Federal Trade Commission (FTC) Chair Lina Khan recently spoke at the Carnegie Endowment on “The Future of American Innovation.” Khan’s speech made the case that vigorous enforcement of antitrust policy is vital to ensure American businesses remain innovative.
Chair Khan describes two types of markets. The first is the competitive market, where the market is open to new and innovative business that can compete with the established firms, thus forcing the big firms to innovate or lose customers. Then there is the consolidated market, where large firms dominate the marketplace and use their power to keep all rivals out. In a consolidated market, consumers have fewer choices, pay higher prices, and rarely, if ever, have the option to try new products developed by a young company eager to knock the big companies off their perch. Chair Khan does make a good point when she says that large firms tend to become encumbered by “red tape and bureaucracy.” This makes them less likely to introduce innovative new products onto the market, although the big firms are superior to newer firms at improving existing products.
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