Discover more from BIG by Matt Stoller
On Lina Khan Derangement Syndrome
Republican FTC Commissioner Christine Wilson quits in a huff, accusing Lina Khan of lawlessness, dishonesty, and corruption. Wilson's allegations are false. So why is she making them?
Welcome to BIG, a newsletter on the politics of monopoly power. If you’re already signed up, great! If you’d like to sign up and receive issues over email, you can do so here.
It’s been a busy week. I’ve been doing research into OpenAI and search, and learning about how our financial regulars are squeezing crypto to death. But today I’m writing about some drama at the Federal Trade Commission. On Wednesday, Republican FTC commissioner Christine Wilson penned a resignation letter in the Wall Street Journal editorial pages, accusing Chair Lina Khan of lawlessness and deception, and saying she could no longer be part of the commission as a result.
Why does such a move matter? Wilson is a mostly irrelevant minor functionary. But as odd as it may sound, the corporatist wing of the GOP - a network of antitrust defense lawyers, monopoly-funded academics, and Wall Street lobbyists - think that this huffy resignation has delivered a deadly blow to Lina Khan’s agenda. I’m going to explain their point of view, as well as the entrenched anger they feel not just towards Khan, but towards the anti-monopoly movement, as well as their real fear, which is that the Republican Party itself is starting to buy into what Khan is selling.
Wrestling with Ronald Reagan’s Ghost
On February 1, 1981, evangelical leader Billy Graham encouraged social conservatives to avoid jumping into a hard association with the Republican Party. “It would disturb me if there was a wedding between the religious fundamentalists and the political right,” he told Parade magazine. “The hard right has no interest in religion except to manipulate it." Graham was worried that evangelicals would become corrupted by worldly political power, instead of recognizing that church teachings come first, and politics second.
But it was already too late.
Despite Ronald Reagan’s history as a divorced Hollywood icon who had championed abortion rights in California while Governor, he built a deep and enduring bond with the religious right. In 1988, Jerry Falwell, a man with immense influence among white evangelicals, made that clear, saying that “Ronald Reagan saved the country.” Behind this statement was a political deal. Social conservatives would provide the votes, Wall Street would provide the money, and an ascendant Republican coalition would put judges on the bench who would serve both.
Under this new ‘fusion’ coalition, Robert Bork’s Chicago School pro-monopoly antitrust revolution flowered. Since 1890, and again in 1913, 1936, 1950, and 1976, Congress had passed laws to attack corporate consolidation. As Judge Learned Hand wrote in 1945, “Among the purposes of Congress in 1890 was a desire to put an end to great aggregations of capital because of the helplessness of the individual before them.” But in 1981, the views of Bork, and associated operatives like Tim Muris, Jim Miller, and Bill Baxter, spread from the Wall Street Journal editorial page, and turned antitrust law on its head.
Bork, et al, thought that consolidation was good, and that traditional anti-monopoly safeguards for small business and workers were a form of inefficient ‘protectionism.’ They did not like how antitrust enforcers looked at real-world evidence of how the economy did work. Instead, they wanted enforcers to use wholly theoretical economic models about how the economy should work, calling this the ‘law and economics’ school of policy. For instance, for the Chicago School, pricing below cost to gain market share, aka predatory pricing, might happen in practice, but it didn’t happen in theory. Antitrust should be re-interpreted to accord with theoretical models promoting efficiency, instead of how the laws were written, to attack concentrations of power.
But even with an ascendant conservative coalition, the Chicago School’s ideas still were too unpopular to get through Congress. The Reagan administration tried, but could not convince lawmakers to change statute. So they decided to make the shifts they wanted without Congress, through administrative choices. Reagan’s enforcers dropped cases, filed amicus briefs to circumscribe their own agency discretion, revamped merger guidelines, and cut their own budgets. Reagan FTC Chair Jim Miller fired anti-monopolists from the commission, and hired corporate-friendly economists to stop enforcers from bringing cases. Similar changes happened at the Antitrust Division.
As my colleague Erik Peinert proved with internal Reagan administration memos, these advocates knew they were acting unlawfully when they relaxed antitrust enforcement. But they correctly thought Congress wouldn’t stop them. Mergers exploded as a result, and sectors across the economy consolidated.
Despite some Congressional pushback, Reagan and then his successor George H.W. Bush were in office for twelve years, and so their methods came to dominate. While courts - now packed with Bork-friendly judges - accepted a pro-monopoly interpretation of some antitrust laws, most changes were enacted through administrative choices to not bring cases or by killing useful agency activities.
Bill Clinton and then Barack Obama accepted these unlawful practices. The result was a highly concentrated corporate sector. Enforcement became so feeble that the Department of Justice brought one monopolization claim from 1998-2020, an astonishing record.*
Why? As Obama antitrust official and now Google consultant Carl Shapiro claimed with a in 2017, it was because there weren’t any monopolies to go after.
I can say from personal experience that when I was the chief economist at the DOJ during 2009–2011, the Antitrust Division was genuinely interested in developing meritorious Section 2 cases, and we were prepared to devote the resources necessary to investigate complaints and other leads, but we found precious few cases that warranted an enforcement action based on the facts and the case law.
Gradually, antitrust establishment lawyers and economists took over the field entirely, and a club of narrow technocrats came to imagine themselves as quasi-scientific experts over the economy, above politics or accountability. And until recently, this group ruled, without much dissent. But in 2008, they faced a challenge. The financial crisis, wrought by Too Big to Fail banks, devastated ordinary people. Using theoretical economic models, and ignoring real-world evidence, they let elite lawyers and economists play games with one another and tell themselves a story about how they mustn’t disturb an economy full of wonderful firms like Goldman Sachs, Google and Amazon. But the banking crisis showed that firm behavior is highly political, and hardly understood by so-called experts.
And this brings me to Lina Khan, the Biden antitrust enforcer who has inspired fear, admiration, and to the antitrust defense bar, utter derangement. Khan was appointed in 2021 to run the FTC, but before she was picked, her career was shaped by the same financial crisis. In the early 2010s, a network of anti-monopoly writers, scholars, workers, and businesspeople, spurred by the great collapse of 2008, came together and began arguing that Bork’s framework led to authoritarian commerce dominated by monopolies.
BIG is a reader-supported newsletter focused on the politics of monopoly and finance. This is journalism and advocacy that challenges power, so please consider a paid subscription. You can always get lies for free. The truth costs a few bucks, but in the long run it’s much cheaper. You can subscribe by clicking here.
Khan started after college as a business reporter as a node in this network, focusing on monopolies by talking to business people who were getting harmed by them. She wrote fun but substantive stories on coercive business behavior. An example of the work she produced is this article in Time Magazine, titled “Why So Little Candy Variety? Blame the Chocolate Oligopoly” in 2013, but she also did work on the poultry industry, Monsanto, and the airlines.
She came eventually to target the Chicago School itself. In 2017, as a law student, she published a piece called Amazon’s Antitrust Paradox, an explicit repudiation of Robert Bork’s book The Antitrust Paradox. It’s a long and excellent piece of scholarship in which Khan explained why an immensely powerful firm similar in many ways to Standard Oil had been able to escape scrutiny by antitrust enforcers. She argued that the reason Amazon can wield power as it does is because Bork-influenced enforcers and judges chose to enforce antitrust laws in ways that facilitated, instead of prevented, consolidation. When you de facto repeal the laws passed to constrain Standard Oil-type firms, it’s not a surprise that new similar giants emerge.
The article went viral and made her a superstar. Throughout the 2010s, the broader anti-monopoly movement began picking fights with the increasingly enraged antitrust establishment, and blaming them for Too Big to Fail firms across the economy. Both sides agreed on the shape of the debate. Firms like Amazon were a result of Bork’s philosophy, it’s just that antitrust establishment members were proud of an economy dominated by giants, while opponents saw a concentrated economy as authoritarian.
Naturally, the Reagan and Clinton era officials were unhappy to see their work criticized. But what blew their minds was that Donald Trump, and then Joe Biden, accepted anti-monopoly arguments instead of what they, a self-defined scientific elite, thought. When Khan was appointed Chair of the FTC in 2021, it reflected that this narrow clique was no longer in control of antitrust law. (They still can’t quite imagine it. They are like liberals under the Trump era, who couldn’t believe he was President, and kept denying it even as he governed.)
The real problem for this establishment, though, wasn’t that Khan persuaded Democrats. It was that anti-monopoly arguments began working among Republicans, and picking at the fusion coalition of Reaganism itself. The process of destroying fusionism started in 2016, when Donald Trump drew the votes of social conservatives by rejecting the Wall Street Journal editorial page on things like trade, and by regularly bad-mouthing CEOs like Jeff Bezos. In office, Trump not only challenged the AT&T-Time Warner merger, but brought the very first antitrust case against Google, in 2020. And a new generation of populist conservatives, who grew up in the shadow of the 2008 financial crisis, the Iraq war fiasco, and the opioid disaster, have made a compelling case to GOP voters.
The erosion of the fusion coalition hit the libertarian Republicans at the Federal Trade Commission hardest, because they were put there to protect Bork’s legacy and firms like Amazon, in a party increasingly angry at big tech. Two Republican minority commissioners, Noah Phillips and Christine Wilson, sought to push back against the populist tide, hoping not to be noticed. When Trump’s Chair Joe Simons sought to bring an antitrust case against Facebook, Phillips and Wilson voted against doing so, and Simons had to rely on Democratic commissioners to file it. When the Trump administration sought to stop firms from lying about whether products were Made in USA, Phillips and Wilson voted against it, and were profiled in a New York Times piece titled “On ‘Made in America,’ Trump’s F.T.C. Appointees May Be Out of Step With Him.” It was an embarrassing intra-party squabble, but hinted at the end of the Reagan coalition.
The Lina Khan era has been much worse for libertarians, because they can’t hide anymore, and have a tough time justifying what they are doing on policy grounds. Wilson, for instance, voted to consolidate the dialysis industry, to let Microsoft acquire Activision, to aid in Amazon buying MGM, to help offshore medicine production, to support Meta’s acquisition of Within, to facilitate Chinese government surveillance through a weak settlement with Zoom, and to oppose the attempt to ban non-compete agreements in employment contracts. (She even complained about FTC commission meetings being held in public.) Wilson, knowing her underlying views are unpopular, has tried to disguise her record by focusing on process and trying to polarize the GOP against Khan. ioners.)
Phillips is younger and smarter, and eventually left to make millions at the big law firm Cravath (and he will likely be replaced by Andrew Ferguson, currently the Solicitor General of Virginia). But Wilson is a protege of Tim Muris, one of the original Bork operators from the 1980s, and she genuinely cares about that legacy. So for the four years she’s been an FTC Commissioner, she has dedicated her time to arguments that largely ignore policy or legal disputes. For instance, she routinely calls Khan a Marxist in front of Google-funded business groups, like when she gave a speech titled “Marxism and Critical Legal Studies Walk into the FTC: Deconstructing the Worldview of the Neo-Brandeisians” in front of the Information Technology and Innovation Foundation. (The Marxism charge was later echoed of course by the U.S. Chamber of Commerce.)
Her red-baiting is paired with allegations insinuating unethical behavior. For instance, Wilson would imply that Khan was engaged in subterfuge or mischief, while pointing to acts that happened before Khan became Chair. Or she’d intentionally conflate bureaucratic routine with nefarious motives. Once, Wilson publicly claimed Khan was hiding merger-related documents from her in some sort of conspiracy. It turns out that not sharing investigative documents was a longstanding commission practice, a practice Khan then altered so all commissioners could look at what they wanted.
Wilson’s was so aggressive that she even turned off establishment antitrust gurus like former Antitrust Division chief Bill Baer, who dismissed her as "a habitual naysayer" who "viciously attacks" fellow commissions. And eventually, even journalists tasked with covering the FTC tired of reporting on the gossip that Wilson was peddling. So it was no surprise this week that when Wilson did resign, she did so in a highly public way designed to belittle Khan, avoid underlying policy disagreement, but make enough insinuations to justify Congressional investigations. In a piece on the Wall Street Journal editorial page, Wilson wrote that Khan has “a disregard for the rule of law,” uses “dishonesty and subterfuge to pursue her agenda,” has engaged in an “abuse of power,” has undertaken a “willful disregard of congressionally imposed limits on agency jurisdiction,” and has “spurned federal ethics obligations.”
Wilson’s editorial is mostly a continuation of her tirades while a commissioner. The most significant accusation, and one that Wilson is hoping will be used in Congressional investigations, is that Khan engaged in some sort of ethical violation when she participated in the Meta-Within merger as the Chair of the Commission, despite having previous experience as a researcher of Facebook, and had put out thoughts publicly around antitrust policy vis-a-vis big tech.
Before joining the FTC, Ms. Khan argued that Meta should be blocked from making any future acquisitions and wrote a report on the same issues as a congressional staffer. She would now sit as a purportedly impartial judge and decide whether Meta can acquire Within. Spurning due-process considerations and federal ethics obligations, my Democratic colleagues on the commission affirmed Ms. Khan’s decision not to recuse herself.
I dissented on due-process grounds, which require those sitting in a judicial capacity to avoid even the appearance of unfairness. The law is clear. In one case, a federal appeals court ruled that an FTC chairman who investigated the same company, conduct, lines of business and facts as a committee staffer on Capitol Hill couldn’t then sit as a judge at the FTC and rule on those issues.
This commentary is, frankly, absurd. Ethics rules almost always implicate some sort of financial or personal gain, and there’s nothing of the sort here. And the law is on Khan’s side. As Khan’s colleagues noted in a decision ruling against recusal, Khan didn’t participate in anything related to this line of business as a staffer, has no financial interest in Meta, and never talked about this specific case. Statements about adjacent policy - like writing a report making statutory recommendations - do not themselves present a conflict of interest. Still, while Wilson’s legal analysis is done in bad faith, it is not an outright lie.
Later, however, Wilson veers into straightforward dishonesty. She claimed that large parts of her dissent about Khan’s role in Meta-Within were redacted at the behest of the other commissioners purely to “protect Ms. Khan from embarrassment.” Leaving aside that most of Wilson’s dissent is public, and that Khan isn’t embarrassed by it, Wilson’s claim isn’t true. The FTC has a long-standing policy of redacting pre-decisional advice from staff to commissioners. This policy was adopted in 1984 “to protect the deliberative privilege regarding materials submitted by staff and to reaffirm the need as a body for full and frank staff debate for FTC decisions.” Maybe that’s a wise policy, maybe not, but the reason for the redactions was commission policy, not some personal choice by Democratic commissioners, as Wilson alleged.
More broader, accusations of ethical lapses are, of course, undercut by Wilson’s own behavior. She herself voted to allow a merger by Bristol Myers Squibb, which had been a paying a client of hers immediately before she joined the FTC. Failing to recuse herself despite a financial conflict of interest showed Wilson in violation of a straightforward legal ethics rule and of FTC guidelines. And that is not a close call. Moreover, when in the majority, Wilson’s FTC, tended to over-redact, such as when Google had the commission hide key parts of minority Commissioner Rohit Chopra’s dissent against a feeble settlement with YouTube’s unlawfully collecting data on children.
None of Wilson’s objections, honest or not, were oriented around substance, which is consistent with her track record at the FTC. And that’s because Khan’s tenure is already, by any metric, a success. Take two unnoticed actions that took place this week. Yesterday, in Syracuse, two dominant hospitals - SUNY Upstate University Hospital and Crouse Hospital - had been expected to merge, but they called off their combination because of skepticism from the Federal Trade Commission. Similarly, earlier this week, Shell-Exxon JV Infineum abandoned a $240m bid for Entegris pipeline business after the FTC issued a request for more information about the deal.
That’s two blocked deals, in one week. Virtually no one commented about either deal, because skepticism of mergers is now so routine as to be unnoticeable. Mergers are down 76% this year so far, and while some of that is financing, some of the collapse is a result of a tougher regulatory environment. It’s why CNBC’s Jim Cramer is deeply angry at Khan. If antitrust enforcement were so lawless, as Wilson alleges, firms could avoid sanction, with the courts on their side. But that’s just not what’s happening.
In truth, it’s not Wilson who matters, she’s just speaking for big business and the antitrust establishment club. The ultimate goal here is to try and create some sort of political pushback against Khan. And sure enough, the day after Wilson’s editorial, the U.S. Chamber of Commerce sent a letter demanding Congressional investigations of the FTC over mismanagement and lawlessness, and some Republicans are now using Khan’s presence at the FTC to avoid taking on pharmaceutical prices. The monopoly-friendly leader of the House Judiciary Committee, Jim Jordan, is already threatening an investigation of the FTC for its “power grab” in trying to ban non-compete agreements.
It’s hard to see such campaigning stopping more aggressive antitrust enforcement. But some of the savvier Wall Street conservatives have a different, more defensive goal. They want to make Khan and the anti-monopoly movement so toxic to Republicans that the fusion coalition remains in place, and that their judges get the message to rule against the FTC. Ultimately, I think that’s a long-term loser, but in the short-term it may work. We’ll see soon enough, as Senate Republicans now have to fill the antitrust enforcement slot vacated by… Christine Wilson.
(*UPDATE, 4/21/23: The Obama administration brought one Section 2 complaint in 2011.)
Thanks for reading! Your tips make this newsletter what it is, so please send me tips on weird monopolies, stories I’ve missed, or other thoughts. And if you liked this issue of BIG, you can sign up here for more issues, a newsletter on how to restore fair commerce, innovation and democracy. And consider becoming a paying subscriber to support this work, or if you are a paying subscriber, giving a gift subscription to a friend, colleague, or family member.
P.S. I’m researching competition policy around OpenAI and more broadly large data sets requiring computational power. If you are in this industry and/or have thoughts, send them my way.