Amazon, Facebook try to disarm FTC by attacking its biggest weapon: Lina Khan

Amazon and Facebook have filed petitions seeking the recusal of Federal Trade Commission Chairman Lina Khan in antitrust cases involving their companies.

Khan’s confirmation to the FTC and his appointment as head of the agency presents one of the clearest threats to major regulatory action in the tech industry in years. In seeking to challenge Khan, the companies are attacking one of the FTC’s biggest antitrust weapons, and whether Khan is challenged or not, the move could sully antitrust charges against either company.

Experts have told CNBC it makes sense for Facebook and Amazon to try to remove Khan from prosecution. And in doing so, companies may be able to cast doubt on Khan, even if she doesn’t recuse herself.

There’s a bit of a Catch-22: Khan could recuse himself and leave the votes on future antitrust cases against the two companies to a group of commissioners who were equally divided over whether to bring the initial charges against Facebook. Or, Khan may not be challenged and either company could argue that the whole case was tainted with his involvement.

Here is what is going on.

Both companies argue that Khan’s earlier writings show that she has already made her decision on the liability of tech companies, which the companies say should disqualify her from their cases.

It is not yet clear how Khan will handle the claims or how a federal court would handle challenges if it got to this point. The FTC had previously declined to comment on the petitions.

Khan said during her Senate confirmation hearing that she had no financial conflicts that would be grounds for recusal under ethics law and that she would follow the facts of any case they lead.

His involvement in antitrust cases involving both companies appears vital to their advancement. The two sitting Republican commissioners voted against the lawsuit against Facebook, which was recently dismissed by a federal judge. The FTC has the option of filing an amended complaint this month, but is expected to vote to do so. Assuming both Republicans vote against a new complaint and the other two Democratic commissioners vote for one, there would likely be a stalemate without Khan as a tiebreaker.

Even if companies fail to challenge Khan, they could cast a shadow over future FTC proceedings involving their companies.

Khan has been featured as one of the leading progressive antitrust thinkers since the publication of “Amazon’s Antitrust Paradox” in the Yale Law Journal while a law student in 2017.

The article argued that authorities should apply a broader view of antitrust laws to digital companies like Amazon. Khan argued that traditional frameworks that largely assess whether prices rise or fall for consumers may lack incentives for high-growth firms to engage in predatory pricing, among other aspects unique to their businesses. business models.

Khan also worked for the Open Markets Institute, a political advocacy group that criticized the power of several of the big tech companies. Most recently, she worked for the Democrats on the House Judiciary Subcommittee on Antitrust, where she helped compile the findings of the panels’ investigation into Amazon, Apple, Facebook and Google in a report that made several reform recommendations. Khan worked on the Google section of this report.

Amazon and Facebook argue in their petitions that Khan’s previous statements and work show that she has already tried their cases, which should disqualify her participation.

Experts interviewed by CNBC said petitions to challenge FTC commissioners do occur but are not common. This makes the two petitions in a few weeks seem like an outlier.

But, the experts said, it makes sense for companies to go out of their way if given the chance.

“The last thing a party would want to do is sleep on its rights, so it’s no surprise that they will go ahead and raise the issue now,” said Stephen Calkins, law professor at Wayne. State University and former FTC general. Advice. “And raising it might serve some purpose although all it does is provide an argument that the parties could do if a case were to go ahead and end up in court.”

One difference between the Amazon and Facebook petitions is that Amazon seeks to block Khan’s involvement in a possible future case, while Facebook seeks to prevent him from being involved in an ongoing case.

Calkins and former FTC Competition Bureau director Bruce Hoffman said they were not aware of any time restrictions on considering a challenge. But, speaking generally about the disqualifying petitions and not the Facebook case in particular, Hoffman said a commissioner would still like to seriously consider the consequences of participation. This is because a company could use what it sees as the unfair involvement of a commissioner in future arguments to show that the arguments against it were unfair.

“This is a material and real threat to the viability of any decision the FTC might take on things where a serious challenge of challenge arises,” Hoffman said.

The key case cited by Amazon and Facebook as precedent in their petitions is known as Cinderella Career & Finishing School v. FTC.

In that case, the court determined that then-president Paul Rand Dixon denied due process by participating in the case after making public statements that appeared to predict his opinion.

But there is one important detail in this matter that could set it apart from current and future cases involving Amazon and Facebook.

In the Cinderella case, Dixon did serve as a judge during an internal proceeding as part of the FTC’s administrative law process. Through this process, an administrative law judge will hear a case and make a decision, which either party can appeal to the full board. From there, it can be appealed to the Federal Court.

If Khan were to take a case through the administrative law process, it would look more like the Cinderella case. But if she and other commissioners decide to resubmit the Facebook case in federal court, she would still hand over the ability to rule on the outcome of the case to a federal judge. Because she would not serve as an arbitrator in this scenario, a court might consider a different standard for the challenge.

Another case the FTC might cite as a precedent is the Association of National Advertisers v. FTC. In that case, then FTC chairman Michael Pertschuk was first ordered by a federal court to withdraw from a rule-making inquiry because of previous criticism of him. But an appeals court later overturned that decision.

Still, Pertschuk ended up pulling out of the case because he said it created a distraction.

Even if Amazon and Facebook fail to secure Khan’s disqualification from their business, it could continue to cast doubt on the lawsuits against them. The public might be convinced that the prosecution is politically motivated, for example.

More importantly, a court could decide that Khan’s involvement in a case was in fact inappropriate, which could put the trial in jeopardy. So even if Khan’s involvement does not trigger the FTC’s recusal rules and Khan herself does not choose to step aside, the decision will weigh on the case.

For this reason, any commissioner faced with significant challenge requests should consider them carefully, Hoffman said. Yet, he added, commissioners can take steps to ensure that their procedures are “beyond reproach”, for example by having another commissioner preside over an internal matter and being particularly meticulous with facts.

“This is the kind of thing where the FTC might want to look very seriously and carefully and the commissioner in question might want to take a very serious and careful look at the grounds for the challenge and determine whether they should be challenged,” Hoffman said. . “Because you don’t want to do all the work to get a case done, get a result and have everything put aside because of a challenge issue.”

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