Pressure is building on Big Tech after a federal court ruled Google is a monopoly. Google isn’t the only one the government is going after. Apple, Meta and Amazon are actively fighting lawsuits. 

While Google’s appeal plays out, tech firms will be eyeing the courts, Federal Trade Commission and Department of Justice for clues to a shift in the regulatory landscape.

For how Google’s ruling might impact current and future antitrust cases, Straight Arrow News interviewed former FTC chair and commissioner Bill Kovacic.

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This interview has been edited for length and clarity. Watch the interview in the video above.

Simone Del Rosario: Does this serve as a flashing red light for other Big Tech firms?

Bill Kovacic: It does indeed. They’ve seen the light flashing yellow for several years because, not only in the United States but around the world, we find competition authorities and individual jurisdictions beginning new investigations, initiating cases, and in the case of the European Union adopting new regulatory frameworks, theirs called the Digital Markets Act.

The Big Tech sector has seen gathering storm clouds now for a number of years, going back to, I’d say, the middle of the previous decade. But we’re now seeing the delivery of policy measures that foreshadowed evermore significant forms of intervention. And this is an indication, not only that the government can win, it can marshal the resources to do this kind of work well, it can bring the cases to a successful conclusion at the trial.

But also it means that there will be more to come and there are other significant matters in the pipeline: another Department of Justice case involving Google involving ad serving; a case by the FTC challenging Meta for its acquisition of Instagram 10 years ago; an FTC case against Amazon; a Department of Justice case against Apple; state government cases attacking a number of these large enterprises.

I think for the business community, especially for the tech community, it’s an indication of things to come and that the successful defense of their position is not going to be something they can take for granted.

Simone Del Rosario: How does [the Google ruling] measure up to the Amazon situation where they’re being accused of having self-preference for their own products?

Bill Kovacic: This involves, I think in some ways, a harder case for the Federal Trade Commission. The FTC is arguing that you’ve given your own products, your own services, a better display compared to others, that you’re favoring them. I think the FTC is going to have a somewhat harder time dealing with the argument [of], ‘I’m a successful firm, don’t I have the freedom to offer consumers not only the better product, but to put my product first? To say, look at my product. Why should I have to display the products of my rivals in a better light?’

Amazon would not have unlimited freedom to make certain choices that are going to be the subject of the case. But Amazon’s arguments are arguably more within the framework of Supreme Court jurisprudence that has been encouraging of the ability of dominant firms to decide who they’ll deal with and how they’ll deal. And a concern on the part of judges that they shouldn’t be involved in making technical decisions about how companies operate, determining who they can deal with, the terms on which they can deal with other parties. So I think the FTC in some ways faces a somewhat harder challenge in the light of this existing jurisprudence.

But from Amazon’s point of view, watching the outcome in this first important [Google] case, it’s a warning that the government can prevail. The government can make well-founded arguments. They can present them capably. They’re probably going to be found to be a dominant enterprise and the real question will be, is this self-preferencing behavior acceptable?

I think what all leading firms learn from the experience we’ve just observed is you can take absolutely nothing for granted in this process. And it’s an environment in which judges might well be persuaded that you made an incorrect judgment about where the line of illegality is and you stepped over it. At a very basic level, this is an important caution that says you can lose these cases if you’re a defendant.

Simone Del Rosario: I’m curious what your take is on the types of cases against Big Tech that current FTC Chair Lina Khan has been taking. What do you make of her strategy when it comes to going after Big Tech?

Bill Kovacic: She has put in motion one significant case on her own watch: that’s the Amazon case we mentioned before. The other major case that she has she inherited from the Trump administration. That’s the challenge to Meta for its acquisition of Instagram.

But the Amazon case is a very ambitious case. It is trying to define a new conception of what dominant firms can do, especially dominant firms that act as the owners of a platform on which products are sold, but their own products and the products of other parties operate on the same platform; to identify what a dominant firm can do by way of featuring its own products and perhaps treating the products of third parties on its platform, its competitors, differently.

That would be a significant development in the jurisprudence. I guess to put it in a very general way, it is a riskier case than the case that the DOJ is running against Google, the case that’s running against Apple, the other case that’s running against Google. And this is consistent, I think, with the chair’s philosophy, that a major role of the FTC should be to take on cases that involve more ambiguity, to take on cases that aren’t squarely within a framework where liability has been routinely found, but to move the frontiers outward.

So there’s a greater risk appetite at work there. The DOJ cases are very ambitious as well, but I’d say a signature element of the chair’s own program is to be willing to push the frontiers and to accept the risk that there will be judicial resistance and to accept the risk that there’ll be judicial rejection.

But for the sake of provoking the conversation with the courts and bringing these issues to the courts on a repeated basis, there’s a willingness, not simply in the area of Big Tech, but in other areas of the commission’s jurisdiction, to try to move the frontiers of enforcement outward and to acknowledge and accept the risk that these are hard cases to win. And [she does] not expect to prevail every time, but the very fact of bringing the cases, continuing the conversation with the courts, will have real value.

In the wake of a federal judge ruling that Google is a monopoly for its search business practices, all eyes are turning to other antitrust cases in the works. But even before the Google decision brought by the Justice Department, the Federal Trade Commission and its celebrity chair were feeling the political heat.

FTC Chair Lina Khan has made a name for herself by placing a target on massive tech companies in the United States. The 35-year-old was appointed by President Joe Biden to shake up antitrust enforcement. But some Democratic megadonors are hoping Vice President Kamala Harris will ease the regulatory scrutiny and appoint a more moderate chair.

Last month, LinkedIn co-founder Reid Hoffman called on the vice president to replace Khan if she is elected in November. The billionaire previously donated $10 million to the Biden campaign before the president dropped out of the race and has since thrown his support behind Harris.

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“I do think that Lina Khan is a person who is not helping America in her job and what she’s doing,” Hoffman told CNN in July. “And so I would hope that Vice President Harris would replace her.”

Hoffman has since clarified that his position on Khan is not a condition for supporting Harris. But his comments, and similar ones made by IAC Chair Barry Diller, are catching attention.

“Hoffman’s comment is highly provocative and I think [it is] unusual to say, ‘Bring me the head of the FTC chair, get her out of the chair’s position,'” former FTC chair and commissioner Bill Kovacic told Straight Arrow News. “A new president could not literally fire her. She can’t be removed from the commission but she can be demoted simply by the president signing a letter saying, ‘You are the former chair now, now you’re a commissioner.'”

But the opinion of Khan is split and that split doesn’t happen on political lines. Earlier this year, vice presidential candidate J.D. Vance said the FTC chair was “doing a pretty good job.”

The following transcript has been edited for length and clarity. Watch the full response in the video above.

Simone Del Rosario: To hear that an FTC chair is being brought up in the conversation of a presidential election and donations to the Democratic candidate for president, what do you make of this environment? What does it tell you about how [Khan has] been received in this world and the direction she’s decided to take?

Bill Kovacic: I suppose in the modern world, nothing should surprise us, but Hoffman’s comment is highly provocative and I think unusual to say, ‘Bring me the head of the FTC chair, get her out of the chair’s position.’ A new president could not literally fire her. She can’t be removed from the commission, but she can be demoted simply by the president signing a letter saying, ‘You are the former chair now, now you’re a commissioner.’

As a footnote, Lina Khan is the most famous competition policy enforcer in the world today, globally. There’s no part of the world you can go to without people knowing who she is. And if you identify yourself as a U.S. citizen, you will be asked immediately, ‘Do you know about Lina Khan?’

So to step forward and say, ‘I want her out of there, in fact, her departure by suggestion is a condition of our support and our enthusiasm for your campaign,’ is quite extraordinary. It does show how Lina Khan has touched a nerve. And I’d say a very sensitive nerve within that community to the degree that no other regulator in my lifetime – going back into the 1970s since Michael Pertschuk who was the chair of the FTC and a strong advocate of powerful competition and consumer protection intervention – nobody has aroused that kind of specific condemnation in that period of time.

I suppose the chair can look at that and say, ‘Good, it’s working. If they loved me, I’m not doing my job.’ And I think in part, she defines her effectiveness, a rough measure of her effectiveness is the vocal exuberant statement of firms in the sector who are saying these things because here we have an agency that’s doing things that really do hurt in some ways.

So I find it an extraordinary comment, but it truly is a testament to how she has changed the debate, changed the focus of attention, and has brought to bear the resources of her agency in a way that has aroused their concern.

A fascinating question is how much will Vice President Harris respond to this if she becomes President Harris. What would happen in a President Harris administration with regard to policy and Big Tech? Would she, in small steps, walk away from the approach that the Biden administration has taken? Will she quietly seek appointments to bring a more moderating influence into the Federal Trade Commission or the Department of Justice? Or will she say, ‘This is why we are in the White House. This is why we have power. We’re gonna exercise it this way.’

Would elected officials such as [Sen.] Elizabeth Warren, [Sen.] Bernie Sanders, as well as some of their counterparts in the Republican Party, the [Sen.] Josh Hawley team, for example, would they rise up and say, ‘You will not touch these programs? We demand that these programs go ahead. This is crucial to the larger progressive agenda and you will not undercut it.’

I suspect if [Harris] took visible steps to retreat from the Khan program or the program that Jonathan Kanter has laid out in the Department of Justice, she could very well face the wrath of the progressives, left and right, in Congress. I don’t think she’d want to provoke that fight openly, so the means of adjustment might be far more subtle and less visible to the naked eye.

The appointment of individuals who have a somewhat more cautious approach to applying the law; one approach would be to say with respect to these Big Tech cases, ‘We already have a very full plate and part of my job is to bring them home, to make sure that they land safely and that the projects work. I’m going to do that. I’m going to worry less about initiating new path-breaking measures. I’m going to make sure that those are brought to a successful conclusion.’ That could be one approach she takes.

Another area where she could back off is merger control. And I think for the Big Tech companies, for [Marc] Andreessen, for Hoffman, for others, they are less disturbed by the big monopolization cases than they are by the aggression with which the FTC and the Department of Justice have gone after deal making. And that might be an area where the Harris team, after January of 2025, backs off a bit and isn’t quite so aggressive as the FTC and DOJ have been.

That would be the barometer for me. That’s the real indication of whether we’re seeing an adjustment in attitude towards tech is the question of merger control. I would not expect her to tamper with these big cases.

I wouldn’t expect [former President Donald] Trump to do it either. The DOJ search case that we’ve been talking about began in his presidency. The FTC case against Meta began in his presidency. The investigation of Apple that led to a case began in his presidency. And he has no fondness for that sector. His vice presidential candidate partner, Senator [J.D.] Vance, has no fondness for that sector. He said, ‘I think Khan’s doing a good job.’

I could imagine that both of them would say, ‘What’s the right remedy in this case? It’s to break them up. We have to de-concentrate these sectors to take their power away because we don’t trust them,’ for different reasons.

With regard to these Big Tech monopolization cases, I think those carry on where we could see a change in both a Harris administration and, maybe more visibly in a Trump administration, is a change in merger control. And maybe that’s what Hoffman and his counterparts have been complaining [about]. That’s their real grievance here is that we can’t do deals.

The antitrust ruling against Google on Monday, Aug. 5, is groundbreaking. By declaring Google is a monopoly, it marked the biggest tech antitrust ruling since Microsoft in the ’90s.

It’s not that the government never takes up these cases; it’s that the government doesn’t often win. And to be fair, it hasn’t won yet. Google plans to appeal and the tech world is closely watching how this one shakes out. 

For what punishments Google could face to how long this case will drag out, Straight Arrow News tapped the expertise of Bill Kovacic, a former FTC chair and commissioner.

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This interview has been edited for length and clarity. Watch the interview in the video above.

Simone Del Rosario: What do you make of Google’s assertion that its product is just better?

Bill Kovacic: The language and the music of earlier decisions from the Supreme Court has been one that’s very solicitous of the successful firm that achieves prominence through superior performance. So in making that argument, they are appealing directly to a policy position that has appeared in a number of earlier decisions that you can’t take a successful enterprise and punish it for offering a better product.

Through the trial and certainly through the appeals, they will say, “We may not be the perfect company, but there’s no way to explain our position except for our ability to provide our users a better and better experience and certainly superior to anyone else’s.”

That’s a very important argument, but there are still limits on the steps they can take to reinforce the preeminence.

Simone Del Rosario: Let’s say that this judgment stands. What’s going to happen to Google? What are the likely punishments that Google will face?

Bill Kovacic: Judge Mehta, who is the trial judge in the Google case, decided to split the proceedings into two parts. The first part was going to be the trial on whether the law had been broken. That part has been concluded with his opinion that finds that yes, indeed, in some respects, the law was broken.

The second part was that if there was a finding of liability, we’re going to have a separate proceeding on remedies. He’s going to have a meeting with the parties in early September to schedule the hearing or hearings that will take place to address the remedy.

We probably will see, I suppose, several days of testimony by experts who lay out their views about what the remedy should be. Should it simply be an injunction that tells Google not to engage in the same behavior? Should it mandate that the company take affirmative steps to correct the effects of the behavior that it’s engaged in so far? Will the court go further to say a restructuring of the company is important? That a divestiture of some kind, say, for example, divesting the Android franchise would be an appropriate solution.

The judge is going to have a significant proceeding on the remedy, I suspect, by the end of this calendar year. He will reach his decision about what that remedy should be. We’ll see the final opinion on remedy come out, again, by the end of 2024 with inevitable appeals to the U.S. Court of Appeals to the District of Columbia, which would be step one. That would take up most of 2025.

The Supreme Court is not obliged to review this case. It has complete discretion over its docket with respect to antitrust matters. My intuition is that this will be a compelling case for them to review. This will be a case that they want to review to come in on these basic questions about the application of the antitrust law to Big Tech, to dominant firms generally. So my own quiet wager is that the Supreme Court would take the case. That takes us through most of 2026.

So if all of these appeals come about, we’re a good two years away from a final answer with respect to liability and to remedies. And for a case that began in 2020, in the second half of 2020, I guess all of us can look at that and say, “Is that a sensible way to make decisions about such fundamental matters of economic policy and operation,” a case that lasts the better part of seven years? But that’s what we’re in for going ahead. That’s roughly the timeline that might unfold.

Simone Del Rosario: And just to clarify, the remedies can be prescribed before this appeal process goes through even if they can’t be enforced, is that correct?

Bill Kovacic: Correct. The appeal would take place after the decision on remedies so that the parties would be filing their appeals with respect to decisions about whether the law was broken and with respect to the judge’s decision about what the appropriate remedy will be. It’s proceeding on remedies next, then the parties can appeal any part of what’s taken place before.

Simone Del Rosario: And you mentioned some relatively low-level remedies, an injunction, fines. Would that be enough to stop this behavior that the courts found was monopolistic?

Bill Kovacic: This is a point of enormous and contentious debate. I would say if you go back to the beginning of the U.S. antitrust system, the remedy that generally has been seen to be, by many observers, the necessary remedy for illegal monopolization, is structural relief, simply put, a breakup. You force the company to make major divestitures.

That is the big visible solution that many observers look for. By contrast, the injunction that you referred to is seen as often being too timid a solution, too difficult to oversee and apply, too easily evaded by companies that will adapt immediately to any control on conduct that you put before them.

Part of what makes up the debate today is a more sympathetic view about these injunctions. And the more sympathetic view basically goes like this. One is that the injunction forces the company to change its decision-making process. It means that more matters are run by the lawyers first. And instead of the business people simply acting immediately and impulsively on ideas they have, it’s got to go through the legal department.

The legal department, being somewhat more inherently cautious as a matter of culture, applies the brakes a bit to this process so that there’s an internal decision-making process that means that the company is less aggressive in the way in which it operates.

A second consequence is that there’s an awareness on the part of other firms that they have a bit more room to maneuver. They take advantage of the hesitation and limits on the dominant firm to find crevices in the market in which they can enter to expand their operations over time.

Now one theory is that when the government settled its monopolization case against Microsoft, a case brought in the late ’90s and settled in the early 2000s – in parallel with a case that was settled by the European Union, also involving claims of illegal conduct against Microsoft – initially the conduct-related remedies were heavily criticized as being too weak.

A new reinterpretation of that is that those remedies actually gave breathing room for what were then nascent tech competitors named Google, for example, and that it opened the path for Google to prosper.

So I’d say there’s an important strand of modern commentary that says conduct remedies can be a lot more potent than you might think. They may take longer to unfold. They don’t have the big bang explosion of a giant fireworks display. They’re less visible in that respect. But then they can have a powerful impact on the way that the market operates.

I think that even the specialists in the field would say there’s a lot of uncertainty about what the best solution is. You make your best judgment. It’s partly an act of faith that you’ve got the right solution in place. But I’d say that there’s a somewhat more sympathetic view of conduct remedies emerging that might incline the judge to say, that would be enough.

Recession fears have dominated headlines since Friday’s jobs report, where the rising unemployment rate triggered a recession indicator known as the Sahm Rule. The rule has an incredible track record of signaling the start of a recession, yet this time is an outlier, according to the rule’s creator.

The Sahm Rule states a recession in the U.S. has started when the three-month average of the unemployment rate crosses 0.5% or more relative to its low from the previous 12 months. July’s surprise unemployment rate of 4.3% triggered the Sahm Rule with a 0.53% rise.

Asked point-blank whether the U.S. is in a recession, Claudia Sahm told Straight Arrow News, “No, we are not.”

The following transcript has been edited for length and clarity. Watch the full interview in the video above.

Claudia Sahm: We should be concerned that [the unemployment rate] has been rising over the past year. And this is not just about hitting a particular level, or in July, we saw a larger jump than we’ve seen. The Sahm Rule averages across months. It looks over a year-long period. So it’s trying to get this direction that we’re headed and it’s not a good direction.

Now there are some very specific reasons, very special reasons that the Sahm Rule right now looks more ominous than it is. And the first thing we can say about, “we’re not in a recession,” is anytime we make a pronouncement like that, we should look around.

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And in fact, broadly speaking, this economy is still growing and a recession means that it’s contracting, right? So we still see consumer spending, we’re adding jobs, industrial production. It’s slowed down, it’s not growing as fast, but we’re still growing. So that’s not a recession – right now.

So what’s going on with the unemployment rate? So there’s the bad reason unemployment rate goes up is there’s less demand for workers, it gets harder to find jobs. Hiring rates have come down a lot. It is a lot harder if you’re on the outside trying to find a job right now. So the unemployment rate has gone up for a bad reason. It does that in recessions.

The unemployment right now is also going up for one of the good reasons. So we have had more people join the workforce who weren’t working before. In particular, there was a big increase in immigration. And that was so important for solving the labor shortages that we’ve been suffering through. And yet, it takes time to adjust. I mean, that should be the theme of this cycle since the pandemic, that big messy changes take time and it’s painful.

It can make it really hard to read where the economy is, but right now we have people who’ve come in, and for some of them, it’s just going to take time for them to find jobs. And in that period, the unemployment rate will go up. Once they find the jobs, it can come back down. And frankly, people coming in to work, that’s a good sign for keeping the economy growing because there are more workers. That extra piece of unemployment rate increase looks bad but actually, it’s probably not.

I can say, looking broadly, what we know about the economy, we’re not in a recession. I mean, it’s never time to panic, but it’s also not recession time either. So it’s not a recession and yet the risks are there because we do have these increases in the unemployment rate that are of the more problematic kind, we just don’t know exactly how much.

Simone Del Rosario: When you created this rule, it was so policymakers could act on signs of a recession. Looking at what’s happening right now, there’s obviously a major movement happening with unemployment. What’s the remedy?

Claudia Sahm: There is a very clear policy lever out there to be pulled and that is the Federal Reserve beginning to reduce interest rates. And that’s the most straightforward one at this point. And the Fed has told us they are pointed at doing that.

Before we found out about July’s employment report, that’s the path they were on. Seeing that there is probably more weakness or at least more slowing in the labor market than we had previously thought, that probably means that they can get going in September, and maybe even cut interest rates more quickly than they had expected.

And it’s important that they have that lever to pull. It’s so important that we’re still in a position of strength. We’re not in a recession, we are still growing, there’s a lot of good things in U.S. economy.

The direction is not good, right? We don’t need to soften or weaken more than we have and that’s kind of where we’re pointed. And the realization that the Fed has been putting pressure on the economy to slow it down and for them to say, “Okay, we don’t need to slow it down anymore,” and reduce risk, that is the release valve to this that can get us to a good place.

That we just kind of settle into the jobs catch-up, we keep growing, we stay away from the recession. That’s the path. And you can tell the story and the path is there. It’s just anytime you get close to these real risky places in the economy, like a recession, you have to be careful because the people can get scared, markets can react. Things can unfold in unpredictable ways. So I think people should have their guard up more than a typical time and yet, there’s still a path to this all being just fine.

Simone Del Rosario: Are you concerned about a near-term recession or are you confident that when the Fed pulls that lever, the risk is over?

Claudia Sahm: I’m a macroeconomist. I’m always concerned. I devoted much of my career to studying recessions and how to fight them. And so I think it’s a risk that we should always be aware of, or at least policymakers should certainly be aware of. It is not my base case.

And again, I don’t want to make light of the Sahm Rule. The pattern I identified, there are other similar people looking at labor market conditions, it’s not like I’m the only one who’s pointed to weakness right now.

It does have a really strong track record and I don’t want to dismiss it out of hand. Something is happening and I don’t want to just write off any of the bad signs because now would be the time to act on them. Given all that, I think the risks are there. They’re not overwhelming. And because we’re still in a position of relative strength, that gives us a real leg up in terms of like what happens over the next three months, six months, 12 months.

Simone Del Rosario: Did the Fed make a mistake last week by not cutting?

Claudia Sahm: I have made the argument for much of this year that the Federal Reserve should begin to gradually lower interest rates, that inflation was coming down. Yes, the beginning of the year was a little rough. We’re also learning that we probably got head-faked by some of that data. We might be getting head-faked by some of the employment data now. It might not be as bad as it looks, right? But there was definitely a case, inflation is coming down, the Federal Reserve should get out of the way.

I had said last week they should start gradually reducing rates because it would be so much better to gradually reduce interest rates, watch the effects on the economy, because there are many question marks. We don’t know exactly how this amount of interest rate cuts translates into that amount of spending. So just to kind of watch and see what the economy does.

They are in a position now where if things continue to slow, the Fed may need to decrease interest rates more quickly. And at any time, and we’ve seen in the last few days, it can be pretty disruptive.

Hindsight’s 20-20. I think they could have been the winner last week if they had gone ahead with a cut, but you don’t get to go back and redo. I firmly believe they will assess the situation and take the steps necessary. It takes time for their tools to work so they do need to get going. But it’s not like all is lost. They’re going to have to probably play some catch up and they won’t get to do the victory lap.

Simone Del Rosario: The Fed is finding itself back in a position that it was when it started the hiking campaign, which was that it started hiking too late and then they were doing massive hikes. There’s all this talk now about how much more they may have to cut in September and beyond. Do you think that’s overblown?

Claudia Sahm: This cycle was always going to be messy. This has been a very hard-to-read economy. If you think about it, 2022, the Fed went really fast. They raised interest rates really quickly. There were a lot of concerns that we were going to be in a recession, that that was going to be part of what we had to have happen to get inflation down because it had gone up. Well, in fact, two years later, there has been no recession and we had a big disinflation.

It was not pretty in terms of how you would necessarily want the policy to roll out, but things worked out relatively well. So just because it doesn’t have this elegant, gradual cuts, it’s about getting the job done.

It clearly creates strain on families and businesses when they see the stock market, big numbers moving and what comes next. Fear can take on a life of its own and that is something that lives around the edges and in the middle of a recession. So you don’t want to treat those dynamics lightly, but we’ve dealt with a very uncertain, hard-to-read world for the last four and a half years. So we’re not done with the drama.

It was a missed opportunity by the Fed. At least that’s what it looks like today. We’ll get inflation data next week, maybe it doesn’t. But it looks like that was a missed opportunity, but there are so many more opportunities ahead of them to do good policy.