Lina Khan became chair of the Federal Trade Commission two years ago on a promise to take bold action against the biggest technology companies.
For too long, Ms. Khan at that time, the agency was a weak police force and had to challenge behemoths like Microsoft, Amazon, Meta and Google in the courts to curb their growing power. Even if the FTC loses the cases, he later added, they will be a partial victory because the agency will signal that antitrust laws need to be updated for the modern internet age.
But on Tuesday, Ms. Khan is the biggest blow to his mainstream agenda. A federal judge rejected the FTC’s attempt to block Microsoft’s $70 billion acquisition of video game maker Activision Blizzard from closing, saying the agency failed to prove the deal would reduce competition and harm consumers . On Wednesday, the FTC filed notice that it will appeal the judge’s decision.
That follows a defeat in February, when a judge rejected an FTC lawsuit seeking to block Meta from buying virtual reality start-up Within.
The defeats raised questions about Ms. Khan to carry out his ambitious goal to reverse decades of lax antitrust enforcement, as political pressure mounts and patience wears thin for the 34-year-old academic, who has ruffled corporate America’s feathers. The critics of Ms. Khan and they are speaking louder to puncture his take-it-to-the-courts approach, saying losses aren’t even partial wins — just losses.
“I strongly disagree with this approach,” said Anthony Sabino, a professor of business and law at St. John’s University, about the methods of Ms. Khan. “He’s trying to change a century’s worth of antitrust law overnight, and that’s not smart.”
Adam Kovacevich, the chief executive of the Chamber of Progress, a tech trade group, said the defeats made the FTC less credible. “All the losses in court make their threats look more like a paper tiger,” he said.
Others wondered if Ms. Khan the FTC’s resources on cases it can’t win. “They crossed the line into being reckless in the cases they brought,” said Ashley Baker, a director of public policy for the Committee for Justice, a conservative think tank.
The amount of criticism puts Ms. Khan in the hot seat as he prepares more potential actions against the tech giants. The FTC has filed antitrust lawsuits against Meta and may file a lawsuit against Amazon, which it is investigating over claims of illegal monopolization.
Now Ms. has to defend first. Khan himself. On Thursday, he is expected to be grilled by a House Judiciary Committee hearing on FTC oversight, the Republican-led panel’s website says it wants to “examine the mismanagement of the FTC and its disregard for ethics and congressional oversight under Chair Lina Khan.”
Ms. refused. Khan to comment for this article, and Douglas Farrar, an FTC spokesman, also declined to comment on how the court losses would affect his agenda. After the Microsoft-Activision decision on Tuesday, Mr. Farrar said the agency was “disappointed with this outcome because of the clear threat posed by this merger to open up competition in cloud gaming, subscription services and consoles.”
Ms. became famous. Khan while a Yale law student in 2017 when he argued in a paper for a law journal that Amazon was distorting competition and violating antitrust laws despite lowering prices for consumers. The paper helped start a debate about how to limit tech giants and how to modernize antitrust practices.
After President Biden chose Ms. Khan to lead the FTC, he has repeatedly denied that it needs to go to court — win or lose — to send the tech industry a strong signal that the agency is becoming a tougher sheriff. Even court losses, he maintains, will gradually reform antitrust theories.
Ms. applied Khan had that thinking when the FTC sued Meta last year for buying a small virtual-reality company, Within. The case was a surprise because virtual reality is a new technology, making it hard to argue that the deal will reduce competition in a market that has yet to develop.
But said Ms. Khan said regulators should stop violations of competition and consumer protections at the bleeding edge of technology, not just where companies have become behemoths.
“What we’re seeing is that inaction after inaction after inaction can have serious costs,” he said in an interview with The New York Times and CNBC in January 2022. “And that’s what we’re really trying to reverse.”
Earlier this year, a federal judge denied the FTC’s request to block Meta’s acquisition of Within. But the judge agreed with some of the FTC’s arguments, including how the agency defined tech markets in the case.
Tuesday’s loss in the Microsoft-Activision case was more painful, partly because the blockbuster merger has become a test of whether tech megadeals can get through despite heightened regulatory scrutiny. Judge Jacqueline Scott Corley of the US District Court for the Northern District of California said consumers benefited from Microsoft’s expectation of a rigorous review, writing: “That review paid off.” But his decision left little to redeem for the FTC
In the case, the agency argued that the deal should not be closed because it could harm competition. Microsoft could make some of Activision’s games exclusive to its Xbox game consoles or degrade the experience of playing games like Activision’s Call of Duty on competing consoles like Sony’s PlayStation.
But Judge Corley wrote that the FTC is unlikely to win its challenge to the merger in the agency’s internal court and said, essentially, Microsoft is doing enough to avoid hurting rivals.
“The FTC has identified no documents that contradict Microsoft’s publicly stated commitment to make Call of Duty available on PlayStation,” he wrote.
Eleanor Fox, a professor emeritus at New York University’s law school, said it was too early to pass judgment on Ms. Khan. Elsewhere in the world, especially in the European Union and in Britain, regulators have also pursued antitrust actions against big tech companies, he said.
Ms. Khan, he said, “is an outlier only in the US, not globally.”
