A few questions for Lina Khan

On last Monday’s Daily Show, Jon Stewart interviewed Lina Khan, who chairs the Federal Trade Commission (FTC). She talked about the use of anti-trust laws against monopolies. And after listening to the interview, I have a few more questions for her.

Question 1

Speaking of the dangers of monopolies and large companies you said,

I think it just shows one of the dangers of what happens when you concentrate so much power and so much decision-making […]

You’re a 35-year-old with no more background in economics than I have, and you’re running what you describe as a small agency. And yet the FTC has enormous power over companies that make up a significant portion of the U.S. economy. So when you were expressing concerns about “what happens when you concentrate so much power,” did that inspire any moments of self-reflection?

Question 2

In your interview, you were concerned about the dangers of monopolies:

Look, monopolies harm Americans in a whole bunch of ways. You’re absolutely right that it’s not just higher prices. It can be lower wages. It can be suppliers getting muscled out of the market or seeing their own payments drop. It can also be shortages.

Your concerns about monopolies are well-founded.^[1]Although low wages are not usually considered one of the traditional problems with monopolies. Also, low wages have nothing to do with the FTC’s stated goal of consumer protection. However, I can’t help noticing that your agency has a budget of about $425 million which ultimately comes out of the pockets of taxpayers like me. And the thing is, if I don’t like the work the FTC is doing, I have no way to stop paying the FTC to do it. I can’t just take my share of your budget and pay it to a different agency. The only place I can get FTC services is from the FTC. And that is pretty much the definition of a monopoly. Given how awful monopolies are, how much damage has the FTC’s monopoly power done to American citizens? And would you like to apologize?

Question 3

When discussing the problem of monopoly-caused shortages, you used as examples the recent shortages of baby food and Adderall. Those are interesting choices.

It’s true the baby food shortage was initially caused by supply chain issues and contamination at a major producer’s facilities, but this was exacerbated by the fact that the U.S. government makes it difficult to import baby food from other countries. To sell baby food in the U.S., foreign producers would have to submit detailed data to the FDA, meet strict U.S. labeling standards, and endure a 90-day waiting period. And they would still be subject to high import tariffs. For all these reasons, foreign baby food producers did not have a presence in U.S. markets, so they were unable to help when the shortage hit.

As for Adderall, the the Drug Enforcement Administration (DEA) imposes production caps on Schedule I and II narcotics, including Adderall, and they actually harass pharmacies and doctors who they think are selling or prescribing too much. When the demand for Adderall went up during the Covid pandemic, the DEA did not raise production limits. In fact, the DEA shut down one manufacturer of Adderall in 2022 over their supposed failure to keep good records about production.

Ms. Khan, What, if anything, are you planning to do about these federal agencies that are causing so much economic disruption? Does your answer change if I remind you that they, like your own agency, are monopolies?

Question 4

Most people in the U.S. have only one choice of cable TV/internet provider. These are very clearly monopolies and have been for decades. These monopolies exist because many local governments only permitted one cable company to serve their residents. They created the monopolies that protect cable companies from competition and allow them to rake in profits.

Many states have some form of Certificate Of Need (CON) law requiring anyone who wants to build a new hospital (or expand an existing hospital) to prove that the community needs more hospital services. Existing hospitals can challenge new CON applications, and they often have a lot of influence over the government bodies that evaluate them. This creates artificial monopoly power for hospitals that would normally compete against each other.

Similar laws produce artificial government-created monopolies for other business such as casinos, cannabis distributors, bars, and taxi companies. They are often justified in the name of protecting consumers although, as with hospital CON laws, what they really protect are the profits of politically influential businesses.

At the national level there are laws such as the infamous Jones Act of 1920, which requires that only ships that are American built, owned, and operated are allowed to carry cargo between U.S. ports. A similar Foreign Dredge Act of 1906 prevents foreign owned or operated dredging in U.S. waters — which is probably going to drive up the City of Baltimore’s cost of recovering from the collapse of the Key bridge. Enacted in the name of protecting American business, these laws actually just give some U.S. businesses monopoly power against their customers.

And so my question: Given how many monopolies are created by governments, and given how durable they are for having been enshrined in legislation, do you really feel that going after private sector monopolies is anything more than a distraction from the real problem?