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FTC’s Leena Khan faces new questions after Microsoft decision

Leena Khan became chairman of the federal trade commission Two years ago it was promised bold action against the biggest tech companies.

For too long, the agency has been a weak policeman and giants like Microsoft, Amazon, Meta and Google needed to challenge them in the courts to curb their growing power, Ms Khan said at the time. Even though the FTC lost the case, he later said, he partial victory Because the agency would indicate that antitrust laws need to be updated for the modern internet age.

But on Tuesday, Ms. Khan suffered the biggest blow yet to her hallmark agenda. A federal judge blocks the FTC’s effort To stop the $70 billion takeover of Microsoft Video game maker Activision Blizzard has been blocked from being shut down, saying the agency failed to prove the deal would reduce competition and harm consumers. This was followed by a defeat in February, when a the judge dismissed An FTC lawsuit seeking to block Meta from buying virtual reality start-up Within.

The defeat calls into question Ms Khan’s ability to meet the ambitious target Reversing Decades of Weak Antitrust Enforcement, as political pressure mounts and patience runs low for the 34-year-old academic who has ruffled feathers of corporate America. Ms Khan’s critics have grown emboldened and are becoming more vociferous in poking holes in her court-going strategy, saying the defeats are not even partial victories – they are just losses.

Anthony Sabino, professor of business and law at St. John’s University, said of Ms. Khan’s methods, “I strongly disagree with this approach.” “She’s trying to change a century of antitrust law overnight, and that’s not necessarily wise.”

Adam Kovacevich, chief executive of the tech trade group Chamber of Progress, said the defeat made the FTC less credible. “All these court losses are making his threats look like paper tigers,” he said.

Others wondered whether Ms. Khan was wasting FTC resources on cases that could not be won. “They have crossed the line of negligence in the cases they are bringing,” said Ashley Baker, director of public policy for the Committee for Justice, a conservative think tank.

The tide of criticism has put Ms Khan on the hot seat as she prepares for further possible actions against the tech giant. The FTC has filed an antitrust lawsuit against meta and may bring a case against Amazon, which it is investigating over claims of illegal monopoly.

Now Ms. Khan will have to defend herself first. He is expected to be questioned by the House Judiciary Committee on Thursday the hearing On FTC oversight, the Republican-led panel’s website says it wants to “investigate the FTC’s mismanagement and ethics under Chairman Leena Khan and its disregard for congressional oversight.”

Ms. Khan declined to comment for this article, and FTC spokesman Douglas Farrar also declined to comment on how the court defeat would affect their agenda. Following the Microsoft-Activision decision on Tuesday, Farrar said the agency was “disappointed with the outcome because this merger poses a clear threat to open competition in cloud gaming, subscription services and consoles.” The FTC can appeal the judge’s decision.

Ms. Khan rose to fame As a Yale law student in 2017, when she argued in a paper 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 tech giants and modernize antitrust practices.

After President Biden picked Ms Khan to lead the FTC, she repeatedly argued she needed to go to court to send a strong signal to the tech industry that the agency was becoming a stricter sheriff. win or lose. He said that even a defeat in court would gradually improve the principles of antitrust.

Ms. Khan applied that thinking when FTC files lawsuit to stop Meta By buying Vidin, a smaller virtual-reality company, last year. The case was surprising because virtual reality is an emerging technology, making it hard to argue that the deal would reduce competition in a market that hasn’t even been formed yet.

But Ms. Khan argued that regulators should prevent competition and consumer protection violations in technology, not just areas where companies have already become giants.

In an interview with The New York Times and CNBC in January 2022, he said, “What we may see is that inaction after inaction can have serious costs.” And that’s what we’re really trying to reverse.

Earlier this year, a federal judge rejected the FTC’s demand to block Vidin’s acquisition of Meta. 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 stinging, partly because the blockbuster merger has become a test of whether tech megadeals can last despite increasing regulatory scrutiny. Judge Jacqueline Scott Corley of the US District Court for the Northern District of California said consumers benefited from the expectation of a tighter review from Microsoft, writing: “That scrutiny has paid off.” But his decision left nothing more to do with the FTC.

In the case, the agency argued that the deal should not be called off as it may harm competition. Microsoft may make some of Activision’s games exclusive to its Xbox game console or spoil the experience of playing games such as Activision’s Call of Duty on competing consoles such as Sony’s PlayStation.

But Judge Corley wrote that the FTC probably won’t win its challenge to the merger in the agency’s internal court and said, essentially, that Microsoft is doing enough to prevent competitors from being harmed.

They wrote, “The FTC has not identified a single document that contradicts Microsoft’s publicly stated commitment to making Call of Duty available on PlayStation.”

Eleanor Fox, professor emeritus at New York University’s law school, said it was too early to pass judgment on Ms. Khan’s strategy. He noted that elsewhere in the world, notably in the European Union and the UK, regulators have also taken antitrust actions against large tech companies.

“It’s just an outlier in America, not globally,” Ms. Khan said.

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