Big Tech has its moment to take on Lina Khan

The Federal Trade Commission building is seen in Washington on March 4, 2012. REUTERS/Gary Cameron (UNITED STATES)

NEW YORK, Sept 12 (Reuters Breakingviews) – A litigation setback for Federal Trade Commission trustbusters shows the thin legal ice on which antitrust hardliners like agency boss Lina Khan tread. Procedural hurdles to dealmaking introduced under her tenure appropriately discourage some mergers. But technology giants with the resources to wage court battles have an opening, now with extra legal precedent, to push back.

An agency-appointed judge’s ruling in favor of medical technology companies Illumina (ILMN.O) and Grail (GRAL.O) marks the FTC’s first major loss under Khan. The FTC sued to unwind their $7 billion merger shortly before she was appointed chair in 2021, part of a clampdown on consolidation under the Biden administration that ramped up after she took over.

Under Khan, the FTC expanded deal investigations, stopped putting uncontroversial approvals on a fast-track, and expanded its reach by selectively screening future transactions outside of the normal process read more. These hurdles increase the cost of deals, so transactions without a compelling case no longer make sense. Meanwhile, deals raising bipartisan antitrust bugbears are more verboten than ever.

Yet US dealmaking totaled $2.6 trillion in 2021, per Refinitiv – a record. Big tech firms are buying into adjacent markets: Microsoft (MSFT.O) agreed to buy Activision Blizzard (ATVI.O) for $69 billion; Amazon.com (AMZN.O) acquired MGM for $8.5 billion. So Khan is rewriting the antitrust playbook to target tech deals that are harder to block under traditional rubric read more.

The problem, as the FTC found out in court, is convincing judges of these novel theories if buyers litigate. Despite launching its lawsuit on a bipartisan vote, the FTC’s case stretched the bounds of normal antitrust arguments. Khan’s next targets – like a recent lawsuit against Meta Platform’s (META.O) acquisition of virtual reality app developer Within – push even further, implying an even tougher battle.

Seeing this potential weakness, buyers looking to buck a crackdown have reason to stand their ground in court – as Meta is doing. And as the stakes increase, the possibility that a lawsuit will spiral into appeals, possibly all the way to the Supreme Court, rises.

If that happens, fundamental questions of antitrust practice that have largely been uncontested, like the FTC’s analytical methods, could be challenged. Justice Brett Kavanaugh, part of the court’s conservative majority, has expressed antitrust skepticism. Khan says there are benefits to fighting cases the agency might lose. But if courts establish legal precedent limiting the agency’s power, both she and her successors will bear that burden for years to come.

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CONTEXT NEWS

The Federal Trade Commission on Sept. 2 said that it would appeal a decision by an administrative law judge to allow gene-sequencing company Illumina to acquire cancer detection test maker Grail. The FTC sued to force the companies to unwind their $7 billion merger.

The European Commission, which was also investigating the transaction, said on Sept. 6 that it had decided to prohibit the merger. In response, Illumina said it would appeal the decision.

Editing by Lauren Silva Laughlin and Sharon Lam

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