FTC Chair Lina Khan is the youngest person to be appointed when she takes office in 2021. But when her term ends in September, she will remain at the FTC until her successor is named. This may be the last time people remember her age. About her reign in the institution.
It is more likely that Khan's legacy will adopt technology on a large scale and do so very publicly. Unlike his decidedly underperforming predecessors, Khan regularly speaks to the press about how the FTC carries out its mission to enforce antitrust laws and protect consumers, and continues to keep tech giants on the radar, whose growth has remained unchecked for decades.
This strategy is even more noteworthy when you consider how small the FTC actually is. That's because it has just 1,300 employees handling about 150 tasks simultaneously and an annual budget of just $400 million.
We sat down with Khan earlier this week at one of TechCrunch's more intimate StrictlyVC events in Washington to talk to Khan about her approach and what she thinks Silicon Valley is getting wrong about it. The conversation has been edited for length below. You can listen to the full lecture here.
For the past 20 years, Washington has been dominated by giant corporations like Google and Microsoft. If you could tell us anything about your plans, I was hoping to start with a report from the Wall Street Journal that federal regulators are investigating some of the biggest companies, including Microsoft, OpenAI, and Nvidia.
You're right that there's a lot of interest across DC and making sure we can take advantage of the opportunities and potential that these tools provide, while also ensuring that these markets remain open, fair and competitive rather than allowing certain types of behavior. . Bottlenecks or gateways can emerge in ways that can undermine competition, opportunity, and innovation. . . I went to Silicon Valley a few months ago, and it was really interesting to hear, especially from founders, about how much opacity there is about who has access to some of these key inputs, whether it's computation or not. Check whether the model guarantees that it does not effectively feed back proprietary information. So, I think there's a lot of excitement, but I'm also hearing a little bit of fatigue that can come when you realize that a lot of the power has already been focused on it. And when that power is concentrated, innovation and competition can be excluded.
It also seems like some of the people you're trying to regulate are getting more creative about the deals they strike. For example, Microsoft's deal with Inflection AI, an AI company that hired a co-founder and staff member at Microsoft last March. Microsoft is currently paying $650 million in licensing fees to resell InflectionAI's technology. so it's not like that technically Merger. Have you talked to your agency or other regulators about what they are doing?
I'm limited in what I can say about this particular transaction or this particular potential issue. I would like to say that we are concerned to guard against circumvention of existing laws. We have made clear that all existing laws, including those prohibiting mergers that may substantially lessen competition and those prohibiting price fixing and collusion, still apply. Price fixing, whether through algorithms or handshakes, is still illegal. So overall, we are scrutinizing and trying to make sure that these innovations are not visible to potential violations of the law. We want everyone to play by the same rules.
I would like to tell you that earlier this year we started looking into some of these strategic partnerships and investments to understand what's really going on here. For example, some of these partnerships and investments may result in privileged access for some and exclusive access for others. . And that work is still in progress.
Apple also made a lot of announcements (at WWDC this week). They said they are integrating OpenAI. It said it may potentially work with other third parties, including Google Gemini. There seems to be a lot of partnerships between the same players which is a bit concerning to you right now. What did you think of coming out of that incident?
We see that historically some of the most important and groundbreaking innovations have come from startups, entrepreneurs, and small businesses that can see things differently, see market opportunities, and create real disruption by disintermediating the big ones. I did. Guys . . .
What we can say right now is that some of the incumbents may be controlling access to the inputs and raw materials needed for these innovations. So we have to guard against moments of competition, innovation and disruption being co-opted by incumbents, shutting down markets and preventing us from actually enjoying innovation and competition. It is what has put our country ahead historically. . .
I know you don't believe the argument that these companies should be protected (from antitrust actions) because slowing them down in any way weakens America as a country. On the one hand, many people agree with this. They want to see everything broken down so the startup can breathe. Others say, 'This technology moves much faster than we've ever seen before. Autonomous weapons could incorporate this technology.' How do you explain how companies (that you are reportedly targeting) are breaking up the work you say they will do without endangering the country?
Even 40 or 50 years ago, when the Justice Department was investigating AT&T, it was the Department of Defense that intervened and said, 'Hey, we have to be really careful here because antitrust action against AT&T could pose a national security risk.' So we were hearing a lot of similar claims back then.
Here are some natural experiments: At various moments, we are faced with a choice: whether to protect and conserve monopolies or to protect fair competition laws. And time and time again, we have chosen the competitive path. And this has been the driving force and catalyst for many of the groundbreaking innovations and incredible growth that our country has enjoyed and allowed us to lead globally. If you look at other countries that have instead chosen the national champion model, they are the ones left behind. I think we should keep these lessons of history in mind as we choose our paths again.
Among this audience are founders and VCs who have mixed feelings about you because they want their companies to thrive. They're so vocal about you keeping an eye on big tech companies that they're worried they're doing nothing. (take over). Exit is a big road for VCs and founders. How do you make them comfortable that you are doing what's best for them in the short and long term?
Of course, we understand that for some startups and founders, acquisitions are a key exit path of interest to them. What the law actually prohibits are exits or acquisitions that strengthen a monopoly or allow a dominant company to take over. Initial and competitive threats. . . Let me take a step back: Up to 3,000 merger filings are reported to us each year. About 2% of those actually get reviewed by the government, so in most cases, 98% of all transactions go through.
I also think that if you're a startup or a founder aspiring to an acquisition as an exit, a world with six, seven, eight potential suitors is a better world than the one you're in. Just one or two.
The FTC has 1,500 people?
Even though the economy has grown more than 15 times, there are actually about 1,300 people, 400 fewer than there were in the 1980s. . We may be a small agency, but we definitely punch above our weight.
I don't know if he's doing more than his predecessor or if he's more visible. Are you aware that you are moving at a faster pace than any of your predecessors in that role?
If you look at the numbers, there is a slight uptick. But I think counting the number of lawsuits or investigations is just one way to capture the impact. The type of case you bring is also important. One of the things that's important to me is making sure that we're actually seeing. Where are we seeing the most damage? Where do you see players whose illegal actions make you think they are pushing these issues more systematically? So just as tracking down a mob boss is more effective than tracking down his minions on the ground, your enforcement strategy must be effective as well. That's why we can look upstream and actually file lawsuits against some of the larger companies. If we are successful, I think it will have a really beneficial impact on the market.
When it comes to deterrence, I think we're already seeing some of that. We routinely hear senior traders, senior antitrust lawyers, say very publicly that five, six, seven years ago, when they thought about a potential deal, antitrust risk, or even antitrust analysis, wasn't anywhere near the top of the list. Conversation is now front and center. For bailiffs, it's a really good thing to get the company to think about those legal issues on the front end. Because then there would be no need to spend a lot of public resources on transactions that are believed to violate the law. .
Are you using AI to scale a relatively small office with a fairly limited budget?
We are thinking about the following: Is there a way we could benefit from some of these tools, especially in some parts of economic analysis? Clearly, this will require significant computing upgrades, and we're asking Congress for more funding to ensure that happens.
