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The case to breakup Facebook

by on December 11, 2020

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Yet how long will that take and is it too late?

While the antitrust action against Facebook was anticipated, the lawsuits filed this week, one by the FTC, and another by 46 US states (plus DC and Guam), are nonetheless bold, and foster cautious optimism that the era of digital robber barons could be coming to an end.

As we often note in this newsletter, what’s significant about these antitrust lawsuits are the language and narrative that they use to (re)frame the way we regard social media companies.

It has taken a while for this shift in thinking to come about, but it’s difficult to believe we’re going back to how we were. As legal researcher Mireille Hildebrandt aptly notes:

Wednesday’s lawsuits take particular aim at Facebook’s blockbuster acquisitions of photo-sharing app Instagram, for $1 billion in 2012, and messaging app WhatsApp, for $19 billion in 2014. Thanks in large part to the growth of the two hugely popular properties, more than 2.5 billion people use one of Facebook’s apps every day.

The attorneys general allege that the deals for Instagram and WhatsApp broke competition law. Prosecutors are asking a federal court to intervene by possibly forcing a sale or spinoff of those apps.

In addition, authorities are asking the court to prevent Facebook from making any acquisitions worth more than $10 million while the case proceeds.

In its separate suit, the FTC is also pushing to have Facebook unwind its purchases of Instagram and WhatsApp.

In targeting the monopoly via acquisition strategy employed by Facebook, these suits are attempting to make the antitrust case as clear and straight forward as possible.

In detailing the company’s acquisitions, these suits also reconstruct Facebook’s history, noting the reversals and broken promises made to users and regulators alike.

As well as their use of analytics to identify and neutralize potential rivals.

A practice they’ve continued up to the present.

What’s significant about these antitrust actions is the advance the discourse of antitrust law from the realm of consumer harms to democratic harms. In this case noting that for Facebook, they’re inseparable.

Also worth noting that the usual, “but China” excuse made by the US based tech giants is no longer flying. FTC Commissioner Rohit Chopra went after it in anticipation.

However before we celebrate the downfall of FB, as many are, we need to both reflect on how long antitrust action can take, and that it can be very difficult to win, especially against companies as powerful as Facebook.

As a quick summary, though, I’d say that both lawsuits make somewhat weak claims regarding acquisitions (mainly, but not limited to) Instagram and WhatsApp. Both lawsuits, though, do make much stronger claims about Facebook abusing its API to try to limit competition (though, doing so without the context of privacy questions that may have driven Facebook to close off more access to its API). I think the API questions are the most interesting to explore, and the ones where Facebook may face the most trouble in court.

Let’s go through each one separately. The key to the FTC’s case is twofold: (1) that Facebook buys up whatever upstart competitors it can find that represent a competitive threat (e.g., Instagram & Whatsapp) and (2) that it puts in place “restrictive policies” that hinder the upstart competitors it cannot acquire. I’m not sure that either claim is fully supported by the facts, but perhaps there’s more evidence to support them. Of course, a key aspect in any antitrust case is proving (1) that there’s a market in which the company is a monopoly and (2) that the company leverages that monopoly in a manner that is abusive to competition.

Mike Masnick is no fan of FB, and his analysis is worth reading in detail if you’re interested. His points about the API and access to Facebook as a platform is interesting, and may be too nuanced or technical for the general public.

As for remedies, if Facebook were forced to spin off Instagram and WhatsApp, I honestly don’t think it would have that big of an impact on Facebook itself. I’m not against that being the final decision, but I don’t see how that would solve any of the issues at play. Either way, Facebook is going to be very busy in court for the next decade or so….

This is another important point. Is Facebook so big, that in cutting it up, we won’t get competition, but instead more Facebooks?!

The NYT also published an analysis pointing out the path to victory will not be easy.

Yet it is also worth noting that the current antitrust milieux is not just about Facebook, but digital dominance in general. Something that in spite of significant antitrust measures over a decade ago, Microsoft still demonstrates.

Which is why there are many who say break them all up. Keep smashing until we get as many pieces as possible. Similarly as soon as they join up again, as they most likely will, well, smash them again!?

All of this will come back to regulatory capacity and capability. With a new administration coming (we assume/hope), we should watch how they handle these antitrust endeavours, but also how they approach big tech in general.

For starters, the relationship between the Biden administration and FB will be worth watching.

For the Biden team, the moment was emblematic of its frustrating yearlong battle with the platform to enforce its own rules. “It was a total reversal,” a senior staff member told me recently. “You have half-baked policies on one hand, and the political reality on the other. And when push comes to shove, they don’t enforce their rules as they describe them.”

In Facebook’s defence, seemingly nobody was able to manage/handle the (hopefully) outgoing POTUS. Yet this inability to do what they say they will certainly impacts larger regulatory and antitrust tensions.

Biden staff members said they repeatedly asked Facebook how it fact-checked content and received few answers in return. “We wanted to know: How many fact checkers do they have? How many requests go to them? How many do they actually end up fact-checking? Standard stuff, really,” one senior campaign worker told me. “We were told weekly that we’d get details on the scope of the program, and it never happened.”

According to campaign officials, when the campaign asked for insight into what political content was performing best on the platform, Facebook promised guidance but never thoroughly followed through.

But the Biden campaign’s own data showed some troubling signs. Workers told me the team attempted to track disinformation about their candidate to compile a weekly report. They were quickly overwhelmed, they said, unable to keep tabs on the vast network of conspiracies and lies.

Probably safe to assume that the (digital) insurgency against Biden will continue to grow, especially on Facebook.

It’s unclear how the Biden campaign staff members’ experience with Facebook will affect the incoming administration’s policies toward the company. But their time on the front lines of the information war has left them gravely concerned that Facebook and the other social media platforms are a threat to the electoral process. One Biden staff member described the flood of content suggesting the election was stolen as “unforgivable.”

And it’s hard to blame that person. The campaign is fighting an uphill battle against a president and a contingent of his followers who refuse to accept reality.

The (theoretically) incoming administration may not have the patience for antitrust. They may want to take (decisive) action sooner. Which may pre-empt or disrupt larger attempts to rein in the digital giants.

One step forward, two steps back? #metaviews

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