How Lina Khan’s FTC Stifled Innovation—And Why A Second Trump Administration Must Reverse Course
To restore innovation and competition, a second Trump administration must reverse Lina Khan’s FTC overreach and remove barriers that stifle startup growth and investment.
In 2022, I wrote at Forbes about how the Federal Trade Commission (FTC), under Lina Khan’s leadership, fundamentally misunderstood the mechanics of innovation and competition. The agency’s misguided attempt to block Meta’s acquisition of Within Unlimited, a virtual reality (VR) fitness company, was a case in point. The FTC’s challenge was rooted in a flawed premise: that allowing Meta to acquire Within would reduce competition in the VR fitness market.
The reality, as I pointed out then, is precisely the opposite. The ability to exit via acquisition is what fuels startup investment in the first place. If the government arbitrarily blocks such acquisitions, the downstream effect is fewer startups, less innovation, and, ultimately, less competition.
Now, as we enter a second Trump administration, we must assess the damage done by the Khan-led FTC and determine how to correct it.
The False Premise That Acquisitions Stifle Competition
In blocking the Meta-Within deal, the FTC trotted out the usual talking points: acquisitions lead to monopolies, stifle innovation, and harm consumers. This claim was not only wrong, but it also betrayed a fundamental misunderstanding of how venture-backed startups work.
Startups are built to exit. Investors take risks with the expectation that their capital will be returned through an IPO or, more commonly, an acquisition. Blocking acquisitions eliminates the primary incentive for investors to fund innovative companies in the first place.
This is not speculation. As I noted in Forbes, data from Silicon Valley Bank revealed that 58% of startup founders expected their companies to be acquired, while only 17% expected to go public. Yet, the FTC’s stance under Khan made clear that it would actively interfere in this natural process, effectively slamming the brakes on startup investment.
Lina Khan’s FTC Has Reduced, Not Increased Competition
By making it more difficult for startups to exit through acquisition, Khan’s FTC reduced the incentives for entrepreneurs to enter the market. The FTC claimed blocking Meta’s purchase of Within would preserve competition, but in reality, it likely had the opposite effect.
If large players like Meta, Apple, and Google know they will face roadblocks acquiring startups, they are more likely to build in-house solutions instead. This means fewer opportunities for startups to compete, less funding for entrepreneurs, and, ultimately, less innovation.
Khan’s FTC ignored this reality and instead pursued a European-style regulatory approach that views all acquisitions with suspicion. The end result? A chilling effect on investment and entrepreneurship.
How The Meta-Within Case Was a Canary in the Coal Mine
This case was not an isolated incident. It signaled a broader ideological shift at the FTC—one in which bureaucrats with no real-world experience in business, investing, or startups took it upon themselves to reshape the tech sector according to their own misguided theories.
The problem is that these policies do not just hurt the tech giants—they harm the very startups and entrepreneurs that regulators claim to protect.
The Meta-Within case should have been a wake-up call. Instead, the FTC continued doubling down on its flawed logic, pursuing aggressive (and often legally dubious) antitrust enforcement that disincentivized market participation.
The Second Trump Administration’s Opportunity to Reverse Course
With a new administration on the horizon, the question becomes: How do we undo the damage caused by Khan’s FTC?
Reform Antitrust Policy – The next FTC leadership must recognize that acquisitions are a feature, not a bug, of a competitive market. The ability to be acquired incentivizes investment, which in turn leads to more innovation and market participation.
Restore a Pro-Growth Regulatory Environment – Khan’s approach has been one of overreach, operating under the assumption that regulators, rather than markets, should decide the trajectory of competition. A second Trump administration has the opportunity to put control back in the hands of businesses and investors.
Encourage Startup Formation Through Clear Exit Pathways – If we want to see more startups, we must ensure that their exit pathways remain open. That means stopping the FTC from arbitrarily blocking acquisitions that pose no real threat to competition.
Shift FTC Focus to Consumer Harm, Not Ideological Battles – Antitrust policy should focus on actual harm to consumers, not theoretical market structures imagined by academics and bureaucrats. If an acquisition leads to better products, more investment, and increased innovation, it should be encouraged, not obstructed.
A Pro-Innovation, Pro-Startup Future
Had the FTC under Lina Khan prevailed in its case against Meta, it would have set a dangerous precedent—one where regulators, not the market, decide which startups succeed and which fail. Fortunately, courts saw through this flawed logic and allowed the acquisition to proceed.
But the damage had already been done. The chilling effect on startup investment, the uncertainty injected into the M&A landscape, and the regulatory hostility toward acquisitions have all had lasting consequences.
A second Trump administration has the opportunity to reverse this course and reestablish a regulatory environment that supports innovation, competition, and entrepreneurship. The past few years have shown us what happens when central planners interfere in markets they do not understand. It’s time to correct those mistakes and put the FTC back on a path that fosters, rather than stifles, innovation.