Francis Chung/POLITICO via AP Images
Federal Trade Commission Chair Lina Khan speaks at the American Bar Association Antitrust Law Spring Meeting at the Marriott Marquis in Washington, March 31, 2023.
Former Amazon CEO Jeff Bezos told shareholders at the company’s annual meeting in 2016 that he wanted Amazon Prime to be such a compelling product that every consumer would covet it. “Our goal with Amazon Prime, make no mistake, is to make sure that if you are not a Prime member, you are being irresponsible,” Bezos said.
A federal lawsuit out this week alleges that Amazon relied on more than just good features to build subscriptions in Prime. The Federal Trade Commission (FTC) argues that Amazon used dark patterns and other online tricks to dupe people into signing up for Prime, and then made it next to impossible to get out. The company called their cancellation program “Iliad,” after the Greek epic depicting the ten-year siege of the city-state of Troy, which involved navigating “a four-page, six-click, fifteen-option” gauntlet just to get out of the $139 annual membership. (A classics scholar might grumble that “Odyssey” would be a more appropriate Greek epic, but perhaps Amazon was saving that for an even worse process.) The FTC is asking for a permanent injunction and civil penalties.
It’s the first suit against Amazon since Lina Khan became FTC chair, and we can surely expect loud howls from the industry lobby about conflicts of interest. Khan rose to prominence after publishing a law review article in 2017 about the need for new efforts to mitigate Amazon’s market power.
That article talks about Prime in the context of below-cost pricing to hook consumers (Amazon nearly doubled Prime fees since its initial offer, a tactic known as recoupment) and the importance of the membership program to increase purchases and revenue. It says nothing about Amazon using unfair practices to acquire and retain Prime customers. But this won’t likely matter, because it fits into an ongoing smear campaign about Khan’s ethics.
Two years ago, Amazon sought Khan’s recusal from matters concerning the company, claiming personal bias. Facebook, now Meta, did the same on multiple occasions, even asking a federal judge to throw out an antitrust suit against the company on this basis; the judge denied the request.
Last week, a splashy Bloomberg article claimed that Khan rejected the recommendation of the agency’s top ethics official that she recuse from a decision on whether to sue Meta over its acquisition of virtual reality firm Within. (The FTC did sue to block the merger, but lost the case.)
The story was based on a leaked document from ethics official Lorielle Pankey, which states in its first paragraph, “I do not find [that Khan’s] participation would constitute a per se federal ethics violation.” Nevertheless, this has sent conservative opponents of Khan into high dudgeon, including the Wall Street Journal editorial page, which published its 67th editorial about Khan over this issue, two days before giving Samuel Alito op-ed space to explain why he didn’t need to recuse himself over taking undisclosed fishing junkets alongside billionaires with business before the Supreme Court.
At the time of being named FTC chair, Khan worked at Columbia University, along with her husband. This is perhaps the smallest number of work-related conflicts in recent FTC history, which is in fact littered with outrageous displays of what any reasonable observer might call corruption.
Since the late 1990s, 31 out of 41 top FTC officials worked directly for a company that has business before the agency, with 26 of them related to the technology industry.
Christine Wilson was the FTC commissioner who brought the ethics inquiry against Khan in the Meta case; she has since stepped down in a huff, with an angry burn book of a resignation letter, published on that same Wall Street Journal editorial page. Wilson, as doctrinaire a believer in deregulation as Khan is a believer in open markets, voted to allow Bristol-Myers Squibb’s merger with Celgene, after receiving compensation from Bristol-Myers Squibb for legal services. The thundering Journal editorial on that must have gotten mysteriously deleted.
Former Republican commissioner Josh Wright, who pulled off the rare revolving-door quadruple play of going between Google and the government on four separate occasions, lobbied FTC officials several times in 2017 on behalf of Qualcomm, a top donor to George Mason’s Antonin Scalia Law School (Wright’s employer), despite having “personally and substantially” worked on the case while at the commission. The Trump Justice Department failed to take up the case. (Fourteen different top FTC officials have ties to George Mason’s corporate-funded law school, according to the Tech Transparency Project.)
None of this is particularly unusual, on either side of the aisle. Public Citizen documented in 2019 that since the late 1990s, 31 out of 41 top FTC officials worked directly for a company that has business before the agency, with 26 of them related to the technology industry. All nine directors of the Bureau of Competition had revolving-door conflicts.
Over half of Department of Justice and FTC competition lawyers between 2014 and 2021 rotated out to a corporate law firm, according to the Revolving Door Project. As I wrote in my book Monopolized, one BigLaw firm, Arnold & Porter Kaye Scholer, has an antitrust group that as of 2019 included “the former Assistant Attorney General for Antitrust at the DOJ, two Directors of the Bureau of Competition at the FTC … Deputy Assistant Attorney General for Civil and Criminal Operations of the Antitrust Division, Deputy Director in the Bureau of Competition at the FTC, two Chiefs of Staff at the Antitrust Division [and] Assistant Director of the FTC’s Bureau of Competition.” These kinds of conflicts arguably violate American Bar Association rules.
Arnold & Porter’s Deborah Feinstein, a former Democratic head of the FTC’s Bureau of Competition, represented clients like General Electric, NBCUniversal, Unilever, and Pepsi before the agency before rotating in to wave through numerous pharmaceutical mergers; her old law firm counts pharma firms as major clients. Former Bureau of Competition assistant director Michael Moiseyev, who led many of those merger reviews that got approved, now heads the merger practice at Weil Gotshal & Manges, representing Microsoft, Meta, and Eli Lilly before his former colleagues. Joe Simons, the former FTC chair under Trump, also represented Microsoft, along with Sony, Sharp, and Mastercard. His Democratic predecessor as chair, Edith Ramirez, represented YouTube and biotech clients after leaving the agency.
Maybe the most obvious example of the status quo at the FTC before Khan’s entry is the case of Andrew Smith, head of the Bureau of Consumer Protection in Trump’s FTC. Smith represented 120 different clients from virtually every walk of economic life, including nearly every major bank in America, drug industry lobbyist PhRMA, Uber, Equifax, Amazon, Facebook, Verizon, and a variety of payday lenders, to name but a few. In fairness to Smith, he did mostly recuse himself from cases involving these clients, giving him little to do at work. But when Public Citizen asked for all documents involving Smith’s conflicts of interest, they returned 495 pages of almost entirely redacted text.
On one level, this long litany of FTC financial and ethical conflicts demonstrates the stupendous hypocrisy of the prior FTC establishment. The Federal Trade Commission was essentially a conflict-of-interest assembly line, moving through corporate lawyers and industry hangers-on without resistance for decades.
But on a deeper level, this reveals the total hollowness of the accusation here. With Lina Khan, we finally have an FTC head with no such conflicts, no history of working for anyone whom the commission might regulate, and thanks to her anti-corporate moves, no prospect of a cushy post-office career at the companies she used to regulate. We have a frenzied outcry over the fact that she has a point of view, as if Christine Wilson and Josh Wright and all the other pro-corporate widgets assembled in the previous FTC corruption factory over the years don’t.
The real reason that the Journal and the corporate lobby gets so out of their minds about Khan is that she’s everything they’ve tried to stamp out for 40 years: an effective adversary who focuses on the actual law rather than their feelings. They think corruption is when the government isn’t doing exactly what they want, all the time. Everything they’ve lobbed at her, they’re far more guilty of themselves. This parade of smears is more than just an attempt to blunt her impact; it’s a warning to other progressives that they will be slandered too if they dare challenge corporate power. Let’s hope it’s unsuccessful.
