Freakonomics Radio Episode 625: "The Biden Policy That Trump Hasn’t Touched"

In Episode 625 of Freakonomics Radio, host Stephen Dubner engages in a deep and insightful conversation with Lina Khan, the former Chair of the Federal Trade Commission (FTC). This episode delves into Khan's influential work on antitrust policy, her tenure at the FTC, and the broader implications of her efforts to curb corporate consolidation and monopolistic practices in the United States.

1. Lina Khan’s Journey to the FTC

Background and Early Career

Lina Khan’s path to becoming the youngest FTC Chair in history began with her academic pursuits and early research. While still in law school, Khan authored a pivotal law review article titled "Amazon's Antitrust Paradox", which criticized Amazon’s monopolistic practices and highlighted significant gaps in existing antitrust enforcement. Her dedication to understanding market consolidation led her from the New America think tank’s Open Markets Group, where she meticulously documented consolidation across various industries, to influential roles in the House Judiciary Committee’s antitrust subcommittee and eventually to the FTC.

Notable Quote:

Lina Khan [03:14]: "If you tally up our wins and losses, we have done better than prior administrations, even while taking bigger shots and putting together more ambitious cases."

2. Evolution of Antitrust Policy

Historical Context

Khan provides a comprehensive overview of antitrust laws in the U.S., tracing their origins to the Sherman Antitrust Act of 1890 amidst the Industrial Revolution. She explains how early antitrust efforts aimed to curb railroad monopolies that exploited farmers and small businesses. Over time, especially from the 1970s onwards, antitrust enforcement shifted towards a more hands-off approach influenced by the Chicago School of Thought, which posited that markets would self-regulate and that monopolistic power was both rare and short-lived.

The Chicago School’s Influence

Khan critiques this paradigm, arguing that it underestimated the persistence of monopoly power and overestimated the market’s ability to self-correct. This shift led to significant consolidation across various sectors, undermining competition and harming consumers and smaller businesses.

Notable Quote:

Lina Khan [12:22]: "I think it was primarily driven by theories of how markets work that ended up being pretty divorced from the reality on the ground."

3. The Lina Khan Paradox

Retention of Merger Guidelines Under Trump

One of the most intriguing points discussed is the phenomenon dubbed the "Lina Khan paradox." Despite Lina Khan’s tenure under President Biden and her progressive stance on antitrust, the subsequent Trump administration chose to retain and embrace the Biden-era merger guidelines. This decision was unexpected, given the Trump administration’s general rollback of Biden’s policies.

Khan’s Perspective

Khan views this retention as a validation of her efforts, likening it to having her "house" survive a metaphorical tornado that dismantled others. She emphasizes that effective antitrust policy has garnered bipartisan support, allowing certain key policies to transcend administrative changes.

Notable Quote:

Lina Khan [03:48]: "You need to place more value on feedback and input that is actually tethered to reality and tethered to facts."

4. FTC’s Antitrust Actions Under Khan

Key Lawsuits and Merger Blocks

Khan recounts several significant actions taken by the FTC during her tenure:

• Amazon Lawsuit (2025): Khan, alongside 18 state attorneys general, sued Amazon for monopolistic practices, including anti-discounting measures and algorithmic price inflation through Project Nessie. The case is slated for trial in 2026.

• Sanofi-Maze Merger Block: Prevented Sanofi from acquiring Maze, a company developing a potentially transformative drug for Pompe disease, thereby ensuring continued innovation and patient access.

• John Deere Lawsuit: Addressed John Deere’s restrictive practices that limited farmers' ability to repair their equipment, increasing costs and delays.

• Pepsi and Pharmacy Benefit Managers (PBMs): Sued Pepsi for anti-competitive practices and challenged PBMs' rebating systems that inflated insulin prices.

• Inhaler Patenting Practices: Tackled illegal patenting of minor product components, resulting in reduced out-of-pocket costs for asthma inhalers.

Impact on Markets and Consumers

These actions not only curbed excessive corporate power but also promoted fair competition, benefiting startups, employees, and consumers by preventing price hikes and ensuring better product quality and innovation.

Notable Quote:

Lina Khan [33:54]: "Sanofi had a monopoly on a drug for Pompe disease... The FTC argued that if Sanofi bought out Maze, there was a real risk that Maze's innovative treatments either wouldn't make it to market or wouldn't make it to market as quickly."

5. Tackling Non-Compete Clauses

FTC’s Initiative to Ban Non-Competes

Khan highlights the FTC’s efforts to eliminate non-compete clauses that restrict workers’ ability to switch jobs, thereby deterring fair competition and suppressing wage growth. These clauses, once limited to high-level executives, have proliferated across various industries, affecting as many as one in five Americans.

Challenges and Legal Hurdles

Despite some successes, including the Prudential case where non-competes were successfully removed for security guards in Michigan, the broader initiative faced legal challenges in states like Texas, Pennsylvania, and Florida. These challenges have temporarily stalled the FTC’s rule, leaving existing non-competes largely intact.

Notable Quote:

Lina Khan [28:26]: "Non-compete clauses have proliferated across the economy... A conservative estimate is that as many as one in every five Americans have been covered by a non-compete clause."

6. Revamping Merger Guidelines

Goals and Process

Under Khan’s leadership, the FTC overhauled its merger guidelines to better reflect modern economic realities, particularly in digital and labor markets. The updated guidelines emphasize a more holistic assessment of mergers, considering long-term competitive effects rather than solely immediate price impacts.

Public and Industry Feedback

The revision process was notably inclusive, garnering thousands of public comments from diverse stakeholders, including healthcare workers, farmers, and small business owners. This contrasted with previous, more insular approaches to guideline formulation.

Deterrence and Enforcement

Khan asserts that the new guidelines have shifted how mergers are perceived by dealmakers, leading to increased caution and a decline in proposed mergers that might face stringent scrutiny. This shift underscores the guidelines’ role as a deterrent against anti-competitive consolidations.

Notable Quote:

Lina Khan [40:05]: "We wanted to make sure that these guidelines were up to date and reflecting the realities of the 21st century economy... We ended up getting thousands upon thousands of comments from the public."

7. Addressing Criticism and Internal Challenges

Managing Criticism

Khan acknowledges facing intense scrutiny from various ideological groups. Conservatives accused her of overreach, while some liberals felt her efforts lacked impact. She emphasizes the importance of distinguishing constructive feedback from baseless criticism, focusing on evidence-based policy-making.

Staff Morale and Agency Dynamics

With aspirations to reshape the FTC, Khan encountered resistance within the agency, leading to resignations and concerns about morale. She highlights the challenges of implementing significant changes in a politically influenced bureaucratic environment.

Notable Quote:

Lina Khan [53:11]: "Good faith, constructive engagement is always valuable, but you also have to be able to separate that from the hysteria."

8. Future Directions and Reflections

Post-FTC Plans

Having concluded her government service, Khan expresses a continued commitment to antitrust reform and ensuring competitive markets. She is returning to academia, teaching at Columbia Law School, and remains open to future opportunities to advance her mission.

Vision for Antitrust Enforcement

Khan envisions a robust antitrust framework that not only addresses traditional monopolies but also adapts to the complexities of modern digital and labor markets. She underscores the existential importance of these policies for maintaining democratic and economic integrity.

Notable Quote:

Lina Khan [62:16]: "I view the stakes here as being enormous, as being existential for our country. And I'm really committed to continuing to work on these issues and whatever opportunities I have."

9. Conclusion: The Legacy of Lina Khan’s FTC Tenure

Lina Khan’s tenure as FTC Chair marks a pivotal shift in U.S. antitrust policy, emphasizing proactive measures against corporate consolidation and advocating for fair competition across diverse industries. Her efforts have laid the groundwork for more resilient and equitable markets, reflecting a nuanced understanding of both historical contexts and contemporary economic challenges. As antitrust issues continue to evolve, Khan’s legacy serves as a benchmark for future enforcement and policy-making aimed at safeguarding competitive integrity and consumer welfare.

Final Quote:

Lina Khan [53:11]: "Good faith, constructive engagement is always valuable, but you also have to be able to separate that from the hysteria."

Takeaways

• Antitrust Reforms: Khan’s work redefines antitrust enforcement to address modern economic realities, particularly digital markets and labor practices.
• Merger Guidelines: Updated guidelines promote comprehensive analysis of mergers, deterring anti-competitive consolidations.
• Non-Competes: Efforts to curb non-compete clauses aim to enhance labor market flexibility and wage growth.
• Bipartisan Support: Despite political shifts, strong antitrust policies can garner bipartisan support, ensuring their longevity and effectiveness.
• Ongoing Challenges: Legal hurdles and internal agency dynamics present ongoing challenges to antitrust reforms.

This episode offers a compelling exploration of the intricate balance between regulating corporate power and fostering a dynamic, competitive economy, providing listeners with a deeper understanding of the forces shaping modern markets.