Technology

US watchdog in bid to stop tech monopolies of the future


WASHINGTON (NYTIMES) – Early in her tenure as chairman of the Federal Trade Commission (FTC), Ms Lina Khan declared that she would rein in the power of the largest technology companies in a dramatically new way.

“We’re trying to be forward-looking, anticipating problems and taking fast action,” Ms Khan said in an interview in June. 

She promised to focus on “next-generation technologies”, and not just on areas where tech behemoths were already well established. 

Last week, Ms Khan took her first step towards stopping the tech monopolies of the future when she sued to block a small acquisition by Meta Platforms, the company formerly known as Facebook, of virtual reality (VR) fitness start-up Within, backed by Singapore’s Temasek. 

The deal was significant for Meta’s development of the so-called metaverse, which is a nascent technology and far from mainstream.

In doing so, Ms Khan upended decades of antitrust standards, potentially setting off a wholesale shift in the way Washington enforces competition across corporate America. 

At the heart of the FTC’s lawsuit is the idea that regulators can apply antitrust law without waiting for a market to mature to the point where it is clear which companies hold the most power. 

The FTC said such early action was justified because Meta’s deal would probably eliminate competition in the young VR market. 

Since the late 1970s, most federal challenges to mergers have been in large, well-established markets, and aimed to prevent already clear monopolies. 

Regulators have mostly rubber-stamped the purchases of start-ups by tech giants, such as Google’s 2006 deal to buy YouTube and Facebook’s 2012 acquisition of Instagram, because those markets were still emerging. 

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As a result, Ms Khan faces an uphill climb. 

Regulators have been reluctant to try to stop corporate mergers by relying on the theory that competition and consumers will be harmed in the future. 

The federal government lost at least two cases that used this strategy in the past decade, including an attempt to block a US$1.9 billion merger in 2015 among X-ray sterilisation providers that the FTC had predicted would harm future competition in regional markets. 

The FTC’s lawsuit against Meta in the budding VR market is a “deliberately experimental case that seeks to extend the boundaries of merger enforcement”, said

Mr William Kovacic, a former chairman of the agency. 

“Such cases are certainly harder to win,” he said. 

The FTC’s action immediately caused a ruckus within antitrust circles and across the tech industry. 

Silicon Valley tech executives said that moving to block a deal in an embryonic area of technology might stifle innovation and spook technologists from taking bold leaps in new areas. 

“Regulators predicting future markets is a very, very dangerous precedent and position,” said Mr Aaron Levie, chief executive of cloud storage company Box. 

He warned that venture capitalists and entrepreneurs would be wary of going into new markets if regulators cut off the ability of companies like Meta to buy start-ups. 

Mr Adam Kovacevich, president of trade group Chamber of Progress, which represents Meta, Amazon and Alphabet, also said the lawsuit would have a chilling effect on innovation. 

“This is such an extreme and unfounded reaction to a small deal that many tech industry leaders are already worrying about what an FTC win would mean for start-ups,” he said. 

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