FTC Chair advocates for promoting competition to drive innovation

In the 1970s, the U.S. government took antitrust actions against IBM and AT&T, causing considerable controversy. Walter Wriston, the then-president of Citibank and a key leader on Wall Street, questioned the value of doing this, apparently (according to Lina M. Khan, Federal Trade Commission Chair), likening the move to breaking up the Yankees, because they were so successful. In a presentation she delivered at the Carnegie Endowment for International Peace on March 13, Lina M. Khan, chair of the Federal Trade Commission, disagreed with Wriston’s perspective. In her comments, Khan contended that breaking up monopolies is essential for promoting innovation, that by breaking up companies like AT&T and IBM, the U.S. opened a path to “waves of innovation, including the personal computer, the telecommunications revolution, and the logic chip.”

Khan gave several examples of how consolidation and monopolization have discouraged innovation. She mentioned Boeing, which in 1997 became the only commercial aerospace maker in the U.S. after merging with McDonnell Douglas. Among other issues, Khan cited United Airlines CEO Scott Kirby as saying, "The merger allowed Boeing to slow down innovation and to reduce product quality."

In contrast, Khan also mentioned Nvidia, noting that in 2021, the FTC blocked Nvidia's $40 billion attempted acquisition of Arm, which would have been the largest semiconductor chip merger in history. "Our investigation had found that the merger would have allowed a major chip provider to control key computing technologies that rival firms depended on to develop their own competing chips for next-generation technologies, affecting everything from data centers to self-driving cars." She noted that, two years later, Arm is thriving, with its stock price doubling since it went public last year. "Choosing competition works," Khan said.

Khan noted that some policymakers argue against applying antitrust strategies against today's dominant technology firms. "We often hear that pursuing antitrust cases against or regulating these firms will weaken American innovation and cede the global stage to China," Khan said. However, she questions the idea that a direct relationship exists between U.S. antitrust cases and these companies' ability to keep America's lead in the industry. She is, she said, more concerned about "lumbering monopolies mired in red tape and bureaucratic inertia that cannot deliver the breakthrough innovations and technological advancements that hungry startups tend to create.”

As Khan points out, monopolies do engage in R&D, and do sometimes deliver “marginal innovations and improvements.” However, she also asserts that "breakthrough and paradigm-shifting innovations have historically come from the disruptive outsider."

View Khan’s presentation on YouTube here.