Search the archive.

Khan’s methods have drawn intense criticism from the business community, most recently with the agency’s labor-friendly rulemaking banning noncompete agreements in employment contracts. That action relies on the FTC’s interpretation of its authority to allow it to take action in this area — the kind of thing that brings up questions about agency deference.

But the FTC has already had to contend with trends cutting away at agency deference for quite some time. For example, the noncompete rulemaking is already facing scrutiny under the major questions doctrine, which is cited in the US Chamber of Commerce’s challenge. It’s a principle that’s shown up in Supreme Court cases that basically says Congress must grant clear authority for questions of great political or economic significance. The chamber argues in its lawsuit to block the FTC noncompete rule that the Supreme Court has invoked the major questions Doctrine “to reject similar attempts by administrative agencies to take unprecedented actions with vast economic and political significance based on nothing more than ambiguous and ancillary statutory text—particularly where the agency has never before pointed to that text as a font of regulatory power.”

This past July, the DOJ and the FTC published draft guidelines that laid out the more expansive standards by which they’re prosecuting anticompetitive behavior. The merger guidelines are a sort of open letter to judges, and while they have no power to compel judges to rule a certain way, courts have given guidelines significant deference across every presidency they’ve been issued. As major cases loom, it may help prosecutors turn the tide.

Lawsuits by the FTC and the DOJ are only the most high-profile weapon in the Biden administration’s war against concentrated economic power. Less prominent but equally potent are the writing and enforcement of regulations based on statutory powers previous administrations have neglected. For instance, when Trump took office, enforcement actions by the Consumer Financial Protection Bureau fell by 75 percent, but it has been revitalized by the Biden appointee Rohit Chopra. The CFPB has gone after companies for price gouging in captive markets like prison financial services, is working on rules that would make it easier for consumers to change banks, and is cracking down on “junk fees”—deceptive charges for service—in banking, part of an administration-wide fight against such fees.

And it’s not just merger cases. The agency announced its intention to more aggressively enforce the Clayton Act’s prohibition on directors serving simultaneously on the boards of competitors, leading to the resignation of board directors in several industries. “The DOJ making this a priority is a big step and consistent with the broader theme of reviving dormant legal powers,” Sandeep Vaheesan of the Open Markets Institute (OMI) said. During Obama’s first term, the USDA unsuccessfully tried to challenge the poultry industry’s abusive “tournament system,” which pits chicken farmers against each other to compete for bids and undercuts their bargaining power. But last summer, a DOJ lawsuit against the food production conglomerate Cargill, several competitors, and a data consulting firm alleging years of collusion and wage suppression ended in an $85 million settlement, effectively ending the practice across much of the industry.

Kanter has also initiated a half-dozen criminal investigations against no-poach and wage-fixing agreements, which illegally block workers from changing jobs in their industry. In October 2022, the DOJ won the first-ever conviction under antitrust law for employer collusion when the staffing firm VDA pleaded guilty to a conspiracy with another firm to refrain from recruiting or hiring each other’s nurses. Several other cases have ended in acquittals, but as with lawsuits against mergers, the message is being heard in the business world: Antitrust enforcers are taking labor violations seriously again.

After a sometimes tough year for the F.T.C., the agency will end 2023 with a big win. The biotech company Illumina said on Sunday that it would divest Grail, the cancer test maker it acquired for $7.1 billion in 2021, after an appeals court sided with the F.T.C.’s argument that the deal could harm competition.

The news closes the book on an ill-fated acquisition that earned Illumina no end of trouble — and showed that the assertive enforcement strategy of regulators like Lina Khan, the F.T.C. chair, can produce results.

‘Nearly all key decisions that reshaped antitrust policy were made by regulators and judges with relatively little democratic accountability,’ conclude Filippo Lancieri, Eric A Posner, and Luigi Zingales in a study of the Chicago School’s takeover of antitrust.27 Sidestepping public debate was crucial to the project’s success. Big business and its allies knew that they could not win an open debate in Congress to gut the statutes, hence their clandestine approach, which included issuing new merger guidelines in 1982 that effectively rewrote the law.28 This covert strategy was made easier by two developments. One was that, after decades of effective enforcement, Americans had stopped paying attention to monopoly and turned to other issues.29 The second was that, by the 1980s, the Democratic Party had abandoned its commitment to small business, which had been a key part of the party’s coalition since the New Deal.30 This left a crucial constituency without a political home from which to organize a defence of America’s anti-monopoly policies.

Monopoly has now returned as a live issue, and small businesses and workers have taken centre stage. Since 2019, Congressional committees have held numerous hearings on monopoly power featuring testimony from, among others, a grocer, poultry farmer, wholesaler, pharmacist, singer–songwriter, concert promoter, app developer, warehouse worker, and delivery driver.31 After one electrifying hearing in 2020, when the House Judiciary Committee compelled Jeff Bezos, then CEO of Amazon, to respond to statements from small businesses that had been bullied by Amazon,32 a business owner in Michigan emailed me to say that the hearing brought tears to his eyes. ‘It was so long awaited to just feel even a little bit like the playing field would become even,’ he wrote.

When you're trying to restructure the entire American economy, you take your allies wherever you can find them. And so Lina Khan, the liberal chairwoman of the Federal Trade Commission, welcomes her growing group of Republican fans. "Antitrust and antimonopoly has historically been deeply bipartisan," Khan said in a recent interview in her spacious Washington office lined with 1920s political cartoons. "Conceptually, conservatives view concentration of power skeptically, and there has been a recognition that concentration of corporate power can in some instances be deeply antithetical to liberty." Since being appointed by President Biden three years ago, the 35-year-old Khan has turned the obscure federal agency into a high-profile battleship aimed at the big corporations she says have distorted markets and harmed consumers. Her aggressive actions against Big Tech and other industries have inflamed the business community, and not all have been successful. But in an anomaly in this partisan age, a group of conservatives has cheered her efforts, seeing her as a fellow traveler in the populist cause. The "Khanservatives," as they call themselves, tend to be younger and Trumpier, part of the growing ranks of Republicans who question unfettered markets and see big corporations as an adversary to their constituents. "As the Republican Party becomes more working class, we're less captive to the neolibertarian view that everything big business does to people is OK," said Florida Rep. Matt Gaetz, who has interviewed Khan on his Newsmax show. His party, he said, "can't be whores for big business and be the voice of the working class at the same time." Most Republicans, to be sure, aren't embracing Khan. House Judiciary Chairman Jim Jordan hauled her before the committee for a four-hour grilling in July, where he and other GOP representatives accused her of abusing power and bullying companies. "She has pushed investigations to burden parties with vague and costly demands without any substantive follow-through, or, frankly, logic, for the requests themselves," Jordan said. Khan also faces congressional investigations led by Republicans who charge she has abused her authority and violated ethics rules. Critics accuse her of creating roadblocks to economic activity that do nothing to benefit consumers. But the Khanservatives' ranks are growing—and some of her backers have speculated that if Trump wins this year's election, he could reappoint her. "I would hope," Gaetz said, "that whoever is the next FTC chair would continue many of the cases that Chair Khan has brought against predatory businesses." The bipartisan traction suggests Khan is tapping into a generational shift in attitudes toward corporations and markets. More Republicans are bucking their long alliance with big business and accusing corporations of hurting workers, stifling free speech and imposing a liberal agenda on employees and consumers. Their beefs with big business are different from liberals' focus on workers' rights and corporate greed, but on policy, the two sides sometimes end up in the same place. "We are at an inflection point," said Hannah Garden-Monheit, director of the FTC's office of policy planning, who left a top position in the Biden White House to join the agency she saw as the "tip of the spear" for economic justice. "There's a recognition that decades of laissez-faire has not worked for people, and antitrust and competition policy is the way we can hold large corporations accountable on behalf of working Americans." Rising on the right Khan has compiled a mixed record since her appointment. Some of her aggressive actions have failed as she seeks to reorient decades-old norms surrounding corporate mergers. The agency's suits challenging proposed acquisitions by Meta and Microsoft fizzled, and its much-hyped case accusing Amazon of creating an illegal monopoly faces uncertain prospects. (The agency is appealing the Microsoft decision.) Other actions have been successful. Courts have sided with the agency in recent actions against the biotech company Illumina and the drugmaker Sanofi, and other proposed mergers have fallen apart in anticipation of agency scrutiny. (Khan's backers call this "deterrence"; her critics term it a chilling effect.) Last month, the agency sued to block Kroger from acquiring the Albertsons grocery chain, the largest proposed supermarket merger in U.S. history. The companies targeted by the agency have denied they engaged in anticompetitive practices. Khan's rise on the right was apparent in early November, when she took the stage at an unlikely venue: the annual conference of the Federalist Society, the influential conservative legal organization. She was one of just two members of the Biden administration to appear on the three-day program. Before Khan could begin, her interviewer, Todd Zywicki, a professor at the George Mason University School of Law, uncorked a rant that revealed the underpinnings of the right's romance with antitrust. In 2021, Zywicki said, he sued his employer for trying to force him to take the Covid vaccine. He had videos removed from YouTube for alleged misinformation and had been "shadow-banned" on Facebook, he said. He'd seen friends and colleagues vanish from Twitter or disappear from Google searches. (The companies have denied accusations that they discriminate against conservatives.) When like-minded allies tried to start their own social network, it was banned from app stores and driven out of business. "I'm sort of, I'd say, a market fundamentalist who's been mugged by reality over the last few years," Zywicki said. Khan responded with her spiel about the dangers of concentrated corporate power. "For those of us who care about liberty, who care about the rule of law, recognizing not just the ways in which state power can threaten those core values but the ways in which unchecked economic power can threaten those values" was a potential area of agreement, she said. After the talk, she was mobbed for selfies and stayed for a private lunch with a group of young society members. "If you didn't know she was working for the Biden administration, you wouldn't be able to tell," said one of the lunch attendees, Terence Herrick, an Omaha native and second-year Harvard Law student. "I think there is a lot of alignment with what we in the Federalist Society believe should be the right direction of our country." Some liberals have expressed angst at the outreach to the right by Khan and her allies. But Khan sees only upside in forging ties across the aisle. She has worked to cultivate these relationships, reaching out to employees of the Conservative Policy Institute for guidance before her 2021 Senate confirmation, which succeeded in getting 13 Republican votes. 'Picking up the baton' Conservative interest in antitrust policy has been percolating for years. Many younger conservatives reject the laissez-faire dogma of deregulation and open borders in favor of a muscular state that subordinates business prerogatives to the popular will, from Sen. Marco Rubio's call for "a pro-American capitalism…that promotes the common good, as opposed to one that prioritizes Wall Street and Beijing," to Florida Gov. Ron DeSantis's crackdown on Disney and "woke corporations." Khan has also won over Republicans by taking on causes dear to their hearts. She cracked down on "Made in America" frauds that hurt farmers and cattle ranchers who compete with fake imports. She sued a data-broker company for surveilling people on their way to church. And she pledged that she won't bend the rules to approve corporate mergers even if executives promise to improve environmental or diversity standards. The right's most prominent antitrust hawk is Missouri Sen. Josh Hawley, a former Supreme Court clerk with degrees from Stanford and Yale. Before coming to Washington, the 44-year-old Hawley was the first state attorney general to bring an antitrust case against Google and also mounted an investigation of Facebook over data privacy. In the Senate, he has proposed multiple bills to strengthen antitrust enforcement, including legislation aimed at breaking up meatpacking monopolies, banning large corporate mergers, giving more power to the FTC and bolstering penalties for anticompetitive conduct. In an interview, Hawley said he likes the way Khan has aggressively enforced antitrust laws—a trend he argues began during the Trump administration. Under then-Attorney General William Barr, the Justice Department sued Google, bringing the department's first major monopolization case since the 1990s. "She has done a good job of picking up the baton and running with it," he said. The FTC section of this year's version of the Heritage Foundation's quadrennial policy blueprint for the next potential GOP administration, Project 2025, differs starkly from four years ago, calling for a more aggressive crackdown on large U.S. companies and industries like Big Tech. "We are witnessing in today's markets the use of economic power—often market and perhaps even monopoly power—to undermine democratic institutions and civil society," it states. The document, according to a person involved with its drafting, was the result of intense internal wrangling between conservative groups. The resulting text was so controversial that the authors acknowledge in the text that other conservative groups disagree with their views. In Congress and the courts, the Khanservatives are having an impact. In 2022, 39 Republicans voted for a bill that increased fees on corporations in order to provide more resources to the FTC and DOJ's antitrust division to review proposed mergers and acquisitions. Some conservative judges have shown openness to the FTC's novel legal approaches, including a recent opinion from the conservative Fifth U.S. Circuit Court of Appeals affirming the legitimacy of the agency's attacks on so-called vertical mergers, which combine complementary companies from different parts of the supply chain.

This new circle of advisers — which now included a supportive Slaughter — helped Khan grow into the job. She became more willing to trust the recommendations of staff attorneys and economists as they developed a better understanding of her vision. She became more selective in the cases and investigations she ordered. Most significantly, she came to understand that while transforming antitrust law required bringing cases that the agency might lose, it was also important to win some to maintain the agency’s credibility and morale. The latest employee satisfaction survey, in fact, shows that the FTC has reversed more than half of its precipitous decline.

Khan’s more pragmatic approach was evident last September when the FTC, along with 17 state attorneys general, filed a much-anticipated suit against Amazon. The 172-page complaint did not rely on many of the novel legal theories Khan had advanced in her star-making article. Instead, it took the more traditional approach, accusing Amazon of raising prices for consumers by punishing third-party sellers on its platform who offered lower prices elsewhere, and by requiring sellers to use Amazon’s expensive fulfillment services to qualify for Prime status.

Microsoft, OpenAI and Nvidia face increased antitrust scrutiny of their roles in the artificial intelligence industry after US regulators reportedly reached an agreement on investigating the companies. The US Department of Justice (DoJ) and the Federal Trade Commission (FTC) have struck a deal on investigations into the main protagonists in the AI market, the New York Times reported, with the agreement expected to be completed in the coming days. The DoJ will lead on investigating whether Nvidia, the leading maker of chips that train and operate AI systems, has broken antitrust laws that oversee fair competition in business and aim to prevent monopolies, the NYT said on Wednesday. Meanwhile, the FTC will scrutinise OpenAI, the company behind the ChatGPT chatbot, and Microsoft, OpenAI’s biggest investor and a considerable financial backer of other AI companies. The Wall Street Journal also reported on Thursday that the FTC is investigating whether Microsoft structured a recent deal with startup Inflection AI to avoid an antitrust inquiry. In March, Microsoft hired Inflection’s CEO and co-founder, UK entrepreneur Mustafa Suleyman, as the boss of a new AI division and agreed to pay his company $650m (£508m) to license its AI software. The FTC has already signalled interest in the AI market. In January, it ordered OpenAI, Microsoft, Google owner Alphabet, Amazon, and startup Anthropic to provide information on recent investments and partnerships involving generative AI companies and cloud service providers. Last year, it opened an investigation into OpenAI on claims it had run afoul of consumer protection laws by putting personal reputations and data at risk. The head of the DoJ’s antitrust division, Jonathan Kanter, told the Financial Times on Thursday that the organisation would look “with urgency” at the AI sector and would examine “monopoly choke points and the competitive landscape” in the technology. Kanter said regulators must act quickly to ensure that powerful tech companies do not control the market. The reports came as Nvidia’s valuation reached $3tn for the first time on Wednesday, edging ahead of Apple. Rebecca Haw Allensworth, a professor at Vanderbilt law school, said the reported collaboration between the DoJ and FTC reflected a relationship that has grown more collaborative under the Biden administration. “It used to be that the agencies divided the cases according to industry, but with this market being so large and important for antitrust enforcement, they are sharing responsibility and working hand-in-glove,” she said. “There is no doubt that the agencies see AI as the next frontier of anticompetitive conduct by firms already seen as avoiding and suppressing competition.”

U.S. Federal Trade Commission (FTC) Chair Lina Khan isn’t mincing words in her crusade against big tech companies, training her ire on their even bigger AI goals using a mob metaphor this week. Speaking at TechCrunch’s StrictlyVC conference in Washington, D.C on Tuesday, Khan said the number of cases the FTC brings isn’t as important as the type. “One thing that’s been important for me is to make sure that we’re actually looking at where we see the biggest harm,” she explained. “Where do we see players that are systematically driving these illegal behaviors? Being able to go after the ‘mob boss’ is going to be more effective than going after the henchman at the bottom.” Khan has made waves since being appointed chair of the FTC by President Joe Biden in 2021, recently banning non-compete agreements for most employees and attempting to block multiple blockbuster mergers and acquisitions. Earlier this year, she put the brakes on what would have been the biggest fashion deal in history: Coach’s $8.5 billion acquisition of Michael Kors. Coach’s parent brand Tapestry was in talks to purchase Capri Holdings, which owns brands like Michael Kors, Versace and Jimmy Choo, before the FTC sued, arguing the acquisition would crush “direct head-to-head competition.” But big tech has always been Khan’s main focus when it comes to antitrust actions. Last year, the FTC sued Amazon in a landmark lawsuit accusing the retail giant of using illegal methods to maintain its dominance. Also that year, the FTC hoped to ax Microsoft’s roughly $70 billion purchase of the gaming giant Activision Blizzard, but was rejected by U.S. District Judge Jacqueline Scott Corley, who said the FTC didn’t prove the deal would hurt competition. More recently, Khan and the FTC have turned toward AI, launching multiple lawsuits against big tech companies, headlined by their recent investigation into Microsoft’s $10 billion investment and ongoing relationship with OpenAI, the $80 billion startup behind ChatGPT. Khan said in January she fears the big tech giant may be able to “exert undue influence or gain privileged access in ways that could undermine fair competition” in the AI arms race.

As it examines artificial intelligence, the Federal Trade Commission will seek to ensure these quickly emerging technologies do not close markets or feed into existing monopoly powers, FTC Chair Lina Khan said Wednesday at an international regulatory session in Brussels. “There’s no doubt that these tools could provide enormous opportunity that could really catalyze growth and innovation,” Khan said at the “Antitrust, Regulation and the Next World Order” conference hosted by the Capitol Forum. “But historically, we’ve seen that these moments of technological inflection points and disruption can either open up markets, or they can be used to close off markets and double down on existing monopoly power.” The FTC is “taking a holistic approach across the AI,” Khan added. “We’ve been very fortunate to build up a team of technologists in-house that can help us look under the hood,” she said. “So we’ve been going layer by layer from chips and cloud and compute to the foundation models to the applications to understand what are the key economic properties here.” President Joe Biden has called on the FTC and other federal agencies to address the quickly emerging technology. “It’s a moment of diagnosis and wanting to make sure that our analysis and understanding across the stack … is accurate so that we can then be using any policy or enforcement tools as appropriate to try to get ahead where we can or at least not be decades and decades behind,” Khan said. The FTC last week ordered five companies to provide the agency with information on recent investments and partnerships involving generative artificial intelligence and major cloud service providers. The agency issued the order under its investigative authority in Section 6(b) of the Federal Trade Commission Act. The companies are Alphabet Inc., Amazon.com Inc., Anthropic PBC, Microsoft Corp. and OpenAI Inc.

Richard, The Week UK, Is Big Tech getting too big?: The EU is pursuing anti-competition claims against both Microsoft and Apple,” June 26, 2024 https://theweek.com/tech/is-big-tech-getting-too-big

Microsoft has also come under scrutiny from the Federal Trade Commission in the US for its "dealings" with startup Inflection AI, which may also contravene antitrust laws, said Mark Lemley and Matt Wansley in The New York Times. Microsoft has "defended" its deal, but it has raised questions about whether the Big Tech firms are now too big to allow new companies to flourish, forgetting that "it is competition – not consolidation – that delivers technological progress". Indeed, the Big Tech firms were "once small start-ups themselves", added Lemley and Wansley, but they are now "old", and instead of "innovating", they have "learned to stop the cycle of disruption". They do this by investing in start-ups, giving them "intelligence about competitive threats and the ability to influence the start-ups’ direction". While there have been "competition issues in the Big Tech sector", agreed Andrew Lilico in The Telegraph, the Big Tech firms have been an "important driver of recent US economic growth" and overreaching with regulation could "kill the golden goose". Specific cases of anti-competitive behaviour should be investigated, he argued, but it is wrong to assume Big Tech firms are "automatically monopolists by their nature". What next? The focus for all the Big Tech firms is generative AI, which will undoubtedly be the "big technological upheaval" of the near future, said The Economist. But regulators need to strike a delicate balance when monitoring the firms' interests in AI, and a "light touch" may be necessary. However, Big Tech would surely "use their imperial might to try to bend it to their advantage" if they were left "to their own devices", so regulators must "move fast" and act on their "duty" to "prevent them quashing competition".

The United States Department of Justice and the Federal Trade Commission (FTC) have reportedly reached a deal on how they will pursue an antitrust investigation into tech giants Microsoft, Nvidia, and OpenAI.

The companies are all major players in generative artificial intelligence: OpenAI is the nonprofit startup behind ChatGPT, the blockbuster AI-powered chatbot. Microsoft, the world’s largest company by market capitalisation, has invested more than $13bn in OpenAI and holds a 49 percent stake in the company’s for-profit subsidiary.

There are other potential competitors for AI chips, like AMD and Intel. And customers of AI processors like Microsoft, Google, and Amazon have incentives to develop their own and stop paying an outside vendor. But Nvidia is far out in front; one estimate puts its market share of AI chips above 80 percent. Stock analysts openly enthuse about Nvidia’s lack of competition for AI computing. The company “continues to fundamentally widen [its] competitive moat,” said Vivek Arya of Bank of America in a research note in March.

The company is certainly primed to milk this monopoly. In March, CEO Jensen Huang said Nvidia’s latest AI chip would cost between $30,000 and $40,000 a unit. The premium on Nvidia’s graphic processors has led TSMC, the world leader for advanced semiconductors, to openly muse about raising its own prices. Nvidia accounts for 10 percent of TSMC’s revenue.

Joseph, Economist and reporter at the Economist, “Is artificial intelligence making big tech too big?,” June 23, 2024 https://www.economist.com/business/2024/06/23/is-artificial-intelligence-making-big-tech-too-big

When chatgpt took everyone by storm in November 2022, it was Openai, the startup behind it, that seized the business world’s attention. But, as usual, big tech is back on the front foot. Nvidia, maker of accelerator chips that are at the core of generative artificial intelligence (ai), is duelling with Microsoft, a tech giant of longer standing, to be the world’s most valuable company. Like Microsoft, it is investing in a diverse ecosystem of startups that it hopes will strengthen its lead. Predictably, given the “techlash” mindset of the regulatory authorities, both firms are high on the watch list of antitrust agencies. Don’t roll your eyes. The trustbusters may have infamously overreached in recent years in their attempts to cut big firms down to size. Yet for years big-tech incumbents in Silicon Valley and elsewhere have shown just as infamous a tendency to strut imperiously across their digital domains. What is intriguing is the speed at which the antitrust authorities are operating. Historically, such investigations have tended to be labyrinthine. It took 40 years for the Supreme Court to order E.I. Du Pont de Nemours, a large American chemical firm, to divest its anticompetitive stake in General Motors, which it first started to acquire in 1917 when gm was a fledgling carmaker. The Federal Trade Commission (ftc), an American antitrust agency, is still embroiled in a battle with Meta, a social-media giant, to unwind Facebook’s acquisitions of Instagram and WhatsApp, done 12 and ten years ago, respectively. This time, rather than waiting until deals are done and markets are stitched up, the preference is to be nimble. It is now the trustbusters who are trying to move fast and break things. Broadly speaking, the authorities have two areas of concern. The first is whether the world’s biggest companies are trying to tie businesses into their products in anticompetitive ways. The second is about control: are some of the largest generative-ai investments poorly disguised acquisitions intended to sidestep antitrust consideration? Nvidia faces scrutiny on the first count. It is under the gaze of America’s Department of Justice, which is understood to be examining allegations that it locks users of its graphics processing units (gpus) into its software, and that a scarcity of gpus is the result of anticompetitive conduct. Nvidia declined to comment. The attention on Microsoft is more over the second category. The ftc has launched a market inquiry of the software-provider’s $13bn investment in Openai, which gives it a 49% share of the profits. It is also investigating Microsoft’s hiring in March of most of the staff of Inflection, a rival to Openai (the most significant hire was Mustafa Suleyman, Inflection’s co-founder, who sits on the board of The Economist’s parent company). Microsoft also declined to comment. The ftc has other big-tech firms under the spotlight, too. It is looking at investments by Alphabet and Amazon in Anthropic, another maker of large language models (llms). Inevitably, there is little public information concerning this antitrust scrutiny. Yet Britain’s Competition and Markets Authority, a regulatory agency that is also probing the two Microsoft deals, has recently published a study of llms (it refers to them by their alternative name, foundation models) that illustrates the main concerns. The biggest one, it says, is the potential role of a few tech giants to shape the market in anticompetitive ways. It notes that Alphabet, Amazon, Apple, Meta, Microsoft and Nvidia have forged over 90 partnerships with llm-makers since 2019, mostly by taking minority stakes. It expresses concerns that they may exert leverage on their partners through supply of critical inputs, such as computing power and data, as well as controlling access to consumers via their platforms. It also notes that some of the deals may have been structured to avoid merger scrutiny. In America, the government’s concerns are similar. But the trustbusters are not just looking at llms. They have their eyes on the whole caboodle—from the gpus at the bottom to consumer applications at the top of the generative-ai “stack”. The ftc’s investigation of Microsoft’s Inflection deal is yet another type. The agency is probing whether Microsoft failed to supply the correct merger paperwork when it hired most of Inflection’s employees and paid for a non-exclusive licence to its technology. In other words, it suspects it was an acquisition in disguise aimed at avoiding an antitrust review. For Microsoft, it was not an acquisition at all. What is left of Inflection remains an independent company. This is all tricky terrain. Building llms is capital-intensive, like drilling for oil. The requirements for computing power, digital information and human expertise are such that model-builders justifiably turn to tech giants for support. Big tech has the balance-sheets, data and cloud infrastructure to help, as well as providing a seal of approval. Moreover, it is hard to assert that a tech giant has an exclusive hold over any generative-ai startup when so much polyamory is taking place. Satya Nadella, Microsoft’s boss, once declared with regard to Openai that his firm was “below them, above them, around them”. That sounded suspiciously like monogamy. When Openai recently announced a partnership with Apple, a Microsoft rival, Mr Nadella was reportedly miffed. The other type of competition It is tough political territory as well. If intervention is too heavy-handed, China hawks will accuse the trustbusters of suffocating American innovation in favour of its strategic rival. Yet there is room, at the very least, for a light touch. Generative ai will cause big technological upheaval, though in what ways is still unclear. If the incumbents are left to their own devices, they will surely use their imperial might to try to bend it to their advantage. Regulators have a duty to prevent them squashing competition. So, by all means move fast. Just don’t break things too badly.

Last spring, as the pandemic was taking hold, Ashley Baker, a 32-year-old conservative policy advocate, noticed a trend that alarmed her: A growing number of Republican elected officials were starting to join Democrats in attacking corporate monopolies. Missouri Senator Josh Hawley had introduced several bills to crack down on Big Tech, and more GOP legislators were showing an interest in doing the same. Texas Senator Ted Cruz had argued that “Big Tech is out of control” and posed a threat to the future of American democracy. Colorado Representative Ken Buck, ranking member of the House Antitrust Committee and a former member of the Tea Party, had started floating the idea of creating new regulations for oligopolistic corporations. “I was one of those people that believed that the market could correct itself,” Buck said, “until I saw the cheating.”

At the same time, then President Donald Trump was flailing. His botched response to the coronavirus outbreak was clear, and his approval ratings hit new lows. There was newfound reason to believe that Joe Biden could clinch the White House, and an emerging bipartisan consensus—or something resembling it—on antitrust meant that it could be one of the few areas where the status quo was truly at risk.

The bad news is that Senate Majority Leader Chuck Schumer has done precisely what many long feared he would: While rhetorically supporting two bipartisan antitrust bills targeting Big Tech for months, he effectively killed the effort by never bringing the legislative package for a vote on the Senate floor in the final days of the congressional term. That much was clear this week, when House and Senate leaders introduced a $1.7 trillion end-of-the-year spending package that includes a suite of antitrust bills, but not the two that took direct aim at the tech behemoths: the American Innovation and Choice Online Act (AICOA) and the Open App Markets Act (OAMA). The exclusion amounted to a betrayal in the eyes of antitrust advocates; Schumer had been promising his colleagues a vote on those bills since May. But not only did the New York Democrat block widely supported measures intended to rein in the likes of Google and Amazon, he actually dropped a separate provision that staffers and activists argue was to protect Google from a 2020 Texas lawsuit. Yet the trustbusters aren’t walking away empty-handed. As a consolation, Schumer put an extra $85 million into the nation’s two antitrust enforcement agencies: $50 million to the Federal Trade Commission and $35 million to the Department of Justice’s Antitrust Division, according to multiple Hill sources familiar with the negotiations. Both of those agencies are led by anti-monopoly crusaders—Lina Khan at the FTC and Jonathan Kanter at the DOJ. The majority leader also allowed an amendment to a measure in the omnibus that lets those agencies immediately collect higher fees from companies that need them to review proposed mergers, a move that is projected to help the FTC and DOJ collectively rake in roughly $1.4 billion over the next 10 years, according to a Congressional aide familiar with the process. That infusion of cash is no small matter for both agencies, which are starved of resources and are more often than not outgunned by the corporate giants they are up against in court, be they tech firms like Google or Facebook, pesticide manufacturers like Syngenta and Corteva, or the mega-ticket-selling platform Ticketmaster. Both the FTC and the DOJ have fewer lawyers now than they did in the 1980s, but are each ramping up antitrust enforcement at a time when the economy is more highly concentrated than at any point since the original Gilded Age. “This is clearly the beginning of this fight and not the end,” Sen. Amy Klobuchar, Democrat of Minnesota, who co-sponsored the Senate versions of AICOA and OAMA told reporters on Tuesday. “I will continue to work across the aisle to protect consumers and strengthen competition.” But to get such a bump in funding to help Khan and Kanter crack down on corporate concentration, the bipartisan antitrust coalition in Congress took a loss on their opportunity to change the rules of the game for Big Tech.

The Biden administration has made antitrust enforcement a priority. It has brought actions against large airline companies like Jet Blue and, yes, numerous cases against Big Tech. Many of the Biden administration's antitrust efforts have been met with strong conservative support. So much so that it inspired the Wall Street Journal to introduce a new term into the antitrust nomenclature: "Khanservatives." The ascription refers to conservatives who support Federal Trade Commission (FTC) Chair Lina Khan's relentless pursuit to revert antitrust enforcement to a more trust-busting style. Libertarian Big Tech advocates use the term "Khanservative" as an epithet to treat all conservative support for antitrust enforcement as unprincipled. That view is categorically wrong. Republicans have a long tradition of pushing back on concentrated authorities. President Theodore Roosevelt sought to break up monopolies. President Ronald Reagan's Department of Justice broke up AT&T's monopoly over interstate telecommunications networks. Judge Robert Bork supported the Justice Department's antitrust suit against Microsoft in the 1990s. And the Trump administration initiated antitrust probes into Apple and Google. Another flaw in the criticism of anti-monopoly conservatives is that the cases garnering most conservative support in the Biden administration were not initiated by Chair Khan, but by the Justice Department. And that makes sense. The department's approach follows a more traditional path towards antitrust enforcement by adhering to a consumer welfare framework. The Justice Department's cases against Apple and Google are prime examples. The department makes strong arguments that both Apple and Google have extraordinary market power and abuse that power in their respective markets—arguments that recall its enforcement against Microsoft in the 1990s. Take the department's Google Search case, which the Trump administration initiated. Trump's Attorney General Bill Barr, who brought the case, said that "the antitrust case against Google is a Republican project." There're also clear-cut monopoly abuse issues here. Google stands accused of hiding articles, blocking political emails it doesn't favor, and killing any innovation in the search market that threatens its dominance. In addition, conservatives at the Claremont Institute and the Heritage Foundation have rallied in support of the case against Apple. As Senator Mike Lee (R-Utah) points out, the Justice Department's Apple case builds on an investigation that started under the Trump administration. It charges Apple with killing competitors that challenge its dominance. Just ask Beeper Mini, which competed directly with Apple's iMessage, or the 343,000 apps the company kicked off its App Store with nary an explanation other than that they may violate user privacy—all while listing TikTok as an "essential" app, mind you. It also forces monopoly rents to the tune of 30 percent for merely existing on its App Store—the only store Apple allows on its devices.

In related news, the U.S. Federal Trade Commission (FTC) aims to publish rules relating to "commercial surveillance" in the next couple of months, according to The Record. The FTC defines commercial surveillance as the "business of collecting, analyzing, and profiting from information about people." The FTC recently published a speech from Samuel Levine, the director of its Bureau of Consumer Protection, that lays out the thinking behind the commission's approach. Perhaps most significantly, Levine says "there is momentum across government—state and federal, Republicans and Democrats—to push back against unchecked surveillance." In other words, it's not a coincidence that technology regulation is increasing. In his speech, Levine talks of "unchecked surveillance" and, in our view, conflates the entire digital economy with commercial surveillance. There are companies that track people directly for profit, but that is not what most of the digital economy is about. Despite this caveat, much of what Levine says makes sense and signals the direction for broader government action. Levine takes aim at what he calls the "notice and choice" regime, whereby consumers theoretically provide informed consent after reading terms and conditions or privacy policy documents. He calls the choice regime "a fantasy world, divorced from the reality of how people live or how firms operate." Instead of protecting privacy, it has become "a way for companies to give invasive data practices a thin veneer of legitimacy." This regime is broken, he says, because people don't have the time or expertise to read and understand the documents, and, even if they could, they couldn’t exercise choice because digital services are indispensable and there isn't much competition. The solution here, Levine says, is that "firms need to collect and retain less data about us, and secure it better." The FTC has already secured a number of prohibitions against firms selling sensitive location information and sharing sensitive health data for advertising purposes. In addition to improving consumer privacy, another goal for the FTC is to crack down on "dark patterns" or manipulative user interfaces that trick users into making decisions they would not otherwise have made. One example here is interfaces that make it difficult to cancel ongoing subscriptions, and last year the FTC acted against Amazon for allegedly tricking users into subscribing to Amazon Prime and making the cancellation process deliberately difficult to navigate. The FTC's complaint in that case says: [T]he primary purpose of the Prime cancellation process was not to enable subscribers to cancel, but rather to thwart them. Fittingly, Amazon named that process "Iliad," which refers to Homer's epic about the long, arduous Trojan War. Levine says another FTC goal is to ensure that artificial intelligence (AI) technologies "work for people, and not the other way around." Although AI is still in its infancy, the intent here is to avoid leaving a regulatory vacuum as occurred during the 2000s, when internet companies were left to regulate themselves. These aren't rogue FTC actions but, rather, represent what Levine calls "the tip of the spear in a broader rethinking of the government’s role in making markets work better." There are two possible futures here. In one, Congress passes comprehensive federal privacy legislation such as the recently proposed American Privacy Rights Act (APRA). Compared to other recent proposals, experts think this act has the best chance of making it into law. The APRA, however, hits the same notes that the FTC's Levine does, including data minimization and a prohibition on the use of dark patterns. In this future, the FTC is enforcing legislation. In the second future, comprehensive privacy legislation does not pass Congress and instead the FTC tries to change business practices using regulation and enforcement actions. It's a more difficult road for the FTC, but the destination is much the same.

David, JD Harvard Law School, Executive Director of Towards Justice since 2018 and previously was Litigation Counsel with the organization. Colorado Politics, “Update antitrust laws, regs to cultivate competition, tame Big Tech, Opinion,” June 24, 2024 https://www.coloradopolitics.com/opinion/update-antitrust-laws-regs-to-cultivate-competition-tame-big-tech-opinion/article_ff7182c0-3039-11ef-83cd-cbe2dd3a4956.html

Our federal and state antitrust regulators and enforcers have taken many important steps to reign in abuses of corporate power. They’ve already gone after Amazon for vertical restraints imposed on independent sellers who sell through the Amazon marketplace; they’ve sued to stop anti-competitive mergers; and the FTC has even taken on one of the most problematic vertical restraints in our marketplace with a proposed rule to prohibit non-compete agreements. We need to keep the pedal to the metal to take on vertical restraints. I’d urge the FTC and AG Weiser to investigate Microsoft’s tying practices — just like regulatory bodies in the EU and Britain have — and the vertical restraints Amazon and other corporations use to control their workers while attempting to avoid accountability to them. Our antitrust laws and regulations were put on the books long before with the advent of the digital world and the proliferation of fine-print contracting designed to limit competition and exercise dominance. But those laws were designed precisely to deal with these kinds of abuses of power. Through aggressive enforcement of these rules and by standing up against unfair practices, we can start breaking down the unfair advantages seized by Big Tech and move toward a safer and more equitable future.

Patrick Kulp, Tech Brew, “Why antitrust authorities are reportedly gearing up for a fight over AI: The FTC and DOJ are said to be planning to come after the biggest names in the tech.” June 11, 2024 https://www.emergingtechbrew.com/stories/2024/06/11/ftc-doj-antitrust-ai-microsoft-openai-nvidia

Companies like OpenAI, Microsoft, and Nvidia have positioned themselves as winners in the race to own the latest wave of AI. But could they perhaps be too dominant? That’s what federal regulators charged with ensuring fair competition between companies will be examining in the coming months, according to recent reports in the New York Times and other outlets. The Federal Trade Commission and the Department of Justice have reportedly come to a deal to divvy up oversight as they open a probe into the burgeoning space. What’s behind the move: The antitrust investigation is just one front in how the Biden administration aims to shape control of this new technology and curb its potential worst tendencies. Biden has also staffed these agencies with leaders who have sought to reinvigorate how the government enforces antitrust laws after decades of a more hands-off approach. The FTC previously announced an inquiry into partnerships between tech giants and buzzy startups, like Microsoft and OpenAI, in January, in a likely effort to examine whether these arrangements are efforts to skirt the legal reviews required for a more traditional acquisition. FTC Chair Lina Khan, a noted critic of Big Tech before joining the administration, has said these efforts are meant to tackle problems as the tech develops and before dominance is cemented. What’s the deal: Under this new reported deal, the DOJ will take point on an investigation of Nvidia, which has cornered the market on AI chips and become the world’s second-most valuable public company as a result, per Axios. The FTC, meanwhile, is reportedly investigating Microsoft’s $13 billion investment in OpenAI. The Washington Post reported that the FTC is also looking into Microsoft’s $650 million deal with AI startup Inflection and whether the quasi-acquisition was an effort to “skirt government antitrust reviews.” As major federal antitrust enforcers, it’s not the first time the two agencies have divided and conquered in an investigation like this. They previously reached a similar arrangement in 2019 for a probe into Silicon Valley giants Facebook, Amazon, Apple, and Google. Why it matters: Network effects tend to mean digital markets skew toward dominance by a small number of players, according to Stephen Weymouth, a distinguished associate professor at Georgetown University’s McDonough School of Business and author of the book Digital Globalization: Politics, Policy, and a Governance Paradox. Weymouth said that “the biggest companies need to recognize that this administration is unwilling to turn a blind eye to behavior that undermines competition,” but noted that Congress has so far done little in this arena. Weymouth said the move is a sign that the Biden administration is serious about fostering competition between companies as the US faces a rivalry with China over the fast-emerging tech. “The era of loose regulatory scrutiny that existed prior to recent generative AI advances is over for the time being,” Weymouth said in an email. “This administration seems to recognize the enormous potential for AI to transform the economy, and they are unwilling to sit by and let all the advantages accrue to a small handful of companies.”