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After overseeing one of the largest settlements in FTC history, Lina Khan looks ahead

ANDREW LIMBONG, HOST:

For people who play video games, watch TV or, you know, use the internet, our next guest has a very important job. Lina Khan is the chairperson of the FTC, the Federal Trade Commission. And since taking on that job, I think it's fair to say she's changed the way many people look at the department, with its aggressive approach towards what it sees as unfair methods of competition, things like huge companies buying out smaller competitors. And since it's been a big year for mergers and acquisitions, particularly in the tech department, we've called Lina Khan to hear more about her work in this area and her vision for the FTC going forward. Chair Lina Khan, welcome to the program.

LINA KHAN: Great to be here.

LIMBONG: All right, so I want to get to the news about Fortnite and Epic and all that. But first, for people who aren't familiar with the department, what does your job entail?

KHAN: So the Federal Trade Commission's job is to stop unfair methods of competition and to stop unfair or deceptive practices in the marketplace. And what that means in general is we try to ensure that the economy is operating in a way that's fair and that consumers aren't getting harmed by illegal business practices. And so we do that through enforcing rules of fair competition, as well as strong consumer protections.

LIMBONG: So before arriving at the FTC, you were widely regarded for your writings on antitrust law - right? - and your fresh perspectives on monopoly power in the digital age. Now that you've got some time on the inside - right? - like, has your perception of the FTC and, like, its work changed since your time at the helm?

KHAN: One thing that's important to remember about the FTC is, you know, this is an agency that was created over a hundred years ago by Congress. It was created in 1914 against the backdrop of the robber barons and the industrial giants of that age. So you had the steel monopolies, monopolies in all sorts of sectors that had emerged that were, at that time, using their power in ways that Congress was very worried about. So this is an agency with an incredible history, an incredible legacy. I think, in a lot of ways, the agency's resources have not kept up. So basically, in 1980, there was a big gutting of our budget, and it really hasn't recovered since then.

So we have around 1,100 people that are really charged with being on the front lines of some of the biggest challenges and problems that are facing Americans. And so we don't have the resources, oftentimes, to go fully toe-to-toe with some of the biggest companies in the economy who are extremely powerful, extremely wealthy. And so I would say it can be somewhat of a David-and-Goliath dynamic. We're a small, little agency that's really punching above our weight because Congress has given us such an important job.

LIMBONG: All right, so let's talk about the video game industry for a second. You know, you saw one of the largest settlements in FTC history this week with Fortnite and Epic. It was 520 million for unwanted in-game purchases, as well as alleged violations of child privacy laws. I kind of want to focus on the child privacy issues because one of the main issues is children talking to adults - right? - causing all sorts of problems. But connecting through chat to other players has been, like, the bread and butter for so many online games, right? And I'm curious, what did Epic do with Fortnite that was particularly different or egregious, and what does it signal to other video game makers?

KHAN: When companies are actively directing their products or services at children or if those services are being used by children and they know, there are a set of privacy laws and privacy rules on the books that companies have to abide by. This is under the Children's Online Privacy Protection Act. And so that lays out certain types of requirements relating to needing to get parental consent, needing to, by default, have certain provisions in place. And Epic just ignored those outright. There were all sorts of privacy protections that they flouted. One result of that was that they effectively were enabling real-time communications with strangers online.

And so what we saw was that children were exposed to online bullying and blackmail and harassment, sometimes even sexual abuse, leading to significant trauma and even self-harm by kids and teens. So, you know, we took action against that this week, got a significant settlement and also have put in place important requirements that Epic must abide by to make sure that they're, by default, protecting children's privacy and the privacy of teens online.

LIMBONG: In response, Epic put out a statement. It reads, quote, "No developer creates a game with the intention of ending up here. The video game industry is a place of fast-moving innovation where players' expectations are high and new ideas are paramount. Statutes written decades ago don't specify how gaming ecosystems should operate." And I imagine you get this kind of pushback often - right? - from companies that want to innovate and merge with other companies for their bottom line. How do you respond to the argument that tech requires, like, innovation and acquisition to be dynamic and competitive?

KHAN: The FTC is entirely pro-innovation, and a lot of our work is about ensuring that companies are able to compete in a fair way that is really what's promoting innovation in the first place. I think we've seen all sorts of instances in which monopolies, once they become incumbents, are not incentivized to innovate in the same way. And so really it's about keeping the market open to new entry, to startups, to entrepreneurs. That's so important for innovation. And forcing the antitrust laws is really critical to that.

We also need to be very careful about, you know, what companies are describing as innovation. Sometimes it could be illegal practices, right? I mean, if you look back to the subprime mortgage crisis, when millions of Americans lost their homes, a lot of the financial tricks that the financial institutions had rolled out, what they were describing is innovation, right? So we need to be very careful and scrutinize what's really making sure that companies are innovating in legal ways through actually improving their business practices or actually providing Americans with products and services they want, rather than just refining their ways of deceiving people.

LIMBONG: Right now, you're the bit of a lawsuit to stop Meta from acquiring the virtual reality company Within. Meta head Mark Zuckerberg just testified in court this week arguing his side. You know - and I know you can't talk specifics. So I think people are used to seeing the FTC step in when, like, mergers happen - like, big established industries - right? - like, communications and video games. Now, VR is a relatively new world. And so why did you feel the need for the FTC to step in here?

KHAN: Yeah, can't talk about specifics about that lawsuit. I'll say, as a general matter, look, if you look back at history - right? - the moments when incumbent platforms feel most threatened is when there's new technology that could threaten to dislodge them. We saw this most recently when we saw the shift from desktop to mobile, where, for example, the Justice Department's lawsuit against Google notes that as the market was changing from desktop to mobile, Google felt threatened. And so it's those moments of technological transition when you see potentially new platforms emerging that offer both the most opportunity to inject real competition into the market with new upstarts, but also are most threatening to the incumbents. And that's where we, as enforcers, need to be most vigilant.

LIMBONG: Yeah. All right, so for 2023, what do you predict? What are you girding for? What are you looking at?

KHAN: So, look, we're going to continue building on all of this work. We are currently revising our merger guidelines. It sounds kind of technical, but it's basically the enforcement manual that lays out what mergers are illegal. We also recently clarified, as I mentioned, that we're going after unfair methods of competition. And so over the next year, you're going to see what that means in practice. One example that we've publicly shared is we're thinking about what we can do around non-compete clauses. So this is where companies require workers to sign away the right to leave for a better job, which can stifle not just a person's basic liberty and mobility, but also innovation and dynamism.

And we've also started issuing strong consumer protection rules so that we can get money back to consumers who were illegally defrauded or deceived. Shockingly, sometimes, even when companies have defrauded consumers, the FTC doesn't have the authority to actually get those consumers the money that was stolen from them. And so we started all sorts of rulemakings to make sure we can finally do that. So if they've been deceived by, say, false earning claims that a company is making or fake reviews online, we want to make sure that Americans are being made whole. So that's a whole set of work that we have already underway that we're looking to continue building on and finalizing this next year.

LIMBONG: Lina Khan is chair of the Federal Trade Commission. She's been in the role since June of last year. Before that, she was an associate professor of law at Columbia Law School. Chair Lina Khan, thank you so much for joining us.

KHAN: Thanks so much for having me. Transcript provided by NPR, Copyright NPR.

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