale, including their large number of users, to ward off competition. These so-called network effects have helped companies like Meta and Google maintain their dominance in social media and internet search.The agencies also laid out ways in which mergers involving “platform” businesses, the model used by Amazon’s online store and Apple’s App Store, could harm competition. An acquisition could hurt competition by giving a platform control over a significant stream of data, the draft guidelines said, echoing concerns that tech giants use their vast troves of information to squash rivals.“As markets and commercial realities change, it is vital that we adapt our law enforcement tools to keep pace so that we can protect competition in a manner that reflects the intricacies of our modern economy,” Mr. Kanter said in a statement. “Simply put, competition today looks different than it did 50 — or even 15 — years ago.”While they lack the force of law, the guidelines can influence how judges look at challenges to mergers and acquisitions. The effort to update the guidelines has been closely watched by businesses and corporate lawyers that navigate regulatory scrutiny of megadeals.The guidelines were last updated in 2020. In 2021, Mr. Biden ordered the Justice Department and the F.T.C. to update them again as part of a broader effort to improve competition across the economy. The agencies will take public comment on the proposals and could make amendments before final guidelines are adopted.“These guidelines contain critical updates while ensuring fidelity to the mandate Congress has given us and the legal precedent on the books,” Ms. Khan said in a statement.While the F.T.C. experienced the recent court losses, it has forced some companies, including the chip-maker Nvidia and the aerospace giant Lockheed Martin, to abandon some large deals. The Justice Department blocked the publisher Penguin Random House from buying Simon & Schuster, using an unusual argument that the merger would harm authors who sold the publication rights to their books. More

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    U.S. Moves to Bar Noncompete Agreements in Labor Contracts

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    A sweeping proposal by the Federal Trade Commission would block companies from limiting their employees’ ability to work for a rival.In a far-reaching move that could raise wages and increase competition among businesses, the Federal Trade Commission on Thursday unveiled a rule that would block companies from limiting their employees’ ability to work for a rival.The proposed rule would ban provisions of labor contracts known as noncompete agreements, which prevent workers from leaving for a competitor or starting a competing business for months or years after their employment, often within a certain geographic area. The agreements have applied to workers as varied as sandwich makers, hairstylists, doctors and software engineers.Studies show that noncompetes, which appear to directly affect roughly 20 percent to 45 percent of U.S. workers in the private sector, hold down pay because job switching is one of the more reliable ways of securing a raise. Many economists believe they help explain why pay for middle-income workers has stagnated in recent decades.Other studies show that noncompetes protect established companies from start-ups, reducing competition within industries. The arrangements may also harm productivity by making it hard for companies to hire workers who best fit their needs.The F.T.C. proposal is the latest in a series of aggressive and sometimes unorthodox moves to rein in the power of large companies under the agency’s chair, Lina Khan.President Biden hailed the proposal on Thursday, saying that noncompete clauses “are designed simply to lower people’s wages.”“These agreements block millions of retail workers, construction workers and other working folks from taking a better job, getting better pay and benefits, in the same field,” he said at a cabinet meeting.The public will be allowed to submit comments on the proposal for 60 days, at which point the agency will move to make it final. An F.T.C. document said the rule would take effect 180 days after the final version was published, but experts said it could face legal challenges.The agency estimated that the rule could increase wages by nearly $300 billion a year across the economy. Evan Starr, an economist at the University of Maryland who has studied noncompetes, said that was a plausible wage increase after their elimination.Dr. Starr said noncompetes appeared to lower wages both for workers directly covered by them and for other workers, partly by making the hiring process more costly for employers, who must spend time figuring out whom they can hire and whom they can’t.The State of Jobs in the United StatesEconomists have been surprised by recent strength in the labor market, as the Federal Reserve tries to engineer a slowdown and tame inflation.Retirees: About 3.5 million people are missing from the U.S. labor force. A large number of them, roughly two million, have simply retired.Switching Jobs: A hallmark of the pandemic era has been the surge in employee turnover. The wave of job-switching may be taking a toll on productivity.Delivery Workers: Food app services are warning that a proposed wage increase for New York City workers could mean higher delivery costs.A Self-Fulfilling Prophecy?: Employees seeking wage increases to cover their costs of living amid rising prices could set off a cycle in which fast inflation today begets fast inflation tomorrow.He pointed to research showing that wages tended to be higher in states that restrict noncompetes. One study found that wages for newly hired tech workers in Hawaii increased by about 4 percent after the state banned noncompetes for those workers. In Oregon, where new noncompetes became unenforceable for low-wage workers in 2008, the change appeared to raise the wages of hourly workers by 2 percent to 3 percent.Although noncompetes appear to be more common among more highly paid and more educated workers, many companies have used them for low-wage hourly workers and even interns.About half of states significantly constrain the use of noncompetes, and a small number have deemed them largely unenforceable, including California.But even in such states, companies often include noncompetes in employment contracts, and many workers in these states report turning down job offers partly as a result of the provisions, suggesting that these state regulations may have limited effects. Many workers in those states are not necessarily aware that the provisions are unenforceable, experts say.“Research shows that employers’ use of noncompetes to restrict workers’ mobility significantly suppresses workers’ wages — even for those not subject to noncompetes, or subject to noncompetes that are unenforceable under state law,” Elizabeth Wilkins, the director of the F.T.C.’s office of policy planning, said in a statement.The commission’s proposal appears to address this issue by requiring employers to withdraw existing noncompetes and to inform workers that they no longer apply. The proposal would also make it illegal for an employer to enter into a noncompete with a worker or to try to do so, or to suggest that a worker is bound by a noncompete when he or she is not.The proposal covers not just employees but also independent contractors, interns, volunteers and other workers.Lina Khan, the F.T.C. chair, has tried to use the agency’s authority to limit the power and influence of corporate giants.Graeme Sloan, via Associated PressDefenders of noncompetes argue that employees are free to turn down a job if they want to preserve their ability to join another company, or that they can bargain for higher pay in return for accepting the restriction. Proponents also argue that noncompetes make employers more likely to invest in training and to share sensitive information with workers, which they might withhold if they feared that a worker might quickly leave.A ban “ignores the fact that, when appropriately used, noncompete agreements are an important tool in fostering innovation,” Sean Heather, a senior vice president at the U.S. Chamber of Commerce, said in a statement.At least one study has found that greater enforcement of noncompetes leads to an increase in job creation by start-ups, though some of its conclusions are at odds with other research.Dr. Starr said that noncompetes did appear to encourage businesses to invest more in training, but that there was little evidence that most employees entered into them voluntarily or that they were able to bargain over them. One study found that only 10 percent of workers sought to bargain for concessions in return for signing a noncompete. About one-third became aware of the noncompete only after accepting a job offer.Michael R. Strain, an economist at the American Enterprise Institute, said that while there were good reasons to scale back noncompetes for lower-wage workers, the rationale was less clear for better-paid workers with specialized knowledge or skills.“If your job is to make minor tweaks to the formula for Coca-Cola and you’re one of 25 people on earth who knows the formula,” Dr. Strain said, speaking hypothetically, “it makes total sense that Coca-Cola might say, ‘We don’t want you to go work for Pepsi.’”He said that it might be possible to satisfy an employer’s concerns with a less blunt tool, like a nondisclosure agreement, but that the evidence for this was lacking.In a video call with reporters on Wednesday, Ms. Khan said she believed the F.T.C. had clear authority to issue the rule, noting that federal law empowers the agency to prohibit “unfair methods of competition.”But Kristen Limarzi, a partner at Gibson, Dunn & Crutcher who previously served as a senior official in the antitrust division of the Justice Department, said she believed such a rule could be vulnerable to a legal challenge. Opponents would probably argue that the relevant federal statute is too vague to guide the agency in putting forth a rule banning noncompetes, she said, and that the evidence the agency has on their effects is still too limited to support a rule.At the helm of the F.T.C. since last year, Ms. Khan has tried to use the agency’s authority in untested ways to rein in the power and influence of corporate giants. In doing so, she and her allies hope to reverse a turn in recent decades toward more conservative antitrust law — a shift that they say enabled runaway concentration, limited options for consumers and squeezed small businesses.Ms. Khan has brought lawsuits in recent months to block Meta, Facebook’s parent company, from buying a virtual reality start-up and Microsoft from buying the video game publisher Activision Blizzard. Both cases employ less common legal arguments that are likely to face heavy scrutiny from courts. But Ms. Khan has indicated she is willing to lose cases if the agency ends up taking more risks.Ms. Khan and her counterpart at the Justice Department’s antitrust division, Jonathan Kanter, have also said they want to increase the focus of the nation’s antitrust agencies on empowering workers. Last year, the Justice Department successfully blocked Penguin Random House from buying Simon & Schuster using the argument that the deal would lower compensation for authors.One question looming over the discussion of noncompetes is what effect banning them may have on prices during a period of high inflation, given that limiting noncompetes tends to raise wages.But the experience of the past two years, when rates of quitting and job-hopping have been unusually high, suggests that noncompetes may not currently be as big an obstacle to worker mobility as they have traditionally been. Partly as a result, banning them may not have much of a short-term effect on wages.Instead, some economists say, the more pronounced effect of a ban may come in the intermediate and long term, once the job market softens and workers no longer have as much leverage. At that point, noncompetes could begin to weigh more heavily on job switching and wages again.“Doing something like this is a way to help sustain the increase in worker power over the last couple of years,” said Heidi Shierholz, president of the liberal Economic Policy Institute, who was chief economist at the Labor Department during the Obama administration.David McCabe More

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    F.T.C. Chair Lina Khan Upends Antitrust Standards by Suing Meta

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    Lina Khan may set off a shift in how Washington regulates competition by filing cases in tech areas before they mature. She faces an uphill climb.WASHINGTON — Early in her tenure as chair of the Federal Trade Commission, Lina Khan declared that she would rein in the power of the largest technology companies in a dramatically new way.“We’re trying to be forward looking, anticipating problems and taking fast action,’’ Ms. Khan said in an interview last month. She promised to focus on “next-generation technologies,” and not just on areas where tech behemoths were already well established.This week, Ms. Khan took her first step toward stopping the tech monopolies of the future when she sued to block a small acquisition by Meta, the company formerly known as Facebook, of the virtual-reality fitness start-up Within. The deal was significant for Meta’s development of the so-called metaverse, which is a nascent technology and far from mainstream.In doing so, Ms. Khan upended decades of antitrust standards, potentially setting off a wholesale shift in the way Washington enforces competition across corporate America. At the heart of the F.T.C.’s lawsuit is the idea that regulators can apply antitrust law without waiting for a market to mature to the point where it is clear which companies hold the most power. The F.T.C. said such early action was justified because Meta’s deal would probably eliminate competition in the young virtual-reality market.Since the late 1970s, most federal challenges to mergers have been in large, well-established markets and aim to prevent already clear monopolies. Regulators have mostly rubber-stamped the purchases of start-ups by tech giants, such as Google’s 2006 deal to buy YouTube and Facebook’s 2012 acquisition of Instagram, because those markets were still emerging.As a result, Ms. Khan faces an uphill climb. Regulators have been reluctant to try to stop corporate mergers by relying on the theory that competition and consumers will be harmed in the future. The federal government lost at least two cases that used this strategy in the past decade, including an attempt to block a $1.9 billion merger in 2015 among X-ray sterilization providers that the F.T.C. had predicted would harm future competition in regional markets.The F.T.C.’s lawsuit against Meta in the budding virtual-reality market is a “deliberately experimental case that seeks to extend the boundaries of merger enforcement,” said William Kovacic, a former chair of the agency. “Such cases are certainly harder to win.”The F.T.C.’s action immediately caused a ruckus within antitrust circles and across the tech industry. Silicon Valley tech executives said that moving to block a deal in an embryonic area of technology might stifle innovation and spook technologists from taking bold leaps in new areas.“Regulators predicting future markets is a very, very dangerous precedent and position,” said Aaron Levie, the chief executive of the cloud storage company Box. He warned that venture capitalists and entrepreneurs would become wary of going into new markets if regulators cut off the ability of companies like Meta to buy start-ups.Adam Kovacevich, the president of the trade group Chamber of Progress, which represents Meta, Amazon and Alphabet, also said the lawsuit would have a chilling effect on innovation.Read More on Facebook and MetaA New Name: In 2021, Mark Zuckerberg announced that Facebook would change its name to Meta, as part of a wider strategy shift toward the so-called metaverse that aims at introducing people to shared virtual worlds.Morphing Into Meta: Mr. Zuckerberg is setting a relentless pace as he leads the company into the next phase. But the pivot  is causing internal disruption and uncertainty.Zuckerberg’s No. 2: In June, Sheryl Sandberg, the company’s chief financing officer announced she would step down from Meta, depriving Mr. Zuckerberg of his top deputy.Tough Times Ahead: After years of financial strength, the company is now grappling with upheaval in the global economy, a blow to its advertising business and a Federal Trade Commission lawsuit.“This is such an extreme and unfounded reaction to a small deal that many tech industry leaders are already worrying about what an F.T.C. win would mean for start-ups,” he said.For Ms. Khan, winning the lawsuit may be less of a priority than showing it’s possible to file against a tech deal while it is still early. She has said regulators were too cautious in the past about intervening in mergers for fear of harming innovation, allowing a wave of deals between tech giants and start-ups that eventually cemented their dominance.“What we can see is that inaction after inaction after inaction can have severe costs,” she said in an interview with The New York Times and CNBC in January. “And that’s what we’re really trying to reverse.”Ms. Khan declined requests for an interview for this article, and the F.T.C. declined to comment on Thursday.Mark Zuckerberg, Meta’s chief executive, testifying on Capitol Hill in 2019. He has bet the company on the metaverse, a technology frontier.Pete Marovich for The New York TimesMeta said the F.T.C. was applying antitrust law incorrectly. The lawsuit focuses on how the merger with Within would remove competition, but Meta said the agency was ignoring the large number of companies that also had health and fitness apps.“The F.T.C. has no answer to the most basic question — how could Meta’s acquisition of a single fitness app in a dynamic space with many existing and future players possibly harm competition?” Nikhil Shanbhag, Meta’s vice president and associate general counsel, wrote in a blog post.The company added that it hadn’t decided on whether to challenge the lawsuit, which was filed on Wednesday in U.S. District Court for the Northern District of California.The F.T.C. accused Meta of building a virtual reality “empire,” beginning in 2014 with its purchase of Oculus, the maker of the Quest virtual-reality headset. Since then, Meta has acquired around 10 virtual-reality app makers, such as the maker of a Viking combat game, Asgard’s Wrath, and several first-person shooter and sports games.By buying Within and its Supernatural virtual-reality fitness app, the F.T.C. said, Meta wouldn’t create its own app to compete and would scare potential rivals from trying to create alternative apps. That would hobble competition and consumers, the agency said.“This acquisition poses a reasonable probability of eliminating both present and future competition,” according to the lawsuit. “And Meta would be one step closer to its ultimate goal of owning the entire ‘Metaverse.’”Rebecca Haw Allensworth, a professor of antitrust law at Vanderbilt University, said the F.T.C.’s arguments would face tough scrutiny because Meta and Within did not compete with each other and because the virtual-reality market was fledgling.“The way that merger analysis has stood for at least 40 years is about what kind of head-to-head competition does this merger take out of the picture,” she said.The onus will now be on the agency to convince a judge that its predictions about the metaverse and Meta’s purchase would harm competition.“The burden is on the F.T.C. to show, among other things, reasonable probability that Meta would have entered the V.R.-dedicated fitness apps market, absent its acquisition of Within,” said Diana Moss, president of the American Antitrust Institute.If the court dismisses the case, Ms. Khan may have created a precedent that would make it harder to pursue nascent competition cases, antitrust experts cautioned. That could then embolden tech giants to acquire their way into new lines of businesses.“This is a precedential system which goes both ways — if you win or lose — and sends a signal to the market,” Ms. Allensworth said.The F.T.C. is reviewing other tech deals, including Microsoft’s $70 billion acquisition of the gaming company Activision and Amazon’s $3.9 billion merger with One Medical, a national chain of primary care clinics. In addition, the agency has been investigating Amazon on claims of monopoly abuses in its marketplace of third-party sellers.Ms. Khan appears to be prepared for long legal battles with the tech giants even if the cases do not end up going the F.T.C.’s way.In her earlier interview with The Times and CNBC, she said, “Even if it’s not a slam-dunk case, even if there is a risk you might lose, there can be enormous benefits from taking that risk.” More

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    New F.T.C. Majority Gives Lina Khan a Chance to Push an Aggressive Agenda

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    The confirmation of a third Democrat creates an opportunity for Lina Khan, the Federal Trade Commission’s chair, to advance efforts to rein in corporate power.WASHINGTON — The confirmation of a third Democrat to the Federal Trade Commission on Wednesday broke a partisan deadlock at the agency. That’s good news for Lina Khan, the agency’s chair and a Democrat.It is also a test.With the F.T.C.’s new Democratic majority — which came with the confirmation of Alvaro Bedoya, who becomes the fifth commissioner, in a slot that had been vacant since October — Ms. Khan’s allies and critics are watching to see if she pushes forward plans to address corporate power. That could include filing an antitrust lawsuit against Amazon, setting online privacy rules and tapping little-used agency powers to clip the wings of companies like Meta, Apple and Google.As Congress remains gridlocked and the midterm elections near, agencies like the F.T.C. and the Department of Justice are likely the best remaining hope for activists and policymakers who want the government to restrain corporate power. President Biden, who has promised to crack down, last year ordered the F.T.C. and other federal agencies to take steps to limit concentration.Under Ms. Khan, 33, who became the chair in June, the F.T.C. has already tried tamping down mergers by threatening to challenge deals after they close. The commission has said it will punish companies that make it hard for users to repair their products. And it settled a case with the company once known as Weight Watchers over a diet app that collected data from young children.But Ms. Khan’s new Democratic majority is essential for a broader “realization of her vision,” said William E. Kovacic, a former chair of the F.T.C. “And the clock’s ticking.”In a statement, Ms. Khan said she was “excited” to work with Mr. Bedoya and the other commissioners. She did not address how the F.T.C.’s new majority would affect her plans.The F.T.C.’s previous split between two Republicans and two Democrats led to impasses. In February, the commission couldn’t reach an agreement to move forward with a study of the practices of pharmacy benefit managers.Sarah Miller, the executive director of the American Economic Liberties Project, a progressive group that wants more antitrust enforcement, described the F.T.C.’s two Republicans, Noah Phillips and Christine Wilson, as “libertarian holdouts” who have “kind of thrown the brakes” on Ms. Khan’s ability to advance her agenda.Mr. Phillips said in an email that he supported the commission’s “long tradition of bipartisan work to advance the interests of American consumers.” But he will not support Ms. Khan’s agenda when it “exceeds our legal authority,” raises prices for consumers or harms innovation, he said.Ms. Wilson pointed to three speeches she gave over the last year criticizing Ms. Khan’s philosophy. In one speech last month, Ms. Wilson said Ms. Khan and her allies were drawing on tenets from Marxism.Alvaro Bedoya, a Democrat, was confirmed on Wednesday as the fifth member of the F.T.C.Senator Chuck Schumer of New York, the Democratic majority leader, said Wednesday’s vote confirming Mr. Bedoya was “pivotal to unshackling the F.T.C.”Now Ms. Khan may gain the ability to pursue a legal case against Amazon. She wrote a student law review article in 2017 criticizing the company’s dominance. The F.T.C. began investigating the retail giant under the Trump administration; some state attorneys general have also conducted inquiries into the company.Ms. Khan could file a lawsuit to challenge Amazon’s recent purchase of the movie studio Metro-Goldwyn-Mayer. When the $8.5 billion transaction closed in March, an F.T.C. spokeswoman noted that the agency “may challenge a deal at any time if it determines that it violates the law.”Ms. Khan may put her stamp on other deals. The agency is examining Microsoft’s $70 billion purchase of the video game publisher Activision Blizzard and sent a request to the companies this year for additional information.An executive order from Mr. Biden last year encouraging more aggressive antitrust policy pushed the F.T.C. and the Justice Department to update the guidelines they use to approve deals, which could lead to stricter scrutiny. Ms. Khan is likely to need the support of the commission’s two other Democrats, Mr. Bedoya and Rebecca Kelly Slaughter, to approve aggressive new guidelines or to challenge major mergers.Ms. Khan has also said she wants to bulk up the agency’s powers by considering regulations governing privacy and how algorithms make decisions. She has said that the F.T.C. underutilized its role as a rules-making body and that regulations would enhance its mandate to protect consumers.“Given that our economy will only continue to further digitize, marketwide rules could help provide clear notice and render enforcement more impactful and efficient,” she said last month at a privacy conference.The F.T.C. could also act on requests from progressive activist groups that want the agency to ban data-driven advertising business models and forbid noncompete agreements that stop workers from taking a job with a competitor of their current employer.But former F.T.C. officials said Ms. Khan faced challenges, even with the Democratic majority. The creation of privacy regulations could take years, said Daniel Kaufman, a former deputy head of the agency’s consumer protection bureau. Businesses are likely to challenge rules in court that don’t fit into the F.T.C.’s mandate to protect consumers from deceptive and unfair practices.“The F.T.C.’s rule-making abilities are not designed to tackle behavioral advertising so I’ve been telling my clients the agency could kick something off with a lot of press but it’s unclear where it will go,” Mr. Kaufman, a partner at the law firm BakerHostetler, said.Ms. Khan’s efforts are also sure to continue facing opposition from Mr. Phillips and Ms. Wilson. Mr. Phillips has said he has reservations about the agency’s becoming a more muscular regulator. In January, he said Congress, not the F.T.C., should be the one to make new privacy rules.Ms. Wilson recently posted screenshots of an internal survey showing that satisfaction among the F.T.C.’s career staff has fallen. “New leadership has marginalized and disrespected staff, resulting in a brain drain that will take a generation to fix,” she said.To overcome their opposition, Ms. Khan will have to keep her majority intact. That gives leverage to Mr. Bedoya, a privacy expert who has focused on the civil rights dangers of new technologies, and Ms. Slaughter, a former top member of Senator Schumer’s staff.Ms. Slaughter said in a statement that Mr. Bedoya’s privacy expertise would serve the F.T.C. well. She did not comment on the agency’s Democratic majority.Mr. Bedoya was tight-lipped about his own plans, saying only that he was “excited” to work with his new F.T.C. colleagues. More