Lina Khan: Extraction Exterminator

From The American Prospect (TAP): In March, President Biden established a Strike Force on Unfair and Illegal Pricing, an interagency team designed to coordinate responses to the growing use of tactics that gouge and confuse consumers. The co-chair of that effort is Lina Khan, the head of the Federal Trade Commission. The Prospect sat down with Khan to discuss trends in pricing and the technologies that enable such tactics, and how government can play a role in protecting the public. An edited transcript follows:

TAP: Your famous law review article on Amazon talks a lot about pricing below cost, but the FTC’s lawsuit against Amazon deals with its higher prices. Do you think that we’ve moved from an age of market share gains and corporate cost-cutting to an age of recoupment, not just with Amazon but across the economy?

Lina Khan: It’s an interesting question. Stepping back, we’ve seen what could be described as a monopoly life cycle. Especially in digital markets, there is a premium to, in the early stages, chasing market share, chasing scale, chasing customer lock-in effectively, because the network externalities and self-reinforcing advantages of data reward early winners. And then, [when] we see markets tip to one player or a very small number of players, the monopolist can shift to the next stage of the life cycle. Which you can call recoupment if you’re talking about predation, or you could call extraction. The extraction phase. Where you now have the monopoly, so let’s milk it. And I think that what we see across all sorts of markets, all sorts of sectors, is dominant middlemen that are able to then flip the switch and start extracting.

With more people on e-commerce, there are more opportunities to isolate the consumer, more opportunities to use various pricing tactics. Why do you think the judicial system has had such trouble with these tech innovations?

When you have moments of new technologies or new business models, there can be efforts by firms to try to dazzle enforcers and courts into thinking that there’s something fundamentally new here. And so maybe the existing laws don’t apply, or don’t apply in the same way. That’s why we’ve been crystal clear that there’s no AI exemption from the laws on the books: the laws against collusion, the laws against fraud, the laws against unchecked surveilling of people.

The whole premise of the FTC Act, and Congress stipulating prohibitions on unfair methods of competition and unfair and deceptive acts and practices, [is that] businesses are endlessly innovative, including in their mechanisms of lawbreaking. And so we want to be able to stay relevant even as business practices evolve, even as technologies evolve, and applying [the law] whether you’re in 1914 or 2024.

That brings us to this Strike Force on Unfair and Illegal Pricing that you’ve been put in charge of as the co-chair. Obviously, it has only been in existence a short time. What do you see philosophically as its function and how can it help police pricing deemed unfair or illegal?

I think the strike force responds to a broadly held view among the public that they’re really not getting a fair shake these days. I think there is a recognition that even as some of the acute strains and stresses and shocks that we saw during the pandemic have actually started to get addressed and be relieved, prices are not concurrently falling. And I think people at a more visceral level believe companies are exploiting them and taking advantage of them. And so the strike force is also intended to ensure that, if there are illegal forms of pricing, we’re not standing for that.

Typically when we think about inflation, governments have outsourced the management of that to the Federal Reserve. Do you see the work of the strike force as a last line of defense for the consumer, considering that monetary tools aren’t going to be as effective if these kinds of schemes are allowed to proliferate?

Across the FTC’s work, we’re moving away from this really hollowed-out conception of consumer protection where all you need to do is make sure that people are not getting tricked or actively deceived in the marketplace, and that’s the only role for government. The mechanisms for tricking people are way more sophisticated now and the affirmative burden needs to lie with corporations rather than on consumers. This is not about putting out signs that say, “Beware, predators are around.” The role of consumer protection is to stop the predation.

More here.

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