Shortly after I met Lina Khan, her cellphone rang. The call was from a representative of a national organization, regarding a speech it had asked her to give. Khan was courteous on the phone, but she winced momentarily after hanging up. “That was the American Bar Association,” she confessed. “I don’t know if I’ve passed the bar yet.”
This feeling—that Khan’s ideas are in high demand slightly before her time—has characterized much of her life lately. In the past year, the 29-year-old legal scholar’s work has been cited approvingly by the lefty, rabble-rousing congressman Keith Ellison and by a Trump-appointed assistant attorney general, Makan Delrahim. She has been interviewed by NPR and written op-eds for The New York Times.
She has done it neither by focusing on a hot-button issue nor by cultivating a telegenic demeanor. She is just a young adult—one of many, I would learn—interested in an old topic: antitrust law, that musty corner of American jurisprudence aimed at curtailing monopoly power.
For the past few decades of American life, the specter of monopoly was generally raised only regarding companies that seemed custom-designed to rip off consumers—airlines, cable providers, Big Pharma. These were businesses that pulled from the long-standing monopolist’s bag of tricks: They seemed to keep prices artificially high, or they formed an unspoken cartel with other industry titans. Typically, consumers worried most about how monopolies would pinch their wallet.
For Khan and her colleagues at the Open Markets Institute, an anti-monopoly think tank based in Washington, D.C., monopoly power includes all of that. But it goes further. Even when monopolies appear to benefit consumers by offering free services or low prices, Khan contends that they can still be deeply harmful. Among the group’s frequent targets are some of the most popular companies in America: Google, Facebook, and the one to which Khan has committed much of her published work, Amazon. She tells a comprehensive story about how these companies make Americans less free, a story that recently received a surprising addendum: Last year, monopoly power cost Khan a month’s pay.
I met Khan on a Friday morning last fall at the Shops at Columbus Circle, a glitzy mall at the southwest corner of Central Park that now contains not one but two Amazon properties. On the third floor is an Amazon Books, one of more than a dozen brick-and-mortar bookstores the company has opened since 2015. It’s inspired less by libraries than by Apple stores: paperbacks and Kindles side by side on pale, sparse shelves. And in the basement is a sprawling Whole Foods—Amazon acquired the grocery chain for $13.7 billion last year—its crowded aisles lined with craft beer, foreign yogurts, and kohlrabi.
Khan is unassuming in person, with a narrow face and unruly black hair. She arrived at Amazon Books wearing the uniform of the young, urban professional class: black jeans, an oversize green flannel shirt, a cycling-inspired backpack. (Full disclosure: I was wearing almost exactly the same outfit.) She arrived very slightly late and immediately apologized. She might be a little slow, she said: She was getting married in a week, her entire family was in town, and it had already been a ludicrously busy month. But I couldn’t detect any sluggishness. A minute later, she was reeling off paragraph-length digressions on the history of Amazon’s business and the nature of its monopoly power.
“There’s a whole line of critique about Amazon that’s culture-based, about how they’re wrecking the experience of bookstores,” Khan told me as we surveyed Neil deGrasse Tyson’s latest tome. “I personally am less focused on that element.”
Instead, she argues that Amazon has denuded America’s book-buying landscape in other ways. “Amazon has massively—and I’m trying not to use this particular word, but I can’t not use it here—disrupted the business model in publishing,” she told me. “Publishers used to be able to take risks with heavier books that might not be as popular, and they used to be able to subsidize them with best sellers.” But Amazon’s demand for discounts has made it harder to cross-subsidize this way, leading to consolidation among book publishers and reduced diversity.
This is a typically Khanian analysis. In her telling, monopolies don’t just exploit consumers and workers in their part of the economy. Even when they offer low prices to consumers, their influence propagates through the entire system. If one part of an industry consolidates, then all the other parts of the industry will feel pressure to consolidate too.
Amazon does not, in some respects, look like a monopoly. According to the National Retail Federation, it is only the country’s seventh-biggest retailer by total sales. It sells more than Target, but less than Walgreens. And Walmart, the nation’s largest retailer, still generates nearly three times as much revenue as Amazon.
Yet these numbers fail to capture Amazon’s online dominance. About 44 cents of every dollar that Americans spend online go to Amazon. (The next-biggest online retailer, Ebay, gets about six cents of that dollar.) They also miss Amazon’s prodigious growth. In 2010, when Khan graduated from college, Amazon employed 33,700 people. It now employs more than 560,000, and its search for a site for its second headquarters has turned cities and locales across the country into desperate supplicants. Three years ago, Amazon was worth less than Walmart. As of this year, it is three times as valuable as the big-box king. (According to an Amazon spokesperson, “In every one of our businesses we have incredible competition. In worldwide retail, we’re less than 1 percent. We think our job is to keep inventing for customers.”)
Khan didn’t start out interested in antitrust. Seeking a job at the New America Foundation, a center-left think tank in Washington, she landed in the group’s antitrust program, whose director, Barry Lynn, gave her an ad hoc graduate education in the anti-monopoly movement. She studied the book industry, then the chicken-farming industry. Combing the papers for corporate-consolidation news, she started seeing monopoly power in everything. She realized that antitrust policy could dominate the decades to come and that she had to understand it better. So Khan took time off to go to law school—and began intensively studying Amazon.
Three years later, in January 2017, she published the result of that study, “Amazon’s Antitrust Paradox,” in the Yale Law Journal. It went viral—or at least as viral as dense legal scholarship can go. Its driving question is simple: How did Amazon get so big?
The answers are nearly as straightforward. First, Khan says, Amazon has been willing “to sustain losses and invest aggressively at the expense of profits.” This isn’t a controversial assertion: Amazon has posted an annual profit for only 13 of the past 21 years, according to The New York Times. Historically, it has plowed any profits right back into cheaper prices and R&D into everything from robotics to image recognition. Second, Amazon is integrated vertically, across business lines. In addition to selling stuff online, Amazon now publishes books, extends credit, sells online ads, designs clothes, and produces movies and TV shows. It is also one of the world’s largest providers of cloud storage and computing power, renting server space to Netflix, Adobe, Airbnb, and nasa.
These two practices—predatory pricing and integration across business lines—may sound normal. But under old readings of U.S. antitrust law, they are illegal.
Still, it’s unclear whether consumers have seen higher prices as a result of either strategy. As such, Amazon rejects the “predatory pricing” label. And Republican Senator Orrin Hatch last August decried the new antitrust movement as “hipster antitrust” and said it left him “deeply unimpressed.”
As Khan and I entered the sprawling Whole Foods three stories below Amazon Books, we noticed a tower of avocados. A sign bragged that, thanks to the Amazon merger, a single avocado now cost $1.49, down from $2.49. Khan cracked up. “This is peak myself,” she said. “This is hipster antitrust, right here.”
From the Progressive era onward, the U.S. government enacted a powerful set of antitrust laws to curb “the Curse of Bigness,” as Supreme Court Justice Louis Brandeis put it. The scope of these laws was remarkable: The Court once used them to block a shoe company from acquiring 2 percent of the national footwear market.
But antitrust laws could be unwieldy. Judges sometimes struggled to know whether they were enforcing the law or capriciously blocking a merger. And then, in 1978, a Yale Law professor named Robert Bork promoted a clean new theory of antitrust law, inspired by the libertarian Chicago school of economics.
Bork decreed that all antitrust suits should be judged by one question: What will most lower prices for consumers? The answer, he said, was almost always more mergers. When companies merge, they get rid of redundant business units, lower their operating costs, and become more efficient, ultimately passing this efficiency on to consumers as lower prices.
Within a decade, the Reagan administration turned Bork’s theory into official Department of Justice policy. The business world noticed. In 1985, there were about 2,300 corporate mergers in the United States, according to the Institute for Mergers, Acquisitions and Alliances. In 2017, there were more than 15,300, a new record.
Bork’s views become interesting in light of Amazon. Bork thought vertical integration was fine: Since he believed markets were perfectly efficient, he assumed that a lower-cost competitor would always butt in and fight off a would-be monopolist. And predatory pricing? It is “a phenomenon that probably does not exist,” he wrote. The Chicago school, he said, had proved that companies would always pursue short-term profits over long-term growth.
Amazon’s history seems to belie this claim. For more than a decade, Wall Street allowed the company to plow any profits into price discounts. Partly as a result, Amazon has grown so large that it can undercut other companies just by announcing that it will soon compete with them. When Amazon purchased Whole Foods, its market cap rose by $15.6 billion—some $2 billion more than it paid for the chain. Meanwhile, the rest of the grocery industry immediately lost $37 billion in market value. (Amazon protests that it has no control over how investors value its competitors.)
When a company has such power, Khan believes, it will almost inevitably wield that power far and wide, distorting not just the market itself, but the whole of American life. With sufficient power, companies can commission studies, rewrite regulations, bulldoze neighborhoods, and impoverish education and welfare systems by securing billions in sweetheart tax cuts. When a company comes to monopolize a market—when it grows so big that it can threaten other industries just by entering them—it ceases to be merely a company. It becomes an institution so powerful that it can rule over people like a government.
“That was the insight of Brandeis,” Khan told me. “For most people, their everyday interaction with power is not with their representative in Congress, but with their boss. And if in your day-to-day life you’re treated like a serf in your economic relationships, what does that mean for your civic capabilities—for your experience of democracy?”
Khan sees the new antitrust movement, above all, as a revival. Well before Brandeis’s day, Thomas Jefferson sought to add an anti-monopoly clause to the Constitution. Andrew Jackson said Americans should “take a stand against all new grants of monopolies.” And some legal scholars even see an anti-monopoly instinct in the Fourteenth Amendment’s equal-protection clause, since monopolies can assert claims to special protections of the law. “If American democracy was founded on this set of ideas and traditions,” Khan said, “then we just took a knife and lopped off one half of it. It’s just gone.”
Khan knows firsthand what this can look like. In June 2017, the European Union slapped Google with the largest-ever fine of its kind. Officials alleged that the search giant violated anticompetition law when it ranked its own shopping service above those of its rivals in search results. The penalty: $2.7 billion.
Barry Lynn’s team at New America, which by then was known as Open Markets, was delighted. Khan helped edit a short statement from the team, calling Google’s market power “one of the most critical challenges for competition policymakers in the world today.” They published it and moved on with their lives.
But a few hours later, Lynn excused himself from a conference call that Khan was on. Anne-Marie Slaughter, New America’s president, was on the other line. According to The New York Times, Eric Schmidt, Google’s executive chairman at the time, had seen the statement and was unhappy about it. Schmidt had previously been the chairman of New America, and he and Google had given millions to the foundation over the years. A conference room at New America is called the Eric Schmidt Ideas Lab.
A few days later, Slaughter emailed Lynn to inform him that the foundation would be spinning off his group, but with full funding and staffing. “The time has come for Open Markets and New America to part ways,” she wrote. New America disputes many of the details of The Times’ account, primarily the notion that “Google lobbied New America to expel the Open Markets program.” Google also denied playing any role in New America’s decision to cut ties or ever threatening to cut off funding. Slaughter described problems with the group’s institutional fit. However, after two months, negotiations on the spin-off failed and the two think tanks formally separated.
For Khan, the issue was more than academic: It cost her a month of pay. She’d been due to be hired back at New America in late July, following her completion of the bar exam. But that plan was put on hold, so Khan worked without pay until late August, when Open Markets established itself as a new and independent think tank and rehired her.
It was an unexpectedly real example—and one that hit close to home—of how a single powerful firm can influence the many organizations in its orbit. As Khan noted, not without irony: “It was a proof of concept of our work.”
This article appears in the July/August 2018 print edition with the headline “The Trustbuster.”