Lina Khan vs. Jeff Bezos: This Is Big Tech’s Real Cage Match
Jeff Bezos made his fortune with one truly big idea: What if a retailer did everything possible to make customers happy?
His forcefully nurtured creation, Amazon, sold as many items as possible as cheaply as possible and delivered them as quickly as possible. The result is that $40 out of every $100 spent online in the United States goes to Amazon and Mr. Bezos is worth $150 billion.
Low prices, she argued in a 95-page examination of Amazon in the Yale Law Journal, can mask behavior that stifles competition and undermines society. Published in 2017 while she was still a law student, it is already one of the most consequential academic papers of modern times.
These two very different philosophies, each pushed by an outsider unafraid of taking risks, at last have their much-anticipated confrontation. The Federal Trade Commission, now run by Ms. Khan after her stunning rise from policy wonk to policy player, on Tuesday filed suit against Amazon in federal court in Seattle. The suit accused Amazon of being a monopolist that used unfair and illegal tactics to maintain its power. Amazon said the suit was “wrong on the facts and the law.”
Mr. Bezos, 59, is no longer in charge of Amazon on a day-to-day basis. He surrendered the chief executive reins to Andy Jassy two years ago. But make no mistake: Mr. Bezos is Amazon’s executive chair and owns more of the company than anyone else. It is his innovations, carried out over more than 20 years, that Ms. Khan is challenging. The F.T.C. complaint quotes him repeatedly.
Silicon Valley spent the summer transfixed by the prospect of Elon Musk and Mark Zuckerberg literally fighting each other, despite the odds of this actually happening being near zero. Ms. Khan and Mr. Bezos are, however, the real thing — a courtroom clash that could have implications far beyond Amazon’s 1.5 million employees, 300 million customers and $1.3 trillion valuation.
If Ms. Khan’s arguments hold sway, the competitive landscape for tech companies will look very different going forward. Big antitrust cases tend to have that effect. The government achieved only a muddled victory in its pursuit of Microsoft 25 years ago. Yet that still had enough force to distract and weaken a much-feared software empire, allowing 1,000 start-ups to bloom, including Amazon.
It’s due largely to Ms. Khan, 34, that imposing major changes on the retailer is even thinkable. After spending a few days interviewing her and those around her for a profile in 2018, I thought she understood Mr. Bezos because she was so much like him. Very few people can see possibilities unseen by others and successfully work toward them for years, getting others to join along the way. But these were attributes they both shared.
“How does change happen in history?” asked Stacy Mitchell, an early Khan ally who is co-executive director at the Institute for Local Self-Reliance, a research and advocacy group that promotes local power to fight corporations. “Lina has captured imaginations in a way that has enabled the reform movement to engage a wider set of people.”
Ms. Khan and Mr. Bezos were even similar in their silence. For years, every article about Amazon featured the line “Amazon declined to comment,” another form of control. Ms. Khan likewise never willingly surrendered to me a piece of personal data, even if it was inconsequential.
Amazon and the F.T.C. declined to comment for this article.
Mr. Bezos’ unlikely saga long ago entered the realm of myth. He spent his childhood summers on his grandfather’s West Texas ranch, wanted to be a theoretical physicist but became a Wall Street analyst instead. He had no retailing background. He was interested in ideas, not things.
Amazon was not the first online store — it wasn’t even the first online bookstore. It spent lots of money foolishly and drove many employees mercilessly. The whole enterprise nearly failed in the dot-com crash in the early 2000s. But the media was fascinated by it, customers liked it, and that gave Mr. Bezos room to run.
A former Amazon engineer once memorably described Mr. Bezos as making “ordinary control freaks look like stoned hippies.” A company that puts “attendance reminder” signs in bathroom stalls telling warehouse workers they will be “reviewed for termination” if they screw up their time keeping is a company with overwhelming ambition.
Reformers are just like entrepreneurs: They too are fighting against reality, trying to carve out space for their vision of how things could be better. Ms. Khan’s journey to confronting Amazon in federal court is in some ways an even less likely tale than Mr. Bezos’s. And so, like Mr. Bezos in the early years of Amazon, she has become a figure of fascination.
The daughter of Pakistani immigrants by way of London, Ms. Khan had the natural instincts of a good journalist. At Williams College, where she worked on the school paper, a friend described her as especially interested in understanding power, particularly the way it conceals itself to seize more power. She was in her late 20s when she wrote her paper on Amazon — about Mr. Bezos’s age when he quit his Wall Street job to drive with his wife at the time, MacKenzie Scott, west to Seattle and his destiny.
Antitrust law was the traditional tool used to rein in companies that became too powerful. Antitrust played a major role in the 1890s, marking the beginning of the Progressive Era, and again in the 1930s under the New Deal. But by the early 1980s, antitrust was at a low ebb. The so-called consumer welfare standard reduced antitrust down to one issue: the price customers paid. If prices were low, there was no problem.
The Microsoft case was important and influential, but it was very much an aberration. In the early years of this century, the prevailing laissez-faire philosophy allowed not just Amazon but other start-ups to rise much quicker than they might otherwise have. Facebook and Google charged users nothing, and were allowed to acquire their way to dominance. Six of the eight most valuable U.S. companies are tech companies — seven if you consider Tesla a tech firm.
Government was slow; Silicon Valley was fast. The marketplace would decide the fate of corporate empires. By 2015, when Ms. Khan was entering law school, hardly anyone was interested in promoting competition through government intervention. Criminal justice reform, environmental law, immigration — those were the topics that appealed to students. She chose antitrust, practically alone.
Anyone with a radical idea in Washington faces so many obstacles that it is not surprising it happens so rarely. When Ms. Khan was nominated to be chair of the F.T.C. in 2021, Amazon complained that she was biased.
“She has on numerous occasions argued that Amazon is guilty of antitrust violations and should be broken up,” the company wrote in a 25-page petition to have Ms. Khan recused from any judgment on it.
The logic: If you are critical of a company, you can’t be allowed anywhere near it as a regulator. Ms. Khan survived this challenge but it was only the first. To go against the live-and-let-live attitude of many bureaucrats, a relentless determination is required.
A hostile media is another hurdle. Dozens of Wall Street Journal editorials, opinion essays and letters to the editor have criticized Ms. Khan over the last two years. They called for Congress to investigate her, argued she didn’t understand that monopolies were actually good and accused her of letting people die by blocking a drug company merger.
Then there is the lobbying. Amazon spent $10 million in the first half of this year, five times the 2013 level. It gave money to hundreds of trade associations and nonprofits in 2022, some of which issue pro-Amazon reports without publicizing their funding. Under the “know your enemy” philosophy, Amazon has also been staffing up with Ms. Khan’s former F.T.C. colleagues.
Getting to court offers little relief. Well-steeped in decades of the consumer welfare standard, judges are not particularly encouraging to Ms. Khan’s arguments. Cases against Meta, Facebook’s parent company, and more recently Microsoft have faltered. The Amazon case incorporates aspects of the consumer welfare standard, which might make it more palatable in court.
It’s a formidable amount of opposition. Even some of her ideological foes are impressed that Ms. Khan is nevertheless having such an impact. By sheer force of intellect, she is opening up a conversation about how companies are allowed to behave.
“Five years ago, you would have been laughed out of the room if you challenged the consumer welfare standard,” said Konstantin Medvedovsky, a former antitrust attorney who is now a hedge fund analyst. “Now serious people make that argument at major conferences and are taken seriously. That’s Lina’s triumph.”
Mr. Medvedovsky is not very sympathetic to Ms. Khan’s enforcement agenda. He was one of the critics who derided the reform movement as “hipster” antitrust. Still, he said, “It’s hard not to be somewhat in awe.”
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Amazon’s new CEO Andy Jassy ‘is being forced to clean up Jeff Bezos’ mess that saw firm expand too quickly during COVID as firm’s billionaire owner enjoys “neverending vacation”‘ with ‘Sexbot’ girl friend
- New boss Andy Jassy has returned the online giant to profit and sent its share price soaring
- But a lawsuit from FTC regulator threatens to destroy Amazon’s dominance of the retail market
- Founder Jeff Bezos meanwhile shows no sign of returning to the fray as he enjoys perma-vacation with new fiancee Lauren Sanchez (3-cock joker-mouth)
Andy Jassy will have to fight off accusations that the online giant uses its market dominance to ramp up prices, overcharge sellers and stifle competition.
The investigation dates to Bezos’s time at the head of the company he founded, and hard-headed Wall Street analysts voiced sympathy for Jassy as his predecessor enjoys a seemingly ‘never-ending vacation’ with glamorous fiancée Lauren Sanchez after stepping back from the firm in July 2021.
‘He is cleaning up a mess that somebody else created,’ said Sucharita Kodali of Forrester Research.
‘And he is doing it while trying to keep the ship afloat.’+7View gallery
Billionaire Jeff Bezos has no difficulty keeping his ship afloat as he parties with fiancee Lauren Sanchez and his successor at Amazon fights to save the company+7View gallery
Bezos, 59, and Sanchez, 53, have posted a series of glamorous shot to social media as they have partied around the Mediterranean this summer+7View gallery
New CEO Andy Jassy first joined the firm three days after leaving Harvard Business School and has taken an ax to many of Bezos’s pet projects
Bezos, 59, has been pictured relaxing on his latest ship as he took a Mediterranean holiday tour this summer, proposing to Sanchez while popping back for New York Fashion Week and Beyonce in LA earlier this month.
His $500million yacht named Koru, with a figurehead carved in the image of Sanchez, has docked in Sardinia, Croatia and Corfu where billionaire friends including Oprah Winfrey and David Geffen dined aboard.
The couple held the secret engagement party aboard the yacht off Italy’s Amalfi Coast in July with guests including Kris Jenner and Bumble boss Whitney Wolfe Herd.
‘He makes me laugh all the time,’ Sanchez, 53, revealed.
‘He can be goofy. He’s so happy, he inspires me every day, he makes me a better person every day; he’s the most loving human I know.’
Jassy meanwhile has been taking the ax to dozens of the billionaire’s pet projects, reversing the company’s warehouse expansion program, scaling back investment in automated stores and laying off 27,000 employees.
He also demanded cuts at the company’s $7billion TV production arm responsible for shows including The Boys and The Rings of Power.
Amazon’s profits surged during the pandemic as it took advantage of lockdowns to increase its share of the retail market, but they crashed to a $2.7billion loss last year with analysts blaming the overexpansion of the Bezos era.
Jassy’s moves helped return the company to profit in the last quarter and increase its share price by half since the start of the year – and he may have had his former boss in mind when he warned staff in March they needed to be back in the office or ‘it’s probably not going to work out for you’.
‘As a leadership team, we’ve decided that we will be better for customers and for our business being in the office,’ he insisted.
The Federal Trade Commission suit filed on Tuesday in federal court in Seattle, where Amazon is headquartered, follows a four-year investigation into the company, and federal lawsuits filed against Alphabet’s Google and Facebook-owner Meta.
It accuses the Silicon Valley giant of anti-competitive practices, including punishing sellers who offer lower prices on different websites by burying their listings on Amazon and making them harder to find.+7View gallery
The carefree billionaire accompanied his former news presenter wife to the Big Apple earlier this month for Ne York Fashion Week+7View gallery
The couple also popped up in Las Vegas where they joined Kris Jenner at Beyonce’s star-studded LA concert+7View gallery
The good life: The buff billionaire has dropped in to a series of exclusive resorts
The complaint also says the company degrades the customer experience by replacing relevant search results with paid advertisements, biasing its own brands over other products it knows to be of a better quality and charging heavy fees that force sellers to pay nearly half of their total revenues to Amazon.
The filing also asked the court to consider forcing the online retailer to sell assets, hinting at a possible attempt to break up the online retail giant.
Many had wondered whether the agency would seek a forced break-up of the retail giant, which is also dominant in cloud computing and has a growing presence in other sectors like groceries and health care.
In a briefing with reporters, FTC Chair Lina Khan dodged questions of whether the agency will push for a break-up.
‘At this stage, the focus is more on liability,’ she said.
The company accused the regulator of being ‘wrong on the facts and the law’.+7View gallery
Katy Perry, Orlando Bloom and Usher joined the couple for a stroll along the Dubrovnik’s main street Stradun last month
‘If the FTC gets its way, the result would be fewer products to choose from, higher prices, slower deliveries for consumers, and reduced options for small businesses — the opposite of what antitrust law is designed to do,’ Amazon General Counsel David Zapolsky responded.
Jassy has told investors he plans to fight back with expansion in artificial intelligence, health care and restructured logistics to improve product delivery.
‘He has done a lot, but he clearly is going to have a lot more to do,’ DA Davidson analyst Tom Forte told the New York Times.
‘It was definitely going to be a harder act for Jassy,’ added Kodali.