Will Khan Break Amazon – or Will Her Lawsuit Break Her?

September 23rd, 2023

By Robert H. Bork Jr.

Federal Trade Commission Chair Lina Khan is by all accounts preparing to file her long-anticipated antitrust case against Amazon. There are rumors and reports of tail-chasing and internal angst within the FTC over the drafting of this complaint.

It is easy to see why.

Khan’s rise is often described in adoring media profiles as “meteoric.” The problem with meteors, of course, is that while they are indeed bright and sparkly, they plunge and burn instead of rise. Will Khan shine and rise, or shine and burn? We will soon see. Khan is preparing to launch her career-defining antitrust lawsuit, turning the theories of her famous and much-fêted anti-Amazon article in The Yale Law Journal into flesh.

If the case is successful, Khan’s admirers will celebrate it as the victorious culmination of that remarkable seven-year journey to reframe antitrust law, using Amazon as a target to make her case against the reigning consumer welfare standard. A victory over Amazon would be for today’s progressives what the 1911 breakup of Standard Oil was for the original Progressive Era.

But if she loses, this will be the fifth time the courts will have kicked Khan and her revolutionary legal theories to the curb. Her most recent loss was a quixotic bid to stop Meta (formerly Facebook) from acquiring a virtual reality fitness app. It was from the start a strange bid to apply antitrust standards to a new entrant in a sector brimming with competition. If Khan loses her bid against Amazon, she will have broken her bit in trying to persuade courts to adjust to her theories of antitrust.

Failing to win the case against Amazon would become a textbook example of why courts are reluctant to buy in to progressive antitrust theories. Khan would reportedly force the online retailer to allow sellers on its website to send products to customers using other companies’ shipping. This would undercut Amazon, which has invested tens of billions of dollars in building a nationwide network of warehouses, fulfillment centers, and delivery trucks. To forcibly break this chain would undercut millions of Americans who hold retirement stock in Amazon and consumers who could lose Amazon Prime’s promise of one- to two-day free shipping.

The lawsuit also operates on the theory that there is something exploitative about bundling shipping with music and streaming television. The FTC, an agency charged with protecting the welfare of consumers, would decide for consumers to break this value proposition into separate services, instead of letting consumers vote with their dollars.

Then there is the damage the FTC would do to 2 million small businesses that rely on Amazon to sell their wares online. The FTC holds it is wrong for Amazon to compete with them with its own retail business – despite the fact that many online and brick-and-mortar stores do the same. By undermining Amazon’s business model as well as its world-class logistics, it would shrink access to consumers for the small sellers Amazon serves.

One might ask, why is Amazon such a target? As dominant as it is in online retail, it is not a monopoly. And it is just one of many players in overall retail. Consumers value Amazon and its Prime delivery. A recent Harris/Harvard poll showed that in 2021 the most trusted institution was the U.S. military. Amazon came in second. So why this obsession?

Amazon is a target precisely because it is a consumer-friendly company par excellence: low prices, enormous selection, rapid delivery, combining value from music and movies to hair dryers and outdoor furniture. If that business model is illegal, then the 45-year-old consumer welfare standard can be jettisoned. Any business can be hauled up on charges. And that’s the point of progressive antitrust – to control the private sector by holding every business in the thrall of government.

While Amazon is popular, the same cannot be said for the FTC. For many years, FTC had a storied reputation among its 1,000-plus workforce. A government poll of FTC employees shows a dramatic reversal under Khan, giving their agency abysmal marks, including a low grade for the “integrity” of leadership for two years under her tenure.

But integrity is an extravagance when one sets out to topple judicial doctrine and control the economy. Khan and her followers are dedicated to overturning the almost 50-year-old consumer welfare standard, while targeting legal industries that employ millions of Americans, fund retirement plans, and make consumers happy.

Thus Khan’s elaborate, novel antitrust suit against Amazon is a legal high wire act. The outcome will determine if history defines her tenure as the beginning of a new era in antitrust – warping the fabric of American innovation – or if Khan will be remembered as a Doña Quixote who broke her lance on one windmill too many.

Originally published at Real Clear Politics.