Freakonomics Radio - 625. The Biden Policy That Trump Hasn’t Touched

Episode Date: March 7, 2025

Lina Khan, the youngest F.T.C. chair in history, reset U.S. antitrust policy by thwarting mega-mergers and other monopolistic behavior. This earned her enemies in some places, and big fans in others ��� including the Trump administration. Stephen Dubner speaks with Khan about her tactics, her track record, and her future. SOURCES:Lina Khan, former commissioner of the Federal Trade Commission and professor of law at Columbia Law School. RESOURCES:"Merger Guidelines" (U.S. Department of Justice and the Federal Trade Commission, 2023)."The Rise of Market Power and the Macroeconomic Implications," by Jan De Loecker, Jan Eeckhout, and Gabriel Unger (National Bureau of Economic Research, 2019)."US Antitrust Law and Policy in Historical Perspective," by Laura Phillips Sawyer (Harvard Business School, 2019).The Curse of Bigness: Antitrust in the New Gilded Age, by Tim Wu (2018)."Amazon’s Antitrust Paradox," by Lina Khan (Yale Law Journal, 2017)."A Tempest In a Coffee Shop," by Tanya Mohn (New York Times, 2004). EXTRAS:"The Economics of Eyeglasses," by Freakonomics Radio (2024)."Should You Trust Private Equity to Take Care of Your Dog?" by Freakonomics Radio (2023)."Are Private Equity Firms Plundering the U.S. Economy?" by Freakonomics Radio (2023)."Is the U.S. Really Less Corrupt Than China — and How About Russia? (Update)" by Freakonomics Radio (2022).

Lena Kahn was just 32 years old when Joe Biden appointed her to lead the Federal Trade Commission in 2021. She became the youngest FTC chair in history, and this agency goes back to 1914. Kahn was also considered one of the most progressive chairs in FTC history. While she was still in law school, Kahn a journal article called Amazon's Anti-Trust Paradox, which went on to become famous and which painted a picture of capitalism gone wild where too many firms have become too big and too powerful, posing a threat not just to consumers and employees, but to the economy itself and maybe even to democracy.

One of the signature achievements of her FTC term, done in collaboration with the Department of Justice, was an updated set of the government's merger guidelines. This is a 50-page blueprint for pushing back against overconsolidation, for limiting both horizontal and vertical acquisitions, and for making the economy more resilient by reducing corporate power. These are ideas we have dug into repeatedly on Freakonomics Radio. We have done episodes about consolidation in the eyeglass industry, in the pet care and dialysis industries. We made an episode called Our Private Equity Firms Plundering the U.S. economy. Now with Donald Trump back in the White House, Lena Kahn is of course gone, replaced by a Republican chair, Andrew Ferguson, and the Trump administration has been moving quickly to undo or wipe out any number of Biden administration policies.

But not those merger guidelines. They are being retained and embraced by the Trump administration. Here's how one former Biden administration official put it to me. It's like being in your house when a tornado comes and wipes out everybody's house except for yours. You might call this the Lena Kahn paradox. And how does Kahn herself feel about this paradox? Based on the conversation you are about to hear, I would put it this way. When it comes to antitrust policy, Khan doesn't care who gets it done as long as it gets done. I view the stakes here as being existential for our country.

Today on Freakonomics Radio, we review Lena Khan's FTC track record. 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. And we talk about how to do good work in a world where bad behavior is often rewarded. You need to place more value on feedback and input that is actually tethered to reality and tethered to facts. Reality, facts, and more with former FTC chair Lena Kahn starting now. This is Freakonomics Radio, the podcast that explores the hidden side of everything with

your host, Stephen Dubner. My name is Lena Kahn, and until recently, I served as chair of the Federal Trade Commission. It's fun to say that, I would imagine, yes? Yeah. Can you just give us, in a nutshell, how you got here, there, in such a relatively short time? Yeah, happy to. It is a bit of an idiosyncratic path.

I spent a lot of time in undergrad, interested in journalism. I graduated right after the financial crisis. Journalism jobs were pretty hard to get. I ended up instead landing with a think tank and I worked with a group where my job was to research and document consolidation across markets. This was the open markets group at the New America think tank, yeah? That's right. I had to do these deep dives into all sorts of sectors, be it book publishing or airlines or all sorts of commodity markets. And I started to get a picture of decades of consolidation in market after market,

where we had gone from dozens of competitors to increasingly a small number of firms in each sector. My job was to both document that that had happened and also document what the effects had been. It's one of those things that in retrospect seems obvious, like yes, there's been so much consolidation in our economy, full stop. But at the time, I'm wondering if you felt like you were toiling in some forgotten corner of the economy, that stop. But at the time, I'm wondering if you felt like you were toiling in some forgotten corner of the economy, that this was something that people

weren't paying much attention to at the moment? That's right. This was around 2010, 2011. There was a national conversation around economic inequality more generally, but there was not any real conversation around industry consolidation or concentration. If you went to some type of social gathering and you said,

I research market consolidation and antitrust, people's eyes would tend to glaze over. So my job was to document consolidation and the effects of it. This really gave me a tour of all sorts of sectors across the U.S. economy. I spent a lot of time understanding how the chicken farming industry works today and learned that you have tens of thousands of chicken farmers on one side, millions of consumers on the other, and they're all connected by a very small number of these chicken processing companies. The effects of that and the big picture have been that consumers are paying more even as

farmers are earning less. That got me really interested in the antitrust laws, which were passed over a century ago, designed to keep markets open and competitive. I was really struck by how we had on the one hand a set of laws designed to keep markets open and competitive and yet on the other we had seen just wholesale consolidation and a drift away from markets that were open and competitive. And I was really intrigued by how this had happened. That in turn got me interested in the history of the antitrust laws.

I think most people pay a little bit of attention to what's going on in the world that they live in right now. Not a lot of attention, but a little bit of attention. And very few people read a lot of history. So we tend to respond to what's going on in the news, let's say, in anti-competitive practice, based on what we know about the last couple of years. Yeah, Facebook has gotten too big,

Google's gotten too big, and therefore X or Y needs to be done. But that's not a particularly fruitful way to look at the world. It's nice to have some historical and even philosophical underpinnings. So if you could just talk about a quick history of competition law and how people long before us saw it.

So at the federal level, the first antitrust laws traced back to 1890. This was when the Sherman Antitrust Act was passed. And it was passed against the backdrop of the Industrial Revolution, which had delivered transformative advances across the country,

but it also consolidated a lot of wealth and power. Some of those most affected by this consolidation were farmers and entrepreneurs and small proprietors, especially when it came to the railroads. The railroads had transformed the country. You could suddenly transport your wares nationally. Farmers and others had access to national markets. There were enormous benefits, but it also meant that farmers and others were extraordinarily dependent on a very small number of companies. Sometimes just a single company,

the railroad that controlled the rails going through their town. And farmers recognized that this concentration of power could be abused. You had the railroads effectively picking winners and losers and whether a farmer did well or whether his business sank could just be up to this single railroad. We have discriminatory pricing, arbitrary pricing. So a lot of the

frustrations that farmers felt ended up being channeled towards both the Interstate Commerce Act, which ended up regulating the railroads, as well as the Sherman Antitrust Act, which broadly prohibited certain forms of monopolization and illegal restraints of trade. Those laws were enforced, but it became clear pretty quickly that there were some major gaps so that in 1914 Congress passed two additional antitrust laws, the Clayton Antitrust Act, which prohibited mergers and acquisitions that may lessen competition, as well as the Federal Trade Commission Act, which created the FTC, prohibited unfair methods of competition more generally, and then you had over the decades different levels of activity in terms of vigor from the antitrust agencies, but broadly an approach

to competition that was very focused on wanting to make sure that the market was competitive from a more structural perspective. During the New Deal, you had these two different moments. At one point, a more hands-off approach. And then you had the second New Deal period, where enforcers really doubled down. And then starting in the late 70s and 80s, there was this wholesale revolution,

where we as a country radically reoriented how we were enforcing these laws that in good part led to this consolidation. That wholesale revolution you're referring to, that includes what antitrust people call the Chicago School of Thought, named for University of Chicago legal scholars, Robert Bork and Richard Posner, the economist, Aaron Director and others.

One person I spoke with who used to work with you made the note, and I'm curious if you think this is true, that your youth really served you well in thinking this through because rather than just accepting the current regulatory environment as it stood, you felt compelled to dig into that Chicago history. Can you walk me through what you saw there and how it shaped your thinking? When I started looking at what happened in the 70s and 80s, I was struck by just how radical it was. There were certain economic assumptions

that drove that change and certain ideological assumptions that drove it. There was a view that the best thing for the government to do was to get out of the way. The idea was monopoly power and market power in the economy is rare, but if it is ever to come about and if firms try to abuse their monopoly power, the theory went that that monopoly power would be disciplined by this rush of new entrants that would come

in and limit the ability of that monopolist to exercise its power. And so it was better for government to err on the side of under enforcement than over enforcement, which could chill innovation. Do you feel that was a legitimate expectation or it was a little bit of a fig leaf? I think it was primarily driven by theories of how markets work that ended up being pretty divorced from the reality on the ground. This hands-off approach assumed that markets were more likely to self-correct.

And that had bipartisan staying power. It was ushered in initially by the Reagan administration, but then continued by the Clinton administration and the Bush administration, and then in good continued by the Clinton administration and the Bush administration, and then in good part by the Obama administration. Unfortunately, the last 40 years have been a natural experiment premised on those theories, and now we have more and more empirical evidence that I think rebuts those. When you say that it rebuts those, can you put that in the form of more and more empirical evidence that what? That significant consolidation can result in market power, in monopoly power, that firms can exercise without it immediately

being disciplined in the market. And instead what you can have is persistent monopoly power that firms can use to charge people more, reduce innovation, reduce quality. There are papers looking at markups beyond marginal cost, finding that in the 80s, on average, it was around 20% the markup, and now it's as high as 60%. I think one of the theories that has been rebutted is this idea that monopoly power is rare in fleeting and if it does ever come to be exercised, it will be immediately corrected by the market.

It was a kind of multi-decade consensus. And that consensus started to break during the first Trump administration and then further during this last Biden administration. Okay, so that's the context for the antitrust climate you walked into. Let's back up. You're at the open markets think tank. You're finding out everything there is to know about the history of antitrust policy

and the poultry market, for instance. What happens then? I decided to both apply to law school and to apply to journalism jobs and ended up choosing between going to become a beat reporter at the Wall Street Journal or going to law school and to apply to journalism jobs and ended up choosing between going to become a beat reporter at the Wall Street Journal or going to law school, ended up going to law school and really tried to structure my time there by taking classes focused on the areas of the law that are shaping and structuring corporate power.

That includes antitrust, but it also includes things like trade law or even First Amendment law, which firms had increasingly been using to try to strike down regulations. While I was in law school, I ended up using some of the research I had done around e-commerce and Amazon to write a law review article using Amazon as a vehicle to tell a broader story about the shift in antitrust law, ended up publishing that, and there was a broader conversation around all of these issues. When you say there was a broader conversation, the conversation is mostly around your paper.

To me, it seemed like you're a, let's say, beginning-of-career singer-songwriter, and your first song becomes the world's biggest hit. This was your paper, Amazon's Anti-Trust Paradox. And it catapulted you and this idea, really, onto the global stage. That's at least my outside perspective. What's the inside perspective? You know, I had just been in law school trying to get this paper out. I was impressed and surprised that anybody was reading it,

let alone that it had caught some broader attention. But the background conversation was a growing recognition of the fact that market after market had become so much more consolidated and that antitrust was in need of a reboot. The abstract alone is fascinating. I'll just read one sentence back to you. In addition to being a retailer, Amazon is now a marketing platform, a delivery and logistics network, a payment service, a credit lender, an auction house, major book publisher.

It goes on and on and on and on. Elements of the firm's structure and conduct pose anti-competitive concerns, yet it has escaped anti-trust scrutiny. Is that the paradox of your title, that it's acting like a monopoly but escaping the scrutiny Yes, that is one of the paradoxes To further add to that there's a line in the paper that talks about how Amazon has actually Marched towards becoming a monopoly by singing the tune of contemporary antitrust It wasn't just that it had escaped scrutiny, but it had actually

pursued its strategy in a way that was landing squarely in the very blind spots that had emerged in antitrust. What do you mean by those blind spots? And I'm curious how that was accomplished. Was that just Jeff Bezos and his leadership being very, very good at corporate strategy, or was it more than that? I can't speak to what they were specifically thinking, but one of the reorientations of antitrust had become where enforcers would primarily

look to whether a firm was charging more or reducing output as the metric for understanding whether there was harm in antitrust terms. Amazon, at least rhetorically, its strategy was very much focused around doing what's best for the consumer. When enforcers were looking at that through just a short-term lens, I argued that they were missing some of the broader harms that were emerging. Okay. So your Amazon paper clearly struck a deep chord.

But how did you go from being a law student, admittedly a high-profile law student, to being chair of the FTC? After law school, I spent some time doing more research and writing, was set to clerk for a federal judge. And then a few months before my clerkship was supposed to start, the judge I was supposed to clerk for ended up passing away.

Who was that? Judge Reinhart in the Ninth Circuit., the judge I was supposed to clerk for ended up passing away. Who was that? Judge Reinhart in the Ninth Circuit. So then I reshuffled my plans, ended up going to work for a Federal Trade Commissioner Rohit Chopra, and then ended up going to work for the House Judiciary Committee's Subcommittee on Antitrust, which was looking to start an investigation into the large technology companies, including Facebook, Amazon, Apple, and Google. I became part of a very small team tasked with crafting a congressional investigation. So we did an 18-month investigation, ended up publishing a report, summarizing our findings,

and issuing a set of recommendations for how to make sure that these digital markets are competitive. After that, I was going back to academia and then had the great honor of being nominated to serve at the FTC. Coming up after the break, Lena Kahn puts her Amazon research to work. I'm Stephen Dubner. This is Freakonomics Radio. We'll be right back.

When she was a law student at Yale, Lena Kahn wrote what would become one of the most famous law review articles of the current century. It accused Amazon of using novel forms of monopolistic practice, including deliberately underpricing its goods and services with the goal of becoming an e-commerce behemoth, a goal that Amazon has achieved. Okay, while you were running the FTC, you and 18 state attorneys general in Puerto Rico sued Amazon over monopolistic practices. There is a trial scheduled to start in 2026. I'd like you to take us full circle from writing the Amazon antitrust paradox paper in law school to now having brought this suit

and waiting for the trial to begin. To state the obvious, writing a law school paper is very different than being a law enforcer. Especially in digital markets, you can see a monopoly lifecycle, where the set of tactics that a platform is pursuing in the early stages, when it's looking to scale and achieve monopoly power, will look different than the tactics that it is deploying

once it has achieved that monopoly status, has locked out its rivals, and then is in extraction mode where it's now able to exploit that monopoly power. My law review article was around the first stage and the lawsuit ended up focusing on the practices of the second stage. The lawsuit basically alleges that Amazon, after itself achieving scale, ended up in

a very concerted way pursuing tactics designed to deprive other companies of similarly enjoying that scale that you need to really compete in online commerce. It did this in a few ways. One was it engaged in what we call anti-discounting practices, where Amazon would basically punish any business that listed its goods for a lower price on other platforms. And it was doing this even as Amazon was steadily increasing how much it charges sellers to sell on Amazon.

Amazon takes as much as one out of every $2 from some of the sellers that rely on Amazon. Even as it is increasing prices for sellers, it punishes those sellers for listing goods for a lower price, even on platforms that are taking a smaller cut. We argue that this basically inflates prices across the internet. We also allege that Amazon illegally conditions access to certain prime badge services on

sellers using its fulfillment services and that that has certain anti-competitive effects. And then we also allege that Amazon used this algorithm called Project Nessie that also inflated prices across the internet. Nessie as in Loch Ness Monster? Yes, exactly. Why was it called that, you know? We don't know. We can only speculate. And would you care to predict the outcome of the Amazon trial?

Well, look, the trial is slated to go forward. It is going to trial because the FTC defeated Amazon's efforts to dismiss the case. We got a resounding win where the judge said all of these counts are plausible. I feel very optimistic, but we'll have to wait and see. What do you think Amazon looks like in 20 years? It's hard to say. Part of that answer will depend on what happens with this litigation. So the Amazon case has thus far been a win for you in the FTC, but there were losses as well.

One legal scholar that I spoke with noted that a lot of your lawsuits were just seen as unlikely to succeed in the courts and wondered when is it legitimate to bring a lawsuit that doesn't have a great chance of succeeding and whether that's an attempt to influence the law as opposed to carry out a successful prosecution. Look, we ended up having resounding success in the courts, including with cases that had not been brought previously. If you tally up our wins and losses, we actually have done better than prior administrations, even while taking bigger shots

and putting together more ambitious cases. Sometimes there can be analyses that are not actually matching the facts of what happened. We only filed cases where we thought there was a law violation and where the facts matched it, but we also brought cases that were responding to the harms in the modern economy. One trend that we've seen in various sectors is this issue of private equity rollups or serial acquisitions, where firms will make a whole series of acquisitions, each one of

which may be small or fly beneath the radar, but in the aggregate, they may have still rolled up a market and then inflated prices. That's something that's been happening in our economy for some time and antitrust enforcers had not addressed it. We ended up filing a lawsuit, taking on some of these roll-ups in anesthesiology and ended up having a successful case there.

We also defeated the company's motion to dismiss that's going to trial. We ended up successfully blocking dozens of mergers, including getting litigated wins, including in instances where enforcers in the past candidly had failed to stop some of this consolidation. We succeeded in blocking the Kroger Albertsons merger, which would have been the largest supermarket deal in US history, despite there being a fix that the companies had proposed.

Previously, enforcers had allowed some of those big grocery deals to go through, and the public had really lost out. Let's talk about the work you did on non-competes. These are the employment clauses that might forbid an employee from leaving one company to work for another in the same industry, for instance. And I realize it didn't have the happy ending you were looking for, but I'd love you to walk us through it so people can understand both the scope of what you identify as the

problem and what you see as remedies. Non-compete clauses have proliferated across the economy. They started off in the boardroom, but have now expanded to cover janitors, security guards, fast food workers, gardeners, journalists, health care workers. A conservative estimate is that as many as one in every five Americans have been covered by a non-compete clause. And these clauses can really have a devastating effect on people's lives.

Materially, they can depress income, not just for the workers that are directly covered by a non-compete, but actually for workers as a whole. The idea being that if a worker is not able to change jobs, there is less opportunity and churn in labor markets as a whole in ways that can deprive even those workers that don't have a non-compete from opportunities, and that overall can really have a depressive effect on wages and income. After we put out a proposal to ban non-competes, we got 26,000 comments from people across the country, which was really striking. I mean, people live busy lives, people are not necessarily gonna prioritize sitting down and submitting a comment to some obscure federal agency.

But it was clear that people felt very strongly about non-competes. And we heard some devastating stories about just how these had affected people's lives. So, I have two very basic questions about it. Number one, once you get beyond the top tier employees, right, I don't want my chief blank officer going to a rival firm. I understand that. Or I don't want people with trade secrets leaving my firm and potentially going to a rival firm. I understand that. Or I don't want people with trade secrets leaving my firm and potentially going to a rival firm. Those I understand.

But beyond that, all the other people that you just named, what is the reasoning for why a non-compete would even be considered worthwhile? And then how can it be legal? The motivation question is a good one for the businesses that are imposing these non-compete clauses. Some of the arguments that get made at a high level

is that these non-competes are, in theory, necessary to make sure employees are not divulging trade secrets or that employers need these non-competes to give them an incentive to train their employees. A lot of those arguments will lose their force entirely when you're talking about certain categories of workers. But even for higher income workers, we have trade secrets laws. For the vast majority of American workers, there is no good justification for these non-compete

clauses. So that gets quickly to the second part, which is how did it become legal to enact these non-compete so broadly? Well, I would argue, and the FTC argued, that it is not legal. We brought some enforcement actions, including one case where you had security guards making close to minimum wage.

The security guards were based in Michigan. Under Michigan state law, these non-competes were actually illegal. But the firms still had them in place and still tried to enforce them. We had to basically sue to make sure these non-competes got dropped. Even in states where these non-competes, in theory, are not enforceable, firms take a shot. Oftentimes, workers, their rights are chilled because they may not know that these non-competes are not enforceable and who's going to really want to go up against their employer and risk

being thousands of dollars out of money. In the case of the security guards, Prudential was the name of that firm? That's right. What was the ultimate outcome of that case? So we ended up bringing in enforcement action. We ended up getting an order that required the company to drop its non-compete clauses with the vast majority of the security guards. And so thousands of people were freed from non-compete.

So that's a small victory, but the larger effort has been so far a defeat for you, correct? It's more of a mixed picture. After we finalized the rule, we got three legal challenges, one filed in Texas, one filed in Pennsylvania, and one filed in Florida. Each of those legal challenges came out a slightly different way. The judge in Pennsylvania said the FTC's rule was lawful. The judge in Texas said it was unlawful. And the judge in Florida came out somewhere in between. The FTC, when I was still at the agency,

ended up appealing both the case in Texas and Florida. We're going to have to wait to see what happens, though. You're right that for the time being, the rule is not in effect. Unfortunately, non-competes are still in place right now. So one big function of the FTC is plainly policing but also when it comes to your antitrust activity an implicit argument is that cracking down on monopolistic behavior, cracking down on non-competes also is good for competition and it's good for the

markets. Good markets theoretically benefit a lot of people, startup firms and employees, consumers. In other words, competition is seen, at least by economists, as win-win-win. So what's your best evidence that your work has actually produced these kinds of victories? I can give you a couple of examples. One is a specific merger that we blocked. This was the Sanofi-Maze transaction. Sanofi had a monopoly on a drug for Pompe disease, this really horrible illness that

leads to muscles atrophying. Maze was this upstart that was in the process of developing another treatment for Pompe disease. Unlike Sanofi's treatment that required regular IV shots, Maze was working on something that could be taken orally. It had the potential for dramatically improving the lives of Pompe disease patients. 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. Because here you have a situation where Sanofi is already enjoying monopoly profits on this drug. We worried that it wouldn't have the incentives to introduce another drug that would cannibalize its existing sales. So we filed a lawsuit seeking to block this acquisition, arguing that it would allow Sanofi to illegally monopolize this area. And the companies ended up walking away from the deal. Mays ended up then partnering with another firm that ended up having as good, if not better, terms for Mays and will actually bring that drug to market even more quickly.

This is a Japanese firm, yeah? That's right. So I think that was proof of concept of the FTC's work getting it right. I think more generally the non-competes that ended up being dropped because of the FTC's work, that means there are thousands of workers that are now free to go start their own business or freely switch employers. The mergers that we blocked, including in the context of Nvidia Arm, ended up leading to a lot of independent success for both Nvidia and Arm in ways that also has boosted innovation, especially at a critical moment for a lot of these artificial intelligence technologies.

We've also filed a whole set of other lawsuits, including one against John Deere for illegally restricting farmers' ability to repair their own tractors and agricultural equipment, which is something we heard a lot of concern about from farmers. When they're entirely dependent on John Deere for getting their agricultural equipment fixed, it can both inflate their costs as well as lead to all sorts of devastating delays. We also filed a lawsuit against Pepsi, arguing that it was engaging in illegal discrimination in ways that was squeezing independent grocers. We filed a lawsuit against the three big pharmacy benefit managers, claiming that the rebating

practices they have in place have systematically hiked the cost of insulin, as well as other drugs. And then we more generally took on these illegal patenting practices, where firms would illegally list patents for certain products and components of devices, including things like the plastic cap on an inhaler. Asthma inhalers out of pocket costs have been hundreds of dollars, even though asthma inhalers have been around for decades. Once we called out some of these illegal patenting practices, three of the four big inhaler manufacturers announced that they would drop the out of pocket costs to $35.

And what happened to the share prices of those firms? You know, that's a good question. I don't remember right off the bat. They didn't go out of business though. No, I think they have a lot of other lucrative lines of revenue. Can you talk a bit more about the price of insulin? The FTC's lawsuit was actually about the market as a whole, where we found that basically these pharmacy benefit managers engaging what are known as

these rebating practices, where drug manufacturers have to pay these PBMs a rebate to get their drugs listed on what's known as the formulary. We allege that the way the PBMs have structured this whole system means that the drug companies are incentivized to ultimately raise the cost of insulin rather than compete by lowering it, and that this as a whole is inflating the cost. We did a series on private equity consolidation in the pet care industry,

and we found a lot of problems there for employees and consumers, but we also learned something that seems to apply to a lot of the human healthcare industry. If you look at nursing homes, doctors' offices, dentist's offices, what we heard is that the founders of these offices and companies, when it's time to retire, they might prefer to sell to one of their junior partners. That's what often happened before private equity was around.

But now those junior partners have so much debt from medical school or veterinary school or whatever that they can't afford to buy the practice. So the only likely buyer is an outside investor like a private equity firm. The PE firm is satisfying a real need there, but the resulting roll-ups or consolidations are often worse for existing employees

and worse for consumers. Do you have any thoughts for how that might work differently? It's a really good point and I think highlights how antitrust and competition policy have a really important role to play, but there are all sorts of other economic policy decisions that are going to affect, for example, whether the junior partner even has the ability to make that acquisition that we need to be paying attention to as well. The other thing I'll note is there are all sorts of different types of private equity business models, but it is true that one model has been the leverage buyout where a private

equity firm is using the assets of the company they're buying as collateral, loading up that company with a lot of debt. Sometimes there's the 70-30 model where the private equity firm is making 30% of the investment and then using the balance sheet of the underlying company and taking on a lot of debt. That can weaken the underlying firm but also incentivize the private equity owner to make a lot of short-term extractions and engineer a lot of short-term returns in ways that can undermine the quality of the business as a whole. For example, we got some submissions from ER doctors. Emergency Medicine is a place where we've

seen a lot of private equity incursion. They mentioned that there are all sorts of financial metrics introduced into their work. I remember hearing from one ER doctor that he was sitting with a parent who had just lost their kid, and this ER doctor having to think that he didn't even have the time to commiserate with this parent because he felt such significant financial pressure to meet this quota.

If the government is concerned about over consolidation in those kind of spaces, right, healthcare, whether human, animal, whatever, would it be viable to consider something like low interest loans to junior partners to help keep firms a smaller size rather than succumb to the one possible sellout outcome, which is to a bigger investment firm like private equity? That's a really interesting idea and not something I've heard proposed before. I could imagine it could make a difference. Let's talk for a minute about the merger guidelines released by the FTC under your watch.

Just start with the process, maybe the idea or the theory, and then the drafting. What were you hoping to accomplish and why did you think it was important? The merger guidelines can sound like this arcane document, but the core of it is a roadmap for how enforcers review and assess mergers that are before them. There have been guidelines going back to 1968, and periodically these have been updated. We undertook a process starting in late 2021 to revise these merger guidelines with a couple of goals in mind.

First was wanting to make sure that these guidelines were actually reflecting the law. We had seen that in some prior instances, enforcers had actually handicapped themselves and written guidelines with very cramped or sometimes just inaccurate expressions of what the law really was, which we thought was not being faithful to Congress or the courts.

We also wanted to make sure these guidelines were up to date and reflecting the realities of the 21st century economy. We wanted to make sure they were addressing things like digital markets and platforms. We wanted to make sure they were addressing labor markets, which had been a big blind spot in the past, and issues like serial acquisitions. And then we wanted to make sure that we were hearing from a broad set of market participants. Antitrust in recent decades has been quite insular.

You'll hear from very smart and accomplished experts, but the broader public as a whole has often been neglected. We wanted to change that and ended up getting thousands upon thousands of comments from the public. A lot of healthcare workers participated, including doctors, nurses, people who had seen their field and their practice change based on increasing consolidation. We heard from farmers, we heard from musicians, heard from teachers, ordinary Americans who don't spend their days practicing antitrust law, but whose life has shown them that whether markets are

extremely consolidated and monopolized or whether they're open and competitive makes a real difference. What about from the industry side? The draft of the merger guidelines was open to them as well. It sounds like you're saying most of the public sentiment was saying, yes, we would like stronger guidelines. What about from industry though? Industry spans a broad set of market actors.

We heard from a lot of small businesses, including independent pharmacists, independent grocers. We heard a lot from entrepreneurs and startups and founders who have seen that when you have these big gatekeepers that can shut them out of the market, that can have real problems. So even within industry and the business community, we heard a lot of interest in favor of stronger antitrust. Of course, we did also hear from existing monopolists and incumbents and dominant

firms who would prefer that antitrust enforcement be quite weak. I assume that the goal of these merger guidelines is to act as a deterrent against some mergers that might be seen later as anti-competitive. Assuming that is true, how do you measure the effect of deterrence? The goal of the guidelines is really to provide clarity to the public about how it is that enforcers will look at mergers and analyze them. On the deterrence question, of course, as a law enforcer, you don't want illegal behavior to occur in the first instance. So if through that type of guidance, you are deterring illegal mergers, that is a net good.

In terms of how you measure deterrence, it's a good question. I don't think it's a precise science, but over the years when I was serving at the FTC, we got some data points like what senior deal makers would be saying around how several years ago when they were counseling clients, they wouldn't really talk about antitrust until the very, very end of the discussion.

Whereas over the last couple of years, antitrust was upfront and center right at the beginning. We also heard from deal makers and senior executives about how certain deals that were initially being discussed ended up not being proposed because there was a recognition that the legal risk was too high. We also saw deals where once they were proposed and the FTC started investigating, the firms ended up abandoning. There was a practice in the past where firms sometimes recognized that there was significant legal risk, but would kind of roll the dice and say,

well, maybe enforcers will look the other way or maybe they'll miss it. Once we started taking a closer look and a more stringent approach, some of those deals abandoned as well. So if you read the Wall Street Journal editorial pages, these merger guidelines are an attack on the free markets. There's been a lot of criticism on that front. Mark Andreessen, the very prominent venture capitalist, he said when Trump was reelected, it was like, quote, getting a boot off the throat for people like him, for people in the tech and business sectors.

I gather that you're the person wearing that boot in the Andreessen comment? What we heard from startups and founders was that they wanted a chance to compete. When you have markets where the only option is to be bought up, that's not giving founders the opportunity to really scale organically. I think the story is a bit more textured here. We've learned recently that the merger guidelines put out on your watch will be retained by the Trump administration. Are you surprised by that? I personally am not that surprised, in part because issues around antitrust and anti-monopoly

have had a strong bipartisan current in recent years. Some of the initial lawsuits that were filed against large technology companies including Facebook and Google actually were initiated during the first Trump administration. I know JD Vance is a fan of yours. He recently said, I look at Lena Conn as one of the few people in the Biden administration I actually think is doing a pretty good job. Considering how much Biden administration work has already been undone by the Trump administration, I wonder what it feels like for you to have one of your signature

policies continue under Trump. It's too early to say what the big picture is going to look like in terms of whether we're going to continue to see strong enforcement. Of course, seeing other law enforcers be dismantled, including the Consumer Financial Protection Bureau is quite troubling. But of course, the fact that at this stage, it's clear there is bipartisan support for strong merger guidelines that's going to protect more Americans from consolidation and monopolization.

I think we can have some cautious optimism on that small front, even as we're going to have to wait and see what happens more generally. You once wrote that your hobbies include, quote, trying to find the most obscure industry where I can find consolidation. Can you name some industries that we may not think of as heavily consolidated, but are? Oh, that's a good question. One industry that I actually came to learn about, it was a market for basically ugly produce.

I don't know how else to put it. Produce that is seen as not being attractive enough for supermarket shelves. And then it gets sent off to certain other markets. And I remember there was a merger being reviewed that was focused on that market that actually was more consolidated than I expected. Lena Khan's example here, a consolidated market in ugly produce, points to a larger philosophical argument about how the U.S. economy should work.

Just about every economist agrees that consolidation above a certain level can be a big problem. The history of our economy includes a long line of creators and innovators, operators and aggregators who through their grit and savvy cornered markets or created monopolies. Some of these companies were intensely exploitative, but they were also helping create what would become perhaps the most dynamic economy in the history of the world. And this dynamic capitalism has helped produce huge gains for many people over the years. It's hardly perfect. Everybody knows that. And over-consolidation is one big flaw. But how do you dampen the appetite for domination while keeping alive the incentives to create?

How do you encourage people to keep risking their time and money and brain power if they're punished for winning too big? If someone comes up with a clever idea, like buying up ugly produce and building a market around it, and they come to dominate that market, is that reason alone to break them up? That is essentially the same question Google is facing in court right now. So where is the appropriate middle ground? After the break, we will try to find it. Constructive engagement is always valuable, but you also have to be able to separate that from some of the hysteria.

I'm Stephen Dubner. This is Freakonomics Radio. We'll be right back. Lena Kahn had plenty of critics during her tenure as FTC chair from a variety of ideological camps. Some conservatives accused her of overreach. Some liberals said she was more bark than bite. But there is one thing about her that just about everyone agrees on. She is a serious person who eats, sleeps, and breathes antitrust reform. She has been fixated on corporate power since she was at least a high school sophomore. In 2004, she wrote an article for her school newspaper about a nearby Starbucks that wouldn't allow students to congregate. The New York Times followed up her article with one of their own called A Tempest in a Coffee Shop.

I asked Khan if she could identify where this crusading spirit of hers comes from. I think from a young age, I was really struck by journalists and the efforts that they undertake to hold power to account, both powerful corporations as well as powerful actors in government, especially growing up after September 11th and seeing the incredible important role that journalists were playing then really made a big impression on me. You have been praised in some quarters for your work at the FTC, but also attacked. And I would argue the attacks were much more intense than is typical for the FTC chair. How do you manage the criticism? Do you try to seek out criticism that has value and try to learn from it and sort that

out from the rest that's just noise? Do you not pay attention to any of it? You know, I'm a public servant, I serve the public. So it's absolutely important for me to be soliciting and getting feedback and input and understanding what the public response is. But of course you need to place more value on feedback and input that is actually tethered to reality and tethered to facts. Good faith constructive engagement is always valuable, but you also have to be able to separate that from the hysteria.

Where does the Wall Street Journal editorial page sit on the tethered to facts spectrum? I was surprised sometimes by just the factual errors. I think it does go back to this basic issue of economic reality versus theoretical assumptions that are just out of date. Although I will say this, one critic of yours, this is an academic who doesn't like your work very much, he works in the antitrust space. He made the argument that your work is almost universally, in his view, ideological and not empirical. How would you respond to that? I think the fact that this work has gotten so much traction so quickly was entirely because it was on the side of reality.

The antitrust enforcement model that had been followed for 40 years had failed to keep markets open and fair and competitive. And so it was really empiricism that drove this work forward. What kind of a boss are you? I'm told you're not the let's all grab a beer after work kind of boss. Any particular aspect of that that you're interested in? Some people complained about your leadership style. People said there was low morale at the FTC during your tenure. There were a lot of resignations. I'm also aware that when you're a political appointee coming into an agency like this

and you try to do things quite differently, there's going to be friction. Looking back now after four years, if you could start again, would you approach your management style any differently? Well, let me say first of all, the FTC is really fortunate to have extraordinarily hardworking, talented career civil servants that are being pitted up against some of the largest, most powerful companies in our country.

My hat's off to them in terms of the grit and commitment that they bring every day. Stepping back, my arrival, understandably, I think, was received by some as some type of indictment of the agency. I had been on the outside a critic of the FTC, arguing that both the FTC and the DOJ had gotten things wrong, had taken decisions that ended up resulting in real harm to the American people. Those criticisms were really directed at political leadership, the people that are calling the shots.

Understandably, there was some questioning about what my criticisms were really about. This was also a moment where you had the president say that the last 40 years of competition policy had gone astray. So these are people who were saying, look, I've been doing my job every day as a dedicated civil servant, and now I'm being told that I've been doing it all wrong. It sounds as though you're coming into an agency that had operated under a sort of political ideology, a consistent political ideology for let's call it 40 years. Does an agency like that therefore attract civil servants

who jibe with that ideology? In other words, did you take over an agency that was staffed quite robustly by a bunch of people who really liked the Reagan and the Bork and the Chicago School of Thinking? Well, there are all sorts of different factors that drive people to public service. For the most part,

they want to serve their fellow Americans. It was more about the antitrust enterprise as a whole, the ways that the law had drifted, what type of analysis the law was privileging, rather than any specific person or groups of people. Were there particular quadrants of the FTC that you bulked up on or tried to slim down? We wanted, first of all, just to make sure we had the teams that we needed to pursue some of these litigations. I mean, the agency was actually smaller than it had been in the 1970s, especially when we got a budget increase.

We did hire more people, including very talented litigators. We also wanted to make sure that the way we were looking at markets was actually reflecting the reality on the ground. And that meant broadening the type of skill sets that we had. We were not just hiring industrial organization economists, but also labor economists, accountants, people who had slightly different skill sets that would be able to give us a more 360 view. We also started a new office of technologists, wanting to make sure that we had data scientists and data engineers and AI experts, especially as more and more markets digitize.

We need people who can sit alongside the economists and the lawyers and explain how are these algorithms actually working. What share of this new wave of FTC employees would you say will still be there a month or a year from now? It's hard to know. Obviously, across government, there's

a lot of disruptive efforts right now that are resulting in a lot of people being laid off and let go. So it's too early to say. I will say the new administration has talked a lot about the importance of making sure our technology markets and digital markets are open and fair and competitive. If you are gutting the FTC by eliminating technologists and eliminating the litigating teams that are supposed to be pursuing these cases, that's gonna really handicap your ability. What was your favorite thing about working in government?

I really loved getting to hear from people who had an issue that they thought the FTC should be focusing on. I had the chance to do a lot of listening sessions across the country. I went to Ames, Iowa to hear from farmers that were worried about this particular fertilizer merger, heard from pharmacists in Kansas City. Those types of engagements were really important in keeping me focused and underscoring the ways that seemingly arcane agencies like the FTC have a lot of opportunity to make a real difference in people's lives.

What are some of your least favorite things about working in government? Sometimes it can take longer to get things done than is optimal. We certainly streamlined certain processes and tried to eliminate red tape, but I think there's just more of that that could be done. Of course, there's a lot of baked-in pushback from monopolists and dominant firms. I'm curious to know your thoughts on the choice of Kamala Harris as the candidate with no outside competition after Biden withdrew. I mean, doesn't it feel that that was handled in a similar way to some of the

anti-competitive cronyism that you're fighting? I have zero comparative advantage in terms of weighing in on this. I'm kind of a policy nerd, but I don't really have much to add when it comes to some of the political analysis here. I don't know if you're familiar with the work of the political scientist Yuanyuan Ong, she's at Johns Hopkins, and she studies political corruption. She makes the argument that countries like China and Russia have significant levels of corruption in forms that to an American seem patently illegal, suitcases full of cash and no bid contracts, things like that.

But she argues that political corruption in the US is also very significant. It's just that it's essentially legal corruption in the form of corporate capture of government. I'm curious to hear your thoughts on corporate capture and how serious you think that problem is. Americans certainly worry that government is not always serving their best interests because large corporations have too much influence.

We see that concern expressed in all sorts of ways, including concern about the role of money in elections. But I think there are all sorts of subtle ways beyond just how much money large, wealthy entities can pour into elections, intellectual capture can occur. We see it through a lot of the funding of research, and then what kinds of research is even made available to regulators and enforcers. There can be all sorts of ways that the information environment in which

enforcers and regulators are operating is already skewed by those well-heeled interests. So, Lena, your life has already had this amazing arc with a lot of accomplishment and drama. It feels like enough to write a book about, maybe an opera, but you're still very young. So let's assume that your life to date is Act One of that opera. What do you want the second and third acts to look like? I'm still just processing the last few years. I ended my government service at the end of January.

So really just focused on the near term for now. But I care deeply about wanting to make sure that markets in America are open and fair and competitive. This is important for people materially, but these issues also go to the core values of our country. The lawmakers who initially passed the antitrust laws viewed them as being a key safeguard against the concentration of power. That in the same way we needed checks and balances in our government to protect against the exercise of arbitrary power, there was a view that the antitrust and anti-monopoly

laws would play a similar role in our economic and commercial sphere. So 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 opportunity I have. I understand you're back teaching at Columbia now, at least for this semester, is that right? Yeah, exactly. I had been on leave and I'm back at the law school. Do you have any concrete items on your wish list? Does policy and politics remain toward the top of that list or something quite different perhaps?

For now, just continuing to build out this work, there is a lot of enthusiasm and interest among law students and young people in general. Of course, it was a great honor to serve. And if there was another opportunity, that's of course, something I would be open to. If president Trump had asked you to stay on, I realize that may sound unlikely to a lot of people hearing this,

but the more they know about you and your work and how the Trump administration thinks about your work, it's actually maybe not so unlikely, but would you have stayed under Trump? I mean, you know, that was a hypothetical, but my term ended up expiring in September. President Trump ended up nominating somebody new to fill my seat.

So I, you know, had a great time getting to work alongside Andrew Ferguson when he was a commissioner and I was chair. And I do think it's important for people to serve. And the FTC historically has had bipartisan commissioners that have continued to serve across administrations. I see that Bernie Sanders has embarked on what he calls a national tour to fight oligarchy. He's drawing pretty big crowds, a lot of enthusiasm. I'm curious if he has asked you to put in an appearance and if you would, if you were asked? I'm a great admirer of Senator Sanders.

He was a strong supporter of the FTC's work. There's a real concern that very well-heeled interests in this country are wielding enormous, not just economic power, but political power. And the antitrust and anti-monopoly laws were supposed to be a bulwark against that. I leave it to the elected officials to do what they do best. But of course, I'm happy to support that work however I can. When I hear you mention Ames, Iowa, I cannot help but think that perhaps you might have aspirations of being elected to office one day. Is that the case? No.

That's a flat no. No, I've really enjoyed being a bureaucrat. It's always good to speak with someone who enjoys being a bureaucrat. I'd like to thank Lena Kahn for the good conversation today. I learned a lot. I hope you did too. Let us know what you are thinking. Our email is radio at Freakonomics.com.

Coming up next time on the show, another one-on-one conversation around another set of important government functions. But this person is not embraced by politicians on both sides. My nonpartisan approach is to be critical of everybody in Washington. Do you have any friends? No. Not really. Jessica Riedel has two main messages.

Number one, the federal debt crisis is even worse than you think and few politicians have the courage to do anything about it. And number two, just about everything you know about U.S. tax policy is wrong. That's next time on the show. Until then, take care of yourself and if you can, someone else too. Freakonomics Radio is produced by Stitcher and Renbud Radio. You can find our entire archive on any podcast app also at Freakonomics.com where we publish transcripts and show notes. This episode was produced by Teo Jacobs with help from Zach Lipinski. The Freakonomics

Radio network staff includes Alina Kullman, Augusta Chapman, Dalvin Abouaji, Eleanor Osborne, Ellen Frankman, Elsa Hernandez, Gabriel Roth, Greg Rippon, Jasmine Klinger, Jeremy Johnston, John Schnarres, Morgan Levy, Neil Carruth, and Sarah Lilly. Our theme song is Mr. Fortune by the Hitchhikers. Our composer is Luis Guerra. As always, thanks for listening. I know you're married and have a young kid. Are they grateful that you're no longer at the white-hot center of anti-monopoly? I would think so, yes. Less multitasking while making dinner or breakfast. The Freakonomics Radio Network. The hidden side of everything.