Lina Khan became chairman of the Federal Trade Commission two years ago on a promise to take bold action against the biggest tech companies.
For too long, Ms. Khan said at the time, the agency had been a weak police force and had to challenge giants like Microsoft, Amazon, Meta and Google in the courts to curb their growing power. Even if the FTC lost the cases, she later added, they would be a partial victory because the agency would signal that antitrust laws need to be updated for the modern Internet age.
But on Tuesday, Ms Khan suffered the biggest blow yet to her signature agenda. A federal judge rejected the FTC’s attempt to stop 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. That followed a loss in February, when a judge rejected an FTC lawsuit seeking to block Meta from buying the virtual reality startup Within.
The defeats raise questions about Ms Khan’s ability to fulfill her ambitious goal of overturning decades of weak antitrust enforcement, as political pressure mounts and patience wears thin for the 34-year-old academic who ruffled the feathers of corporate America. Ms. Khan’s detractors are bolder and louder in blasting her strategy for dealing with the courts, saying the losses aren’t even partial wins — they’re just losses.
“I completely disagree with this approach,” said Anthony Sabino, a professor of business and law at the University of St. John, about Ms. Khan’s methods. “She’s trying to change a century’s worth of antitrust law overnight, and that’s not necessarily smart.”
Adam Kovacevich, the chief executive of Chamber of Progress, a tech trade group, said the defeats made the FTC seem less credible. “All these court losses make their threats look more like a paper tiger,” he said.
Others wondered if Ms. Khan was wasting the FTC’s resources by not being able to win cases. “They’ve crossed the line to be reckless with the cases they bring,” said Ashley Baker, director of public policy for the Committee for Justice, a conservative think tank.
The tide of criticism puts Ms Khan in the hot seat as she prepares further possible actions against the tech giants. The FTC has filed antitrust lawsuits against Meta and could bring a case against Amazon, which it has been investigating over claims of illegal monopolization.
Now Ms. Khan will first have to defend herself. On Thursday, she is expected to be grilled by the House Judiciary Committee hearing on oversight of the FTC, with the Republican-led panel’s website saying it wants to “examine mismanagement of the FTC and its disregard for ethics and congressional oversight under Chairman Lina Khan.”
Ms. Khan declined to comment for this article, and Douglas Farrar, a spokesman for the FTC, also declined to comment on how the court losses will affect her agenda. After the Microsoft-Activision ruling on Tuesday, Mr. Farrar said the agency was “disappointed in this outcome because of the clear threat this merger poses to open competition in cloud gaming, subscription services and consoles.” The FTC could appeal the judge’s decision.
Ms. Khan rose to fame as a Yale law student in 2017 when she argued in an article for a law journal that Amazon was crushing competition and violating antitrust laws despite lowering prices for consumers. The paper helped start a debate about how to limit the tech giants and how to modernize antitrust practices.
After President Biden picked Ms. Khan to lead the FTC, she repeatedly argued that it was necessary to go to court — win or lose — to send the tech industry a strong signal that the agency was becoming a tougher sheriff. Even losses in court, she claimed, would gradually reform antitrust theories.
Ms. Khan applied that thinking when the FTC sued to prevent Meta from buying a small virtual reality company, Within, last year. The case was a surprise because virtual reality is a nascent technology, making it difficult to argue that the deal would reduce competition in a market that has yet to form.
But Ms. Khan argued that regulators need to crack down on violations of competition and consumer protections at the bleeding edge of technology, not just in places where the companies have already become giants.
“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 2022. “And that’s what we’re really trying to reverse.”
Earlier this year, a federal judge rejected 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 technical markets in the case.
The loss on Tuesday in the case of Microsoft-Activision was sharper, in part because the successful merger became a test of whether tech megadeals can go through despite increasing regulatory scrutiny. Judge Jacqueline Scott Corley of the U.S. District Court for the Northern District of California said consumers benefited from Microsoft’s expectation of a tough review, writing: “That scrutiny has paid off.” But her reign left little else redeeming for the FTC
In the case, the agency argued that the deal should not close because it might 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 PlayStation.
But Judge Corley wrote that the FTC was unlikely to win its challenge to the merger in the agency’s internal court and said, essentially, that Microsoft had done enough to prevent rivals from being hurt.
“The FTC has not identified a single document that contradicts Microsoft’s publicly stated commitment to make Call of Duty available on PlayStation,” she wrote.
Eleanor Fox, a professor emeritus at New York University law school, said it was too soon to have a verdict on Ms. Khan’s strategy. Elsewhere in the world, particularly in the European Union and the United Kingdom, regulators have also taken antitrust actions against large technology companies, she noted.
Ms. Khan, she said, “is only extraordinary in the United States, not globally.”