December 30, 2024 • 29 mins
FTC Chair Lina Khan joins Ed Zitron to talk about competitiveness in the tech industry, controlling the cloud giants, and what should give you hope as we head into 2025.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Cool Media.
Speaker 2 (00:05):
Hello, and welcome's a Better offline. I'm your host ed zietron.
Speaker 1 (00:16):
As.
Speaker 2 (00:19):
I am joined by the Chair of the Federal Trade Commission,
Lena Cohn. Lena, thank you so much for joining me.
Speaker 1 (00:24):
Great to be here.
Speaker 2 (00:25):
So on a simple level, what does the FTC actually do?
Speaker 1 (00:30):
So, the FTC enforces America's anti trust and consumer protection laws,
and so these are the laws that try to ensure
that our markets are fair and honest and competitive, and
so that means we're looking to protect people from illegal monopolies.
We're trying to protect people from all sorts of frauds
and scams. We're trying to protect people's privacy and wanting
(00:50):
to make sure that they're not subjected to all sorts
of unfair practices. We were created one hundred and ten
years ago, and so it's a pretty big mandate. We
have oversight across markets across the entire economy for the
most part, with some exceptions like in areas such as
banks and airlines. So it's a really big job that
(01:11):
this agency does and it's been thrilling to get to
do it.
Speaker 2 (01:15):
And it feels like you're a lot more aggressive than
perhaps anti monopoly and anti consolidation has been in the past,
what led to them.
Speaker 1 (01:24):
So I came into this job wanting to make sure
that we were a fully using the tools that Congress
gave us. As I noted, this agency has been around
for o first century. Our agency was given some pretty
important authorities and tools, but over the decades there had
been a drift away from fully using all of the
(01:44):
tools that we have, from fully embracing the law on
the books. And so the first thing we did was
kind of come in and just make sure that we
are mapping out what are all the tools we actually
have and how do we make sure we're faithfully using those.
The second thing that's been important is wanting to make
sure that we're enforcing the law and taking action in
(02:07):
response to how markets actually work today, and that meant
making sure we were having top expertise Internally. We started
a new Bureau of Technologists that you know, brought data scientists,
data engineers, people who fully understand the ins and outs
of how algorithms work. Previously, companies would view lawsuits as
(02:29):
just a cost of doing business, and especially in digital
markets where there's such a focus on chasing scale and
chasing growth, you know, there was a bit of a
ask for forgiveness later mentality, rather than everybody abiding by
the law and making sure Americans were getting their rights
on the front end.
Speaker 2 (02:47):
So how do you curtail that instinct where they have
so much money that they can just kind of absorb
the fee, sorry, the fine.
Speaker 1 (02:54):
I mean, yeah, it's a good question, and it's especially
important because a few months before I came into this role,
the courts had actually further limited the FTC's ability to
get money. We mitigated that in a couple of ways. First,
we used the tools we did have to their full
extent to still get record breaking sums. We also made
(03:18):
sure we were looking at things like individual accountability, and
so if a specific individual executive was involved in directing
or participating in the law breaking, the lawsuit can be
brought not just against the company but also against the
individual executive. And so we've done that in several instances
(03:40):
where we had evidence that high level execs knew what
was going on, had the ability to stop it, and didn't.
And there's been a lot of empirical work that shows
that actually holding individual executives accountable is really important for
deterring law breaking in the first instance. So we've done that.
We've also made sure that when companies, for example, have
(04:04):
used illegal practices to hoard people's data, that they're having
to actually get rid of that data or get rid
of the models that we're trained on the data. So
we're actually getting remedies that make sense for today's markets.
Speaker 2 (04:19):
So you file the case against Amazon? What is the case?
What's going on over there? Because I know you have
some history when at Yale Law School you wrote that
the antitrust paradox. I believe it, like, what's the case
against Amazon?
Speaker 1 (04:32):
So just to step back, what we see with digital
platforms in particular is that there can be a life cycle.
Right initially, when a digital platform is entering the market,
they're really focused on chasing scale and building up a
large customer base on one side of the market, so
then they can also attract a big customer base on
(04:54):
the other end, and they want to basically achieve, you know,
the flywheel of accelerated growth in them. Mentum that, especially
in digital markets, once you've kind of hit that sweet
spot of sufficient scale, there can be enormous acceleration. But
what we've seen is that once firms achieve that accelerated growth,
(05:14):
and if they're successful at knocking out their arrivals, we
can see a different phase kick in where the platform
starts looking to milk the monopoly right, and we can
see that in a few ways, the company can start
charging higher prices. Sometimes they can make service worse. Corey
(05:34):
doctor Rowe has coined this term and shoitification around just
the degradation of the services that you see. And so
the lawsuit that we've brought is about Amazon as it
is in this second phase, where basically we alleged they
have height prices for both buyers on Amazon's platform as
(05:55):
well as the small businesses that sell through its platform,
where Amazon now collects one out of every two dollars.
We also note that Amazon has kind of cluttered its
search results page with irrelevant ads as a very deliberate
strategy to be able to basically milk more ad revenue
from the platform even when it's not serving shoppers and
(06:17):
serving consumers. And so we allege that Amazon's only been
able to make things worse in this way for people
because they've architected this anti competitive scheme to block out
rivals through illegal tactics. And so that's what the lawsuit
is about. It's going to go to trial in a
couple of years, and we brought it with a whole
(06:39):
bunch of state attorneys general as well.
Speaker 2 (06:42):
Lovely So some one of the core thrusts you made
in your paper. Amazon's antitrust paradox is that they prioritized
growth over being a profitable company. This feels like a
problem across the tech firms, all of them, they all
seem to be growth hungry. I feel do you feel
that this is anti competitive at its core because growth
(07:03):
doesn't seem to be about better, just seems like more.
Speaker 1 (07:07):
Yeah, it's a really good question. And the antitrust laws
in no way say that chasing scale or chasing growth
is illegal, or even that being big is illegal. It
really comes down to what are the mechanisms of chasing
that growth or the mechanisms of becoming big? Right, and
so in the same ways that we would recognize, hey,
(07:31):
like going across You know, if you have a pizza
shop that goes across the street and sets fire to
its rival pizza shop, you know that's not fair competition.
That's an extreme example, but there are all sorts of
other mechanisms that the law say are not fair means
of competing, and so that's what the law does. It
tries to distinguish what is fair play versus not when
(07:53):
you're looking to, you know, compete and grow and get big.
And so chasing scale and growth is not in any
way by itself illegal and instead is a really kind
of core part of what incentivizes business. Is What we
have seen though, is if law enforcers are not effective
(08:13):
and are not timely, chasing growth can happen through playing
fast and loose with the rules, especially if companies know that, Okay,
sure I might get hit with a lawsuit in five years,
but guess what, I will have hit my targets by then,
I'll be the biggest firm. I'll have achieved dominance, and
so I can worry about that later. From a business perspective,
(08:35):
it's actually better for the company to play fast and
loose with the rules so that they gain that dominance
and then deal with it later. That's really problematic as
a mindset for law enforcement, and so that's something that
we've been trying to figure out. How do we devise
strategies to be much more assertive, be much more forward leaning,
be much more timely, So that we're not having to
do that clean up five years, ten years after.
Speaker 2 (08:58):
The fact, How does the FTC have to actually tackle
anti trust violators? And indeed within those shortened time scales.
Speaker 1 (09:06):
So we oversee various facets of firms behavior. One is
if they are looking to merge or pursue an acquisition,
if it's above you know, one hundred and nineteen million dollars,
it gets reported both to the FTC and to the
Anti Trust Division, and we can figure out is this
an anti competitive transaction? Is this basically going to reduce competition?
(09:30):
And then we can also look at companies business tactics,
especially you know, if they've become monopolies or are kind
of using their dominance in illegal ways, and so we
can bring lawsuits. We can also issue rules, and we've
been very active in issuing rules, including in areas like
fake reviews, you know, taking on things like government impostors.
(09:55):
We just finalized a rule taking on junk fees in
the economy. These you know, hidden fees that companies just
show at the very end that you don't know what
you're exactly paying for, but suddenly the price of the
ticket is almost doubled and you have no choice, and
so we've issued a series of rules, we've brought a
series of lawsuits. We can also do various studies of
(10:18):
the market, including in areas where things are moving very quickly.
So we a few months ago launched a study into
surveillance pricing, this idea that firms could be charging every
single individual a standalone price based on the data they
have on you. So these are just some of the
tools and authorities we have.
Speaker 2 (10:47):
So let's still call official intelligence. From a regulatory perspective,
what are your major concerns.
Speaker 1 (10:53):
So the biggest concern for me, just right at the
beginning was making sure we were making very very clear
to the market that there was no AI exemption from
the laws on the books. And this can sound like
a basic point, but it seemed incredibly important because we
have seen, especially when new technologies come onto the market,
(11:14):
we can see an effort by firms to say, Okay,
sure you have these age old laws on the books,
but this new technology is different, and that means these
laws don't apply or they have to apply in dramatically
different ways. And it's really important for enforcers to hear
out those arguments, you know, make sure we understand how
the technologies are working, but not get so dazzled by
(11:37):
the novelty to say, okay, well, I guess we can
totally abandon our core laws and suddenly we're saying, okay,
fraud is illegal, but if you do fraud with AI
sometimes somehow that's okay. Right, That's not a position we
want to be in.
Speaker 2 (11:54):
Companies are making like that kind of argument. They were
attempted to sites that, not that specifically, but they trying
to dodge.
Speaker 1 (12:03):
Yeah, we do see arguments that, you know, the traditional
laws around unfair practices or deceptive practices applied differently. The
other big thing is, you know, America has been so
fortunate to be such a key home of breakthrough innovations historically,
and to my mind, a key ingredient of that has
(12:23):
been making sure we have fair competitive markets where you
actually do have somebody with a great new idea, an
upstart that's able to come in, that's able to fairly
compete and knock out the incumbents. That's how historically we
have gotten real major technological progress in our country. And
(12:44):
what I wanted to make sure we were being very
clear eyed about is the risk of a few large
dominant incumbents locking in the market in a way that
shuts out a lot of that innovation and a lot
of that next generation breakthrough that historically we've seen come
purely from fair competition and open markets. So it was
(13:07):
about wanting to make sure that companies are not using
their existing heft to immediately lock up the market and
shut out the innovation that we should be able to see.
Speaker 2 (13:19):
So, with that in mind, are you worried about the
consolidation we're seeing right now in the generative AI market?
Because to build these models, the foundation models like Claude
three or GPT or LAMA or what have you, it
requires financial heft. How do you avoid the monopoly that
naturally comes out of the fact that you need billions
and billions of dollars to even make one of these.
Speaker 1 (13:42):
Yeah, it's a key question, and one approach that we've
taken is making sure that we are actually going layer
by layer in the market. Right, And so you want
to understand, Okay, what's happening with chips, what's happening with
cloud and compute, what's happening with the models. You want
to understand what are the key economic properties of each
(14:06):
point in the stack and then understand, Okay, do we
see this consolidation purely because they're such high fixed costs
and you know, that's just going to be the state
of the market. And how do we make sure that
the degree you do have dominant players in some of
these layers, they're not using that dominance to then squelch
(14:30):
out competition in a layer where you should actually be
able to see more innovation, more competition. And so we're
looking at, for example, some of the partnerships and investments
between the big cloud providers and some of the newer firms. Famously,
you know, the Microsoft Open Ai partnership. Amazon and Google
(14:53):
have also made some investments, and we want to understand,
you know, are these truly kind of independent companies. Are
these able to be independent firms in terms of the
competitive decision making some of the key strategic calls when
so much investment is being made. What is the structure
of the contracts, What are some of the key requirements?
(15:15):
Are there kind of interlocking director it's here in ways
that create conflicts that are problematic? Are there contractual you know,
tying provisions here? So that's just the universe of what
we're looking at, But of course, it's a fast moving
market and we're very fortunate to have just top tier
technological talent in house to be letting us push forward here.
Speaker 2 (15:37):
So consolidation is a concern though in general of AI, it's.
Speaker 1 (15:42):
Certainly something we have to be vigilant about to make
sure that to the degree we do see you know,
monopolies or firms with enormous market power, we want to
make sure a that that's not being achieved through illegal tactics,
or that it's not being used illegal to snuff out
competition somewhere else. So that's incredibly important.
Speaker 2 (16:04):
How about the training data situation, because that feels like
a mixture of different parts of the government be involved,
but that also feels like a massive anti competitive issue.
Is this something the FTC is looking into or would
have to partner with other parts of the government potentially, So.
Speaker 1 (16:20):
We are looking into it. Actually, last year we convened
a roundtable with creators from all sorts of different sectors.
So we had you know, artists, authors, graphic designers, even
people who work in fashion sharing how their core creations
had actually already been scraped in many instances and suddenly
(16:44):
they were waking up where their life's creation having been
ingested by this machine and spitting out outcomes that they
had never consented to and suddenly felt like they had
no control over. And so that's something we've heard a
lot about. Interestingly, these creators, many of them were acknowledging
that these technologies could be quite fruitful for them as well.
(17:04):
They're not kind of reflexively and viscerally anti AI. It's
really about wanting to make sure that the terms on
which their creations are being used, that those are actually
fairly negotiated and it's not some type of opt out
model after the fact that they actually should be able
to consent, that they should actually be getting compensation that's
(17:27):
you know, can measure it with the value of what
they're getting. So that's a lot of concerns we've heard.
The FTC submitted a comment to the Copyright Office, which
is considering some of these issues, kind of relaying what
we had heard, and so it's certainly a live issue,
and to the extent the FTC can share expertise on it,
we've been looking to do that.
Speaker 2 (17:49):
So Generati is being crammed into every tech product. Do
you see any potential for consumer homes from this happening.
Speaker 1 (17:57):
Well, generally, we've brought a set of lawsuits that fall
into a few categories. One of the big categories is
around this idea of AI hype. So as more and
more products are adopting generative AI services, they're making oftentimes
commitments or promises about what these services can actually deliver,
(18:20):
and sometimes we see that those claims are inflated. And
so you know, for example, the FTC a few months
ago brought a whole sweep of enforcement actions against for example,
a company that was claiming to be the world's first
robot lawyer. Do not pay, but the product fail to
(18:41):
live up to its claims that the service could substitute
for the expertise of a human lawyer. Now, don't get
me wrong. To the extent that these types of services
and advances can bring things like way low cost legal
services to people, that's a great thing. But just we
want to make sure companies are not inflating or hyping
(19:02):
or falsely overstating what those services can actually do. So
that's been a big strain of the cases that we've
brought so far in this area.
Speaker 2 (19:12):
So do you see any anti competitive issues in the
cloud in the compute industry in general, even outside of AI,
because it really is just a few big players.
Speaker 1 (19:23):
It is. Yeah, it is a relatively small number of firms.
The FTC did do a inquiry here. We got a
lot of comments and some of the complaints that we
heard about focused on things like how easy is it
to exit the cloud service and transfer your data elsewhere?
(19:46):
And are you having to play pay these egress fees
to the cloud providers in ways that inhibits, you know, switching.
We also heard just more generally about some of the
software licensing practices, where some people suggested that some of
the cloud providers limit their ability to use certain software
(20:10):
in other cloud infrastructure provider environments, so that you can
imagine could lead to lock in, or if one cloud
provider is effectively degrading the ability to use other third
party softwares on that cloud, you could see some issues there.
And then we also heard some concerns that some provisions
in cloud computing contracts could be incentivizing customers to consolidate
(20:34):
their use of cloud services to just one provider that
could further hasten consolidation. More generally, we looked at this
not just from the competition lens, but also from a
resiliency lens. I think we've all seen how when you
have extreme centralization that can also create a lot of
fragility where you have a single point of failure, right,
(20:56):
And we've seen how if a single data of a
center somewhere goes out, sometimes a corner of the Internet
also goes out. And so how do we make sure
we're also thinking about the resiliency element here. And then
they're kind of similar data security concerns as well that
we heard about.
Speaker 2 (21:29):
So you've been a nonmeditorializing here attacked I would describe
some of the clammiest men alive. A lot of people
in bench capital and within tech have come for you.
How do you deal with that? How's that affected you?
Speaker 1 (21:44):
So as a general matter, you know, I focus on
making sure we're hearing from Americans across the country. And
sometimes it's very easy in these jobs to actually become
very insulated and only hear from the people who have
access us to power or kind of know you know,
where to be ranting in a way that it gets
(22:05):
to public enforcers very easily. So it's really about just
making sure that you're keeping good perspective, keeping a broad
purview of who it is that we serve. So we've
done listening sessions across the country, for example, going to
places like Baraboo, Wisconsin or Aimes, Iowa, hearing from you know,
(22:27):
the gig drivers that use some of these ride sharing
platforms to understand what are they seeing, what is their experience.
We talk to a lot of farmers who are concerned
about the ability to repair their own tractors and why
there's been you know, increasing friction there and so keeping
just a broader set of voices in mind as we're
(22:48):
making our decisions, I think has been incredibly important to
just keep a north star that's properly focused on, you know,
the public as a whole, rather than a handful of
of well resourced, well connected individuals that can sometimes have
an outsized role in policy decisions.
Speaker 2 (23:09):
So what do you think, what are some of the
big wins? What the ones you're most proud of in
your time?
Speaker 1 (23:15):
Well, because of the FTC's work, Americans saw the cost
of inhalers go down from hundreds of dollars just just
thirty five dollars. In the digital space, you know, we've
really helped set new rules of the road. I mean,
one trend that we've seen is as more companies have
become reliant on service based revenues, they've introduced subscriptions and
(23:40):
become much more reliant on subscription revenue, and so we
see firms make it very easy to sign up for
a subscription, but then extraordinarily difficult to cancel. We brought
a whole bunch of lawsuits, including against Amazon, including against
Adobe for their illegal subscription practices that were awarding Americans
(24:01):
from being able to cancel in ways that resulted in people,
you know, overpaying for months and months. We had people
tell us the only way I could cancel my subscription
was to cancel my credit card, right, I mean, just
deeply anti anti consumer practices. We also finalized a rule
that will go into effect next year such that all
(24:21):
companies would have to make it as easy to cancel
a subscription as it is to sign up for one.
We've also been very active in taking on data brokers.
You know, there's been a wild wild West out there
and how people's personal information is bought and sold, and
we've brought a whole set of law enforcement actions when
data brokers are illegally using or collecting people's health data.
(24:45):
People's precise geolocation data, sensitive data like browsing data. Just
to make clear that the default assumption is not that
all of this sensitive data can be bought and sold
even if people have not affirmative given permission. We just
brought the other week two cases against significant data brokers
(25:06):
Mobile Walla and Gravy Analytics for some of their illegal
practices involving geolocation data. The Mobile Walla case was especially
interesting to my mind because it involved account about real
time bidding data, and there's been all this research suggesting
that the online auctions of real time bidding end up
exposing people sensitive data, and we brought a case noting
(25:30):
that that exposure could be you know, and companies using
the real time bidding data unlawfully is problematic. And so
those have been, you know, some of the advances that
we've made.
Speaker 2 (25:43):
So you were confirmed with broad bipartisan support. Jadie Vance
spoke fondly of you. Do you have hope that your
kind of your legacy continues in some level?
Speaker 1 (25:54):
Well, I can't predict what the future holds. I do
know that there has been strong bipartisan support for taking
on unchecked private power. That's true in technology markets. That's
been especially true when it involves people's privacy, when it
involves kids privacy. I think we've seen, you know, people
(26:14):
recognize that if you're freaked out by unlawful surveillance when
the government does it, you should also be freaked out
by surveillance when private companies do it, because the the
you know, the line there can be quite porous. And
so I do think there are a set of areas
where there is strong bipartisan concern and commitment to taking
(26:34):
on corporate law breaking, and so I hope that will continue.
Speaker 2 (26:39):
All right, One last question, So right now, I would
describe the mood is not great out. I think the
people are feeling a little dark. Feels like the ultra
wealthy are kind of gating speed and seeping into the government.
What would you tell people to give them hope?
Speaker 1 (26:53):
Ooof's a that's a tough one. I mean, you know,
I'm a patriot, you know, I really believe in America.
I think there have been moments before where the path
ahead was not clear. And one approach that I've taken
to this job is there are no inevitable outcomes, right,
be it in terms of how our markets evolve, be
(27:15):
it in terms of what our government does or doesn't do,
and how people in positions like at the FTC at
have huge consequences for you know, whether you have markets
that are premised on on check surveillance or whether you
can imagine people's data and privacy being protected right. There
can sometimes be an effort to say, well, there's just
(27:37):
this inevitable march of technological progress where outcomes are sort
of already baked, and I don't believe that. I think
how we use our laws, how we use our policies,
is incredibly important. A priority for me at the FTC
has been to engage with the public and that's partly
so that we hear from them, partly so that we
(27:57):
share with them what we're doing, but it's also to
me make sure that people know that they can hold
future people at the FTC accountable as well for what
decisions are not being made. So I think we've seen
you know that having a strong government that's focused on
protecting people is important and people should be expecting that.
Speaker 2 (28:18):
Lena, thank you so much for joining me. It's been
such a pleasure to have you. Thank you for doing this.
Speaker 1 (28:24):
Thanks so much.
Speaker 2 (28:26):
You've been listening to better Offline, Neil, You've got to
name my own podcast day. Lena Khan, Chair of the FTC,
thank you so much for listening. Everyone, Thank you for
listening to Better Offline. The editor and composer of the
Better Offline theme song is Matasowski. You can check out
(28:48):
more of his music and audio projects at Matasowski dot com,
M A T T O S O W s ki
dot com. You can email me at easy at Better
Offline dot com or visit offline dot com to find
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(29:09):
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for listening.
Speaker 1 (29:14):
Better Offline is a production of cool Zone Media. For
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Cool Media.
Speaker 2 (00:05):
Hello, and welcome's a Better offline. I'm your host ed zietron.
Speaker 1 (00:16):
As.
Speaker 2 (00:19):
I am joined by the Chair of the Federal Trade Commission,
Lena Cohn. Lena, thank you so much for joining me.
Speaker 1 (00:24):
Great to be here.
Speaker 2 (00:25):
So on a simple level, what does the FTC actually do?
Speaker 1 (00:30):
So, the FTC enforces America's anti trust and consumer protection laws,
and so these are the laws that try to ensure
that our markets are fair and honest and competitive, and
so that means we're looking to protect people from illegal monopolies.
We're trying to protect people from all sorts of frauds
and scams. We're trying to protect people's privacy and wanting
(00:50):
to make sure that they're not subjected to all sorts
of unfair practices. We were created one hundred and ten
years ago, and so it's a pretty big mandate. We
have oversight across markets across the entire economy for the
most part, with some exceptions like in areas such as
banks and airlines. So it's a really big job that
(01:11):
this agency does and it's been thrilling to get to
do it.
Speaker 2 (01:15):
And it feels like you're a lot more aggressive than
perhaps anti monopoly and anti consolidation has been in the past,
what led to them.
Speaker 1 (01:24):
So I came into this job wanting to make sure
that we were a fully using the tools that Congress
gave us. As I noted, this agency has been around
for o first century. Our agency was given some pretty
important authorities and tools, but over the decades there had
been a drift away from fully using all of the
(01:44):
tools that we have, from fully embracing the law on
the books. And so the first thing we did was
kind of come in and just make sure that we
are mapping out what are all the tools we actually
have and how do we make sure we're faithfully using those.
The second thing that's been important is wanting to make
sure that we're enforcing the law and taking action in
(02:07):
response to how markets actually work today, and that meant
making sure we were having top expertise Internally. We started
a new Bureau of Technologists that you know, brought data scientists,
data engineers, people who fully understand the ins and outs
of how algorithms work. Previously, companies would view lawsuits as
(02:29):
just a cost of doing business, and especially in digital
markets where there's such a focus on chasing scale and
chasing growth, you know, there was a bit of a
ask for forgiveness later mentality, rather than everybody abiding by
the law and making sure Americans were getting their rights
on the front end.
Speaker 2 (02:47):
So how do you curtail that instinct where they have
so much money that they can just kind of absorb
the fee, sorry, the fine.
Speaker 1 (02:54):
I mean, yeah, it's a good question, and it's especially
important because a few months before I came into this role,
the courts had actually further limited the FTC's ability to
get money. We mitigated that in a couple of ways. First,
we used the tools we did have to their full
extent to still get record breaking sums. We also made
(03:18):
sure we were looking at things like individual accountability, and
so if a specific individual executive was involved in directing
or participating in the law breaking, the lawsuit can be
brought not just against the company but also against the
individual executive. And so we've done that in several instances
(03:40):
where we had evidence that high level execs knew what
was going on, had the ability to stop it, and didn't.
And there's been a lot of empirical work that shows
that actually holding individual executives accountable is really important for
deterring law breaking in the first instance. So we've done that.
We've also made sure that when companies, for example, have
(04:04):
used illegal practices to hoard people's data, that they're having
to actually get rid of that data or get rid
of the models that we're trained on the data. So
we're actually getting remedies that make sense for today's markets.
Speaker 2 (04:19):
So you file the case against Amazon? What is the case?
What's going on over there? Because I know you have
some history when at Yale Law School you wrote that
the antitrust paradox. I believe it, like, what's the case
against Amazon?
Speaker 1 (04:32):
So just to step back, what we see with digital
platforms in particular is that there can be a life cycle.
Right initially, when a digital platform is entering the market,
they're really focused on chasing scale and building up a
large customer base on one side of the market, so
then they can also attract a big customer base on
(04:54):
the other end, and they want to basically achieve, you know,
the flywheel of accelerated growth in them. Mentum that, especially
in digital markets, once you've kind of hit that sweet
spot of sufficient scale, there can be enormous acceleration. But
what we've seen is that once firms achieve that accelerated growth,
(05:14):
and if they're successful at knocking out their arrivals, we
can see a different phase kick in where the platform
starts looking to milk the monopoly right, and we can
see that in a few ways, the company can start
charging higher prices. Sometimes they can make service worse. Corey
(05:34):
doctor Rowe has coined this term and shoitification around just
the degradation of the services that you see. And so
the lawsuit that we've brought is about Amazon as it
is in this second phase, where basically we alleged they
have height prices for both buyers on Amazon's platform as
(05:55):
well as the small businesses that sell through its platform,
where Amazon now collects one out of every two dollars.
We also note that Amazon has kind of cluttered its
search results page with irrelevant ads as a very deliberate
strategy to be able to basically milk more ad revenue
from the platform even when it's not serving shoppers and
(06:17):
serving consumers. And so we allege that Amazon's only been
able to make things worse in this way for people
because they've architected this anti competitive scheme to block out
rivals through illegal tactics. And so that's what the lawsuit
is about. It's going to go to trial in a
couple of years, and we brought it with a whole
(06:39):
bunch of state attorneys general as well.
Speaker 2 (06:42):
Lovely So some one of the core thrusts you made
in your paper. Amazon's antitrust paradox is that they prioritized
growth over being a profitable company. This feels like a
problem across the tech firms, all of them, they all
seem to be growth hungry. I feel do you feel
that this is anti competitive at its core because growth
(07:03):
doesn't seem to be about better, just seems like more.
Speaker 1 (07:07):
Yeah, it's a really good question. And the antitrust laws
in no way say that chasing scale or chasing growth
is illegal, or even that being big is illegal. It
really comes down to what are the mechanisms of chasing
that growth or the mechanisms of becoming big? Right, and
so in the same ways that we would recognize, hey,
(07:31):
like going across You know, if you have a pizza
shop that goes across the street and sets fire to
its rival pizza shop, you know that's not fair competition.
That's an extreme example, but there are all sorts of
other mechanisms that the law say are not fair means
of competing, and so that's what the law does. It
tries to distinguish what is fair play versus not when
(07:53):
you're looking to, you know, compete and grow and get big.
And so chasing scale and growth is not in any
way by itself illegal and instead is a really kind
of core part of what incentivizes business. Is What we
have seen though, is if law enforcers are not effective
(08:13):
and are not timely, chasing growth can happen through playing
fast and loose with the rules, especially if companies know that, Okay,
sure I might get hit with a lawsuit in five years,
but guess what, I will have hit my targets by then,
I'll be the biggest firm. I'll have achieved dominance, and
so I can worry about that later. From a business perspective,
(08:35):
it's actually better for the company to play fast and
loose with the rules so that they gain that dominance
and then deal with it later. That's really problematic as
a mindset for law enforcement, and so that's something that
we've been trying to figure out. How do we devise
strategies to be much more assertive, be much more forward leaning,
be much more timely, So that we're not having to
do that clean up five years, ten years after.
Speaker 2 (08:58):
The fact, How does the FTC have to actually tackle
anti trust violators? And indeed within those shortened time scales.
Speaker 1 (09:06):
So we oversee various facets of firms behavior. One is
if they are looking to merge or pursue an acquisition,
if it's above you know, one hundred and nineteen million dollars,
it gets reported both to the FTC and to the
Anti Trust Division, and we can figure out is this
an anti competitive transaction? Is this basically going to reduce competition?
(09:30):
And then we can also look at companies business tactics,
especially you know, if they've become monopolies or are kind
of using their dominance in illegal ways, and so we
can bring lawsuits. We can also issue rules, and we've
been very active in issuing rules, including in areas like
fake reviews, you know, taking on things like government impostors.
(09:55):
We just finalized a rule taking on junk fees in
the economy. These you know, hidden fees that companies just
show at the very end that you don't know what
you're exactly paying for, but suddenly the price of the
ticket is almost doubled and you have no choice, and
so we've issued a series of rules, we've brought a
series of lawsuits. We can also do various studies of
(10:18):
the market, including in areas where things are moving very quickly.
So we a few months ago launched a study into
surveillance pricing, this idea that firms could be charging every
single individual a standalone price based on the data they
have on you. So these are just some of the
tools and authorities we have.
Speaker 2 (10:47):
So let's still call official intelligence. From a regulatory perspective,
what are your major concerns.
Speaker 1 (10:53):
So the biggest concern for me, just right at the
beginning was making sure we were making very very clear
to the market that there was no AI exemption from
the laws on the books. And this can sound like
a basic point, but it seemed incredibly important because we
have seen, especially when new technologies come onto the market,
(11:14):
we can see an effort by firms to say, Okay,
sure you have these age old laws on the books,
but this new technology is different, and that means these
laws don't apply or they have to apply in dramatically
different ways. And it's really important for enforcers to hear
out those arguments, you know, make sure we understand how
the technologies are working, but not get so dazzled by
(11:37):
the novelty to say, okay, well, I guess we can
totally abandon our core laws and suddenly we're saying, okay,
fraud is illegal, but if you do fraud with AI
sometimes somehow that's okay. Right, That's not a position we
want to be in.
Speaker 2 (11:54):
Companies are making like that kind of argument. They were
attempted to sites that, not that specifically, but they trying
to dodge.
Speaker 1 (12:03):
Yeah, we do see arguments that, you know, the traditional
laws around unfair practices or deceptive practices applied differently. The
other big thing is, you know, America has been so
fortunate to be such a key home of breakthrough innovations historically,
and to my mind, a key ingredient of that has
(12:23):
been making sure we have fair competitive markets where you
actually do have somebody with a great new idea, an
upstart that's able to come in, that's able to fairly
compete and knock out the incumbents. That's how historically we
have gotten real major technological progress in our country. And
(12:44):
what I wanted to make sure we were being very
clear eyed about is the risk of a few large
dominant incumbents locking in the market in a way that
shuts out a lot of that innovation and a lot
of that next generation breakthrough that historically we've seen come
purely from fair competition and open markets. So it was
(13:07):
about wanting to make sure that companies are not using
their existing heft to immediately lock up the market and
shut out the innovation that we should be able to see.
Speaker 2 (13:19):
So, with that in mind, are you worried about the
consolidation we're seeing right now in the generative AI market?
Because to build these models, the foundation models like Claude
three or GPT or LAMA or what have you, it
requires financial heft. How do you avoid the monopoly that
naturally comes out of the fact that you need billions
and billions of dollars to even make one of these.
Speaker 1 (13:42):
Yeah, it's a key question, and one approach that we've
taken is making sure that we are actually going layer
by layer in the market. Right, And so you want
to understand, Okay, what's happening with chips, what's happening with
cloud and compute, what's happening with the models. You want
to understand what are the key economic properties of each
(14:06):
point in the stack and then understand, Okay, do we
see this consolidation purely because they're such high fixed costs
and you know, that's just going to be the state
of the market. And how do we make sure that
the degree you do have dominant players in some of
these layers, they're not using that dominance to then squelch
(14:30):
out competition in a layer where you should actually be
able to see more innovation, more competition. And so we're
looking at, for example, some of the partnerships and investments
between the big cloud providers and some of the newer firms. Famously,
you know, the Microsoft Open Ai partnership. Amazon and Google
(14:53):
have also made some investments, and we want to understand,
you know, are these truly kind of independent companies. Are
these able to be independent firms in terms of the
competitive decision making some of the key strategic calls when
so much investment is being made. What is the structure
of the contracts, What are some of the key requirements?
(15:15):
Are there kind of interlocking director it's here in ways
that create conflicts that are problematic? Are there contractual you know,
tying provisions here? So that's just the universe of what
we're looking at, But of course, it's a fast moving
market and we're very fortunate to have just top tier
technological talent in house to be letting us push forward here.
Speaker 2 (15:37):
So consolidation is a concern though in general of AI, it's.
Speaker 1 (15:42):
Certainly something we have to be vigilant about to make
sure that to the degree we do see you know,
monopolies or firms with enormous market power, we want to
make sure a that that's not being achieved through illegal tactics,
or that it's not being used illegal to snuff out
competition somewhere else. So that's incredibly important.
Speaker 2 (16:04):
How about the training data situation, because that feels like
a mixture of different parts of the government be involved,
but that also feels like a massive anti competitive issue.
Is this something the FTC is looking into or would
have to partner with other parts of the government potentially, So.
Speaker 1 (16:20):
We are looking into it. Actually, last year we convened
a roundtable with creators from all sorts of different sectors.
So we had you know, artists, authors, graphic designers, even
people who work in fashion sharing how their core creations
had actually already been scraped in many instances and suddenly
(16:44):
they were waking up where their life's creation having been
ingested by this machine and spitting out outcomes that they
had never consented to and suddenly felt like they had
no control over. And so that's something we've heard a
lot about. Interestingly, these creators, many of them were acknowledging
that these technologies could be quite fruitful for them as well.
(17:04):
They're not kind of reflexively and viscerally anti AI. It's
really about wanting to make sure that the terms on
which their creations are being used, that those are actually
fairly negotiated and it's not some type of opt out
model after the fact that they actually should be able
to consent, that they should actually be getting compensation that's
(17:27):
you know, can measure it with the value of what
they're getting. So that's a lot of concerns we've heard.
The FTC submitted a comment to the Copyright Office, which
is considering some of these issues, kind of relaying what
we had heard, and so it's certainly a live issue,
and to the extent the FTC can share expertise on it,
we've been looking to do that.
Speaker 2 (17:49):
So Generati is being crammed into every tech product. Do
you see any potential for consumer homes from this happening.
Speaker 1 (17:57):
Well, generally, we've brought a set of lawsuits that fall
into a few categories. One of the big categories is
around this idea of AI hype. So as more and
more products are adopting generative AI services, they're making oftentimes
commitments or promises about what these services can actually deliver,
(18:20):
and sometimes we see that those claims are inflated. And
so you know, for example, the FTC a few months
ago brought a whole sweep of enforcement actions against for example,
a company that was claiming to be the world's first
robot lawyer. Do not pay, but the product fail to
(18:41):
live up to its claims that the service could substitute
for the expertise of a human lawyer. Now, don't get
me wrong. To the extent that these types of services
and advances can bring things like way low cost legal
services to people, that's a great thing. But just we
want to make sure companies are not inflating or hyping
(19:02):
or falsely overstating what those services can actually do. So
that's been a big strain of the cases that we've
brought so far in this area.
Speaker 2 (19:12):
So do you see any anti competitive issues in the
cloud in the compute industry in general, even outside of AI,
because it really is just a few big players.
Speaker 1 (19:23):
It is. Yeah, it is a relatively small number of firms.
The FTC did do a inquiry here. We got a
lot of comments and some of the complaints that we
heard about focused on things like how easy is it
to exit the cloud service and transfer your data elsewhere?
(19:46):
And are you having to play pay these egress fees
to the cloud providers in ways that inhibits, you know, switching.
We also heard just more generally about some of the
software licensing practices, where some people suggested that some of
the cloud providers limit their ability to use certain software
(20:10):
in other cloud infrastructure provider environments, so that you can
imagine could lead to lock in, or if one cloud
provider is effectively degrading the ability to use other third
party softwares on that cloud, you could see some issues there.
And then we also heard some concerns that some provisions
in cloud computing contracts could be incentivizing customers to consolidate
(20:34):
their use of cloud services to just one provider that
could further hasten consolidation. More generally, we looked at this
not just from the competition lens, but also from a
resiliency lens. I think we've all seen how when you
have extreme centralization that can also create a lot of
fragility where you have a single point of failure, right,
(20:56):
And we've seen how if a single data of a
center somewhere goes out, sometimes a corner of the Internet
also goes out. And so how do we make sure
we're also thinking about the resiliency element here. And then
they're kind of similar data security concerns as well that
we heard about.
Speaker 2 (21:29):
So you've been a nonmeditorializing here attacked I would describe
some of the clammiest men alive. A lot of people
in bench capital and within tech have come for you.
How do you deal with that? How's that affected you?
Speaker 1 (21:44):
So as a general matter, you know, I focus on
making sure we're hearing from Americans across the country. And
sometimes it's very easy in these jobs to actually become
very insulated and only hear from the people who have
access us to power or kind of know you know,
where to be ranting in a way that it gets
(22:05):
to public enforcers very easily. So it's really about just
making sure that you're keeping good perspective, keeping a broad
purview of who it is that we serve. So we've
done listening sessions across the country, for example, going to
places like Baraboo, Wisconsin or Aimes, Iowa, hearing from you know,
(22:27):
the gig drivers that use some of these ride sharing
platforms to understand what are they seeing, what is their experience.
We talk to a lot of farmers who are concerned
about the ability to repair their own tractors and why
there's been you know, increasing friction there and so keeping
just a broader set of voices in mind as we're
(22:48):
making our decisions, I think has been incredibly important to
just keep a north star that's properly focused on, you know,
the public as a whole, rather than a handful of
of well resourced, well connected individuals that can sometimes have
an outsized role in policy decisions.
Speaker 2 (23:09):
So what do you think, what are some of the
big wins? What the ones you're most proud of in
your time?
Speaker 1 (23:15):
Well, because of the FTC's work, Americans saw the cost
of inhalers go down from hundreds of dollars just just
thirty five dollars. In the digital space, you know, we've
really helped set new rules of the road. I mean,
one trend that we've seen is as more companies have
become reliant on service based revenues, they've introduced subscriptions and
(23:40):
become much more reliant on subscription revenue, and so we
see firms make it very easy to sign up for
a subscription, but then extraordinarily difficult to cancel. We brought
a whole bunch of lawsuits, including against Amazon, including against
Adobe for their illegal subscription practices that were awarding Americans
(24:01):
from being able to cancel in ways that resulted in people,
you know, overpaying for months and months. We had people
tell us the only way I could cancel my subscription
was to cancel my credit card, right, I mean, just
deeply anti anti consumer practices. We also finalized a rule
that will go into effect next year such that all
(24:21):
companies would have to make it as easy to cancel
a subscription as it is to sign up for one.
We've also been very active in taking on data brokers.
You know, there's been a wild wild West out there
and how people's personal information is bought and sold, and
we've brought a whole set of law enforcement actions when
data brokers are illegally using or collecting people's health data.
(24:45):
People's precise geolocation data, sensitive data like browsing data. Just
to make clear that the default assumption is not that
all of this sensitive data can be bought and sold
even if people have not affirmative given permission. We just
brought the other week two cases against significant data brokers
(25:06):
Mobile Walla and Gravy Analytics for some of their illegal
practices involving geolocation data. The Mobile Walla case was especially
interesting to my mind because it involved account about real
time bidding data, and there's been all this research suggesting
that the online auctions of real time bidding end up
exposing people sensitive data, and we brought a case noting
(25:30):
that that exposure could be you know, and companies using
the real time bidding data unlawfully is problematic. And so
those have been, you know, some of the advances that
we've made.
Speaker 2 (25:43):
So you were confirmed with broad bipartisan support. Jadie Vance
spoke fondly of you. Do you have hope that your
kind of your legacy continues in some level?
Speaker 1 (25:54):
Well, I can't predict what the future holds. I do
know that there has been strong bipartisan support for taking
on unchecked private power. That's true in technology markets. That's
been especially true when it involves people's privacy, when it
involves kids privacy. I think we've seen, you know, people
(26:14):
recognize that if you're freaked out by unlawful surveillance when
the government does it, you should also be freaked out
by surveillance when private companies do it, because the the
you know, the line there can be quite porous. And
so I do think there are a set of areas
where there is strong bipartisan concern and commitment to taking
(26:34):
on corporate law breaking, and so I hope that will continue.
Speaker 2 (26:39):
All right, One last question, So right now, I would
describe the mood is not great out. I think the
people are feeling a little dark. Feels like the ultra
wealthy are kind of gating speed and seeping into the government.
What would you tell people to give them hope?
Speaker 1 (26:53):
Ooof's a that's a tough one. I mean, you know,
I'm a patriot, you know, I really believe in America.
I think there have been moments before where the path
ahead was not clear. And one approach that I've taken
to this job is there are no inevitable outcomes, right,
be it in terms of how our markets evolve, be
(27:15):
it in terms of what our government does or doesn't do,
and how people in positions like at the FTC at
have huge consequences for you know, whether you have markets
that are premised on on check surveillance or whether you
can imagine people's data and privacy being protected right. There
can sometimes be an effort to say, well, there's just
(27:37):
this inevitable march of technological progress where outcomes are sort
of already baked, and I don't believe that. I think
how we use our laws, how we use our policies,
is incredibly important. A priority for me at the FTC
has been to engage with the public and that's partly
so that we hear from them, partly so that we
(27:57):
share with them what we're doing, but it's also to
me make sure that people know that they can hold
future people at the FTC accountable as well for what
decisions are not being made. So I think we've seen
you know that having a strong government that's focused on
protecting people is important and people should be expecting that.
Speaker 2 (28:18):
Lena, thank you so much for joining me. It's been
such a pleasure to have you. Thank you for doing this.
Speaker 1 (28:24):
Thanks so much.
Speaker 2 (28:26):
You've been listening to better Offline, Neil, You've got to
name my own podcast day. Lena Khan, Chair of the FTC,
thank you so much for listening. Everyone, Thank you for
listening to Better Offline. The editor and composer of the
Better Offline theme song is Matasowski. You can check out
(28:48):
more of his music and audio projects at Matasowski dot com,
M A T T O S O W s ki
dot com. You can email me at easy at Better
Offline dot com or visit offline dot com to find
more podcast links and of course, my newsletter. I also
really recommend you go to chat dot where'soead dot at
to visit the discord, and go to our slash Better
(29:09):
Offline to check out I'll Reddit. Thank you so much
for listening.
Speaker 1 (29:14):
Better Offline is a production of cool Zone Media. For
more from cool Zone Media, visit our website cool Zonemedia
dot com, or check us out on the iHeartRadio app,
Apple Podcasts, or wherever you get your podcasts.
Host
Ed Zitron
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