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As we have seen, the FTC that Khan inherited was one of the most widely respected government institutions in the world. Nevertheless, in 2021, President Biden proclaimed the previous 40 years of antitrust an “experiment failed.” Biden, and Khan, rejected the longstanding reliance on the welfare of consumers as the basis for the bipartisan approach to antitrust policy. The Biden administration’s conclusions are controversial, and do not enjoy the widespread support shared by the simple market concentration doctrine that grounded FTC antitrust in 1970 and the consumer welfare standard in the decades preceding 2020.

Certainly, by 2021, there was recent dissatisfaction with the agency in some quarters, including about competition issues, despite the agency’s stellar reputation. As we noted above, Commissioner Chopra regarded the FTC as a failure, and frequently reminded the staff of that view. He argued the Commission was “battling its most serious credibility crisis in decades,” because too many “enforcement actions provide no help whatsoever and do nothing to deter misconduct.” He told Congress that “the FTC has shown it is willing to be lax and forgiving,” and claimed “there simply is lawlessness in our economy writ large, and the FTC is a big part of it.” In frequent dissents from Commission decisions to accept consent agreements, he disparaged orders for not providing meaningful accountability and for not being credible, criticized the staff’s approach to pharmaceutical mergers as “narrow, flawed, and ineffective,” and suggested that the remedies used in cases of fraudulent conduct bordering on criminal should be applied routinely to non-fraud cases involving executives of publicly traded companies. The other minority Commissioner in the Trump administration, Rebecca Slaughter, after a few early disagreements in votes with Chopra, frequently also dissented, but often with separate and more tempered statements.

Oversight of the dominant digital platforms’ broad effects on society is not possible within the existing federal regulatory structure. Agencies such as the Federal Trade Commission (FTC) and Department of Justice (DOJ) are filled with good and dedicated professionals, yet they are constrained in what they can do. Such limitations are perversely demonstrated by the recent headline-grabbing antitrust actions by both agencies. Antitrust enforcement, while important, is targeted against specific circumstances and cannot protect against general consumer abuses. Similarly, while the FTC also has authority over unfair and deceptive acts, many abuses in the digital marketplace are harmful but not considered deceptive and unfair. The FTC is further hampered by limited power to promulgate broad rules, thus constraining most of its activities to one-off proceedings against a singular company for a specific type of abuse rather than establishing broad behavioral rules across the consumer-facing digital economy.

The news: By failing to block Microsoft’s Activision Blizzard acquisition, the Federal Trade Commission (FTC) is facing the biggest in a series of defeats that are undermining ambitions to regulate Big Tech and raising questions about the effectiveness of its approach.

How we got here: The FTC filed to stop Microsoft from buying Activision Blizzard late last year, saying the $68.7 billion blockbuster deal would suppress competition in the video game market.

Three forces tend to work against the attainment of lasting fundamental change. The first is time. A vital determinant of success is the durability of the commitment of the nation’s political leadership to place transformation advocates in senior leadership roles at the DOJ and the FTC, to support new legislation, and to appoint federal judges sympathetic to transformation perspectives. The redirection of the antitrust system began in the federal courts during the late 1970s and accelerated in the Reagan presidency in the 1980s required several decades to set firmly in place. How many transformation-minded presidents will occupy the White House over the next thirty years or so? Over the same period of time, will Congress provide the appropriations, statutory upgrades, and political support necessary for the public agencies to execute the transformation agenda? Are current transformation advocates in the antitrust agencies and the White House taking steps to ensure that their initiatives survive possible regime changes over time? If Congress were to undertake a basic retooling of substantive competition policy principles, might it take the further step of considering whether the existing distribution of prosecutorial authority (including the maintenance of two federal antitrust bodies) requires simplification?153

A second, related factor is the time required to effectuate a change in judicial perspectives that welcomes a significant redrawing of antitrust’s doctrinal boundaries. Two necessary paths to this adjustment are: (1) the appointment of new judges sympathetic to transformation perspectives; and (2) the persuasion of existing judges to endorse efforts, by government agencies and private litigants, to apply or extend (at least in small steps) the existing doctrinal standards to challenge alleged episodes of anticompetitive conduct. In the shorter term, efforts to bring cases that expand enforcement frontiers will face resistance from a large body of judges who endorse the doctrinal status quo and are skeptical about extensions.

Capacity refers to whether an agency has the human capital and technical skills needed to carry out its duties effectively. The capacity of the federal antitrust agencies today is deficient in three important ways. The first is a level of appropriations entirely unsuited to the ambitious agenda that the Biden Administration and congressional advocates for transformation have embraced.140 The second is a civil service compensation scale that denies the DOJ and the FTC the ability to retain experienced, highly skilled professionals (compared to financial services regulators such as the CFPB, which have authority to pay salaries considerably above the basic civil service scale).141 The third is an inadequate number of computer scientists, engineers, and data analytics specialists whose expertise is essential to enable the agencies to execute their Big Tech agenda and improve agency operations generally.142

This Article concludes that there are two principal reasons that customized IP regimes so often disappoint their aspirants. First, the interest groups campaigning for these specialized systems resemble fractals: within every seemingly united, homogenous coalition is a set of smaller, squabbling parties who seek to advance their own gains even at the risk of failure for the larger enterprise.30 Often, these fracture lines divide, crudely, the copyists from the creators. In the same industry, some firms tend to innovate, others duplicate, and some do both. These interests tend to conflict, forcing coalitions to choose between narrower rules that are more politically feasible and broader ones that offer greater pecuniary advantages. Second, despite their expertise and private information, interest groups are no better at predicting economic and technological change than any other observer.31 They tend to encase in regulation the business models of the moment, making these rules brittle and ill-equipped to adapt to the changes that inevitably occur. It is a temptation that is perhaps impossible to resist: the current architecture suits its inhabitants, and innovation is likely to be disruptive.

The normative conclusion flowing from these findings is surprising if not shocking: there is less to be feared from customized IP regulation than one might expect, because internal structural weaknesses are often its undoing. This may hold true beyond intellectual property, extending to other areas where coalitions are unexpectedly diverse and regulating technology is a tough trick to perform.32 History’s lessons are difficult to learn: the drafters of the VHDPA (covering boat hulls) in 1998 were well aware of the failings of both the SCPA (semiconductors) and AHRA (digital audio tapes), but still could not build a better system.

Interest groups tend to be fragile, because they are coalitions of smaller groups whose interests sometimes coincide and sometimes diverge. This has two important effects. First, entities excluded from the coalition, or ones who leave it, can often block legislative change, including by nonlegislative means. Recall that in the run up to the Audio Home Recording Act, songwriters and music publishers were initially excluded from negotiations between equipment manufacturers and the record labels. They responded by suing to block introduction of the technology that was the subject of these discussions: the DAT recorder. The lesson that thesongwriters and publishers taught the labels is that no industry is an island: every group reveals itself, fractal-like, to be comprised of a set of subgroups with their own agendas. This creates a definitional problem for theories of public choice and interest group lobbying: determining what constitutes a “group” is a fraught process.

The AHRA also demonstrates the Goldilocks problem that any putative set of interests faces ex ante: to maximize lobbying power and minimize political opposition, the group or coalition must be broad enough to prevent objections or defections from fellow travelers, but narrow enough that its proposal is not vitiated or defeated altogether by other, less related interests. The music industry’s initial unmitigated opposition to the DAT failed because its coalition was too narrow—it excluded some standard music interests in writers and publishers. Broadening this grouping by bringing these other parties inside the tent (literally, in the case of Sony’s purchase ofCBS Records) weakened the force of the resulting legislation but enabled it to be enacted. And the AHRA ultimately failed in part because the music industry had to appease the nascent but rising personal computer industry. Hardware and software firms lobbied successfully to have PCs, software, hard drives, and the like excluded from the AHRA’s regulatory aegis.425 When computers began to supplant specialized home stereo equipment, the AHRA rapidly became a dead letter..426

While bricks-and-mortar and traditional retail stores temporarily shuttered under government orders addressing the spread of COVID-19, ecommerce platforms have generally thrived. This trend—coerced by government action, to be sure—likely evidences a semi-permanent change toward online retail offerings, as opposed to a mere hiccup in the traditional retail paradigm. In this new retail world, incumbent online platforms are poised to reap significant gains. However, with increased volume of sales also comes the increased potential or likelihood for counterfeiting and intellectual property infringement. Such bad actors pose an existential risk to the platforms and their established goodwill with customers, which should motivate the platforms to respond accordingly.

Recent platforms’ actions may be motivated in part by increasing external pressure from government regulators to do more to protect consumers and address infringers. This pressure only builds as ecommerce platforms expand their markets across borders. Specifically, as we continue to see robust regulations in cyberspace transcend national boundaries, ecommerce platforms do not appear to be immune from the reach of these laws. Further, the incomplete patchwork of varying internet-related laws developing across numerous countries will likely result in many ecommerce platforms treating the more restrictive government policies as the lowest common denominator for their transnational products and related enforcement procedures.

The New York Times, the Screen Actors Guild–American Federation of Television and Radio Artists (SAG-AFTRA), the News Media Alliance, Getty Images, and other organizations and trade groups representing artists, musicians, and journalists have complained that AI companies are violating copyright law by copying their material and using it to train AI. The use of AI was a core concern during this year’s historic writers’ and actors’ strikes.

“Almost all of these AI companies are ingesting copyrighted works in order to train their AI, and in most instances they are not licensing, they’re not getting the permission, and they’re not compensating the copyright owners for using those works,” Keith Kupferschmid, CEO of the Copyright Alliance, told us.

ANALYSIS The US Supreme Court has ruled that the judges should no longer defer to government agency interpretations of ambiguous laws – a decision with potential ramifications for some of the biggest cases against tech companies.

That deference, known as Chevron deference, dates to 1984 when the court ruled in Chevron v. Natural Resources Defense Council that the US Environmental Protection Agency could define ambiguous terms in government legislation, provided the agency was trying to apply the law as Congress intended.

As if Big Tech weren’t powerful enough already, recent decisions by the Supreme Court will give some of the most valuable companies in the world more latitude to undermine the government’s ability to rein them in, according to legal experts WIRED spoke to.

“This has been a bad couple of weeks for regulatory agencies, it’s been a bad couple of weeks for the rule of law, and it’s been really terrible for consumers,” says David Vladeck, a professor at Georgetown Law and former director of the Federal Trade Commission’s Consumer Protection Bureau.

And while President Joe Biden appointed a team of aggressive antitrust regulators to top posts — including former Cicilline aide Lina Khan to chair the Federal Trade Commission — recent losses in the courtroom highlight the need to pass new legislation, argued Cicilline.

“In the end, the change of laws requires congressional action,” the Rhode Island Democrat said. “We’re battling some of the biggest, most powerful companies in the history of the world, and it’s going to require all of us to work together in a bipartisan way to get this done, particularly in Congress.”

The news: By failing to block Microsoft’s Activision Blizzard acquisition, the Federal Trade Commission (FTC) is facing the biggest in a series of defeats that are undermining ambitions to regulate Big Tech and raising questions about the effectiveness of its approach.

How we got here: The FTC filed to stop Microsoft from buying Activision Blizzard late last year, saying the $68.7 billion blockbuster deal would suppress competition in the video game market.

For too long, Ms. Khan said at the time, the agency had been a weak cop and needed to challenge behemoths like Microsoft, Amazon, Meta and Google in the courts to stem their growing power. Even if the F.T.C. lost the cases, she later added, they would be a partial victory because the agency would signal that antitrust laws needed to be updated for the modern internet era.

But on Tuesday, Ms. Khan suffered the biggest blow yet to her hallmark agenda. A federal judge rejected the F.T.C.’s attempt to stop Microsoft’s $70 billion acquisition of the video game maker Activision Blizzard from closing, saying the agency failed to prove the deal would reduce competition and harm consumers. On Wednesday, the F.T.C. filed a notice that it would appeal the judge’s decision.

At these pivotal moments we often see anti-competitive conduct as the monopolist attempts to protect their powerful position. Where Facebook chose to buy, Microsoft attempted to bury. They used multiple strategies to exclude Netscape from the market, resulting in the landmark antitrust case against them. Unfortunately, today’s Big Tech platforms are even more powerful than past monopolists. They saw this transition coming and have been preparing for years. In some ways it appears they have already completely transitioned their existing gatekeeper control to the new industry. When Sam Altman and OpenAI wanted to take their AI products to the next level, Altman knew he would need immense computing power. Although he had initially hoped to keep his company in a not-for-profit model, he recognized how critical it was to get access to that computing power. As a result, he agreed to a partnership with Microsoft. Google’s mechanism for locking up search has been exclusive default contracts with browsers, mobile device manufacturers, and others; the subject of last year’s antitrust trial against them that has yet to be decided. In the trial, Microsoft’s Satya Nadela was asked how the new technology of generative AI was changing or would change the search market. His answer was that it didn’t change the fundamentals of the market. The default contracts continue to prevent Microsoft and Apple, the two largest potential competitors, from competing effectively against Google. But the story is not over. As we speak, AI companies are still in a mad dash to gain access to as much content as possible to train their models. AI companies are licensing content, scraping it from the web, or leveraging data that they already control. This is not finished and it is happening today. But control of data is only one piece of the puzzle—there are other features of the AI industry that will make maintaining dynamic competition extremely difficult including a small pool of skilled researchers and developers and intensive capital investment costs for training supercomputers and the cloud computing infrastructure necessary for offering AI services at scale. As a result, even with pro-competition policies it is likely that we will see significant consolidation around existing technology gatekeepers that already have access to the inputs necessary to succeed in the AI industry. Even more so than the platform markets that dominate our world today, AI may be a market that will tend towards tipping to monopoly or oligopoly. Facing down the prospect that the AI ecosystem may be dominated by a few powerful companies, that makes it all the more critical to decisively regulate AI to protect people from real harms like racial bias and discrimination, labor exploitation, disinformation, invasions of privacy and autonomy. At the same time, I don’t want to give up on competition. That means applying fair competition rules to prevent AI gatekeepers from leveraging their power in one part of the stack into others. This might include utility-style regulation for cloud infrastructure to ensure fair access. It should also mean robust public sector investments in lowering barriers to entry into AI, through research and infrastructure and building full-stack public AI options that can compete with private AI models.

The U.S. government wants to stop Big Tech from parlaying its control of present-day platforms into power over the future — but the giants haven't gotten the message. The big picture: The Justice Department's major new case against Apple, filed Thursday, completes the Biden administration's quartet of antitrust lawsuits aimed at the companies that have defined the tech industry's last 20 years. With another DOJ case against Google and FTC cases against Facebook and Amazon all proceeding in parallel, the Biden antitrust game is now a full-court press. These suits are rooted in the competitive battles that shaped the internet, the smartphone and the social media industries. But the officials responsible for bringing them have made clear they're also aimed squarely at the nascent AI future. "Competition does not just protect the markets and technologies of today, but the innovations of tomorrow," assistant attorney general Jonathan Kanter said Thursday. "We bring this case to make sure that Apple competes by innovating rather than by imposing rules and fees that prevent others from innovating and competing too. In so doing, we protect the market for the innovations that we can't yet perceive." Yes, but: Government lawsuits haven't made tech's trillion-dollar titans any shyer about gobbling up smaller companies in the emergent AI field, though the firms may adjust their tactics. Just this week Microsoft effectively acquired Inflection AI, one of the highest-profile startups developing AI models and chatbots that compete with Microsoft partner OpenAI. Instead of purchasing the startup, Microsoft simply hired its leadership and much of its talent, while arranging a $650 million licensing deal that some experts suggest was specifically designed to avoid antitrust regulation. The tech giants are also tapping one another's AI work — with reports this week of a deal by Apple to license Google's Gemini AI model for the next generation iPhone. These talks don't seem to have been deterred by the proceedings in another federal trial involving Google and Apple, where a judge is now weighing his ruling. That case, centering on Google's dominance of the search market, is based in part on the terms of an Apple deal making Google's search an iPhone default. Zoom out: The new Apple suit catches the company at a moment of unusual vulnerability. Sales of iPhones have plateaued, the fate of the new Vision Pro headset is unclear and Apple has so far brought up the rear of the generative AI parade. The other side: Apple sits on an Everest of cash, and can view even an expensive legal defense — or massive fines like those regularly imposed by the EU — as a bearable cost of doing business. The real danger to tech's dominant firms comes in the form of so-called structural remedies — rulings that require companies to substantially change how they do business or to sell off or split up their products and divisions. Flashback: Structural remedies are rare in the annals of U.S. antitrust. Courts broke up Standard Oil a century ago and AT&T 40 years ago, but they've resisted the move in most tech cases since. In 2000, Microsoft faced a trial judge's ruling that it must separate its applications and its operating system businesses, but the order was overturned on appeal. The bottom line: Glacial antitrust trials have done little so far to limit the wealth and power of tech's biggest companies. The newest addition to the litigation onslaught faces similarly long odds.

Why is the US effort in focus? Since American tech companies and specialized American-made microchips are at the forefront of AI innovation, US leaders wield particular sway over how the field is overseen. Many of the participants in the Senate meetings stressed that the US should play a leading role in the shaping of global governance of AI, and some referenced China’s advancements in the field as a specific concern. Critics have raised concern about the potential for tech executives to have too much influence over legislation, creating a form of regulatory capture that could enhance the power of a few large companies and hamper efforts by so-called open-source organizations to build competing AI platforms.

“A fair, open, and competitive marketplace has long been a cornerstone of the American economy, while excessive market concentration threatens basic economic liberties, democratic accountability and the welfare of workers, farmers, small businesses, start-ups and consumers,” said President Joe Biden in a July 2021 executive order. This unleashed a torrent of investigations of corporate power by the Federal Trade Commission, Department of Justice and the Consumer Financial Protection Bureau.

These included not just traditional antitrust cases, but attempts to ban non-compete clauses that limit workers from moving jobs, and pre-emptive investigations into nascent industries such as AI, which are already dominated by the usual firms. Lina Khan, chair of the FTC, defended this approach in Brussels, saying that “we are still reeling from the concentration that resulted from Web 2.0, and we don’t want to repeat the mis-steps of the past with AI”.

High-level former intelligence and national security officials have provided crucial assistance to Silicon Valley giants as the tech firms fought off efforts to weaken online monopolies and force competition on major platforms.

"We need to keep Big Tech strong — so it can keep America strong," claimed Robert O'Brien, the former White House National Security Advisor to President Trump. O’Brien has appeared on cable news programs and penned several opinion columns rallying opposition to tech antitrust reforms in Congress.

Federal Trade Commission Chair Lina Khan delivered a sharp warning to the technology industry in a speech at Stanford on Thursday: Antitrust enforcers are watching what you do in the race to profit from artificial intelligence. “Much is uncertain about what the future of this technology will look like,” said Khan. “But the FTC has made clear that there is no exemption from the [antitrust] laws on the books.” The agency, she continued, “will be clear-eyed in ensuring that claims of innovation are not used as cover for lawbreaking.” Speaking at the Stanford Institute for Economic Policy Research (SIEPR) on Nov. 2, Khan said the agency is seeing signs of market concentration in AI. She said the FTC is examining Big Tech’s role supplying key tools, like access to cloud infrastructure or data processing units, that AI startups and other developers need. She said the FTC is particularly worried about the prospect of “excessive” prices and “coercive” demands on buyers. “There’s a risk that some of the existing incumbents would use control over those inputs to undermine innovation and competition,” Khan said. Another concern: the turbocharging of AI-enabled scams without a clear “liability regime” for how to punish fraudsters. Khan’s prepared remarks and replies to audience questions at the event — which was co-sponsored by SIEPR, Stanford Graduate School of Business, and its Business, Government, and Society Initiative — touched on a range of hot-button issues confronting the FTC, whose mandate is to protect consumers from unfair competition and deceptive practices. Among the topics covered were the agency’s bid to outlaw non-compete clauses in employment contracts, its efforts to crack down on drug pricing practices, and a proposal released this summer along with the Department of Justice that would toughen guidelines for reviewing the antitrust implications of proposed mergers. Khan’s Stanford visit came at an especially momentous time for the FTC, noted Mark Duggan, The Trione Director at SIEPR, in introducing Khan to the packed room of business leaders, Stanford students, researchers, and alumni. Under Khan’s leadership, the FTC has boldly taken on some of the country’s biggest names in business while testing a new approach to antitrust enforcement after what her supporters say has been decades of weak government oversight. Her most high-profile challenge to business practices yet came in September when the commission and 17 states sued Amazon for allegedly abusing its e-commerce power to stifle competition, thereby harming consumers and other online retailers. The lawsuit is the FTC’s largest antitrust case since taking on Microsoft in the 1990s. ‘Firing on all cylinders’ While calling Stanford a “key catalyst of research and innovation,” Khan focused on a single message throughout the hour-long event: Antitrust enforcement going back to the 1950s and in the decades since has been a crucial driver of the breakthrough innovations that have allowed the U.S. to “lead as an economic powerhouse.” Antitrust watchdogs under President Joe Biden are intent on following a playbook that clearly works, she said. “The FTC is firing on all cylinders,” she said.