FTC and State Prosecutors Join Antitrust Dogpile on Facebook

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The Federal Trade Commission (FTC) and attorneys general are using Facebook as a test case for a massively expanded (and anti-capitalist) conception of antitrust law. Americans have many justified concerns about Facebook, from how the company handles user data to its content moderation policies to how the platform may be used to spread misinformation. To a lesser but still significant extent, Instagram is also subject to these concerns.

One gripe you don’t hear from folks often, however, is that the same parent company owns both Instagram and Facebook (and also owns the messaging platform WhatsApp). It’s not as if being suspended or limited on one app automatically carries over to the others, nor does good standing and popularity on one ensure these things on the others. Furthermore, there’s zero indication that the problems plaguing these platforms individually would be solved or even lessened if only they had separate CEOs hemming them.

But consumer harm has never seemed to be what really concerns politicians about big tech.

In countless ways, they’ve shown that their real aim is grabbing more control of the internet and its social infrastructure, punishing platforms that have personally irked them, extracting money from successful businesses, and expanding their power to dictate decisions made by private companies more generally. Poke a proposal to hold tech companies “accountable,” and you’ll find little that would fix any actual issues people care about; instead, you’ll see a whole lot of ideas that would give federal regulators, lawmakers, and executives more say over online speech and more power to control private companies no matter the sector they’re in.

The FTC’s new lawsuit against Facebook is no exception.

On Wednesday, the FTC unveiled yet another lawsuit alleging illegal behavior by Facebook. The meat of their claim is that Facebook is breaking antitrust law by owning not just the Facebook platform but also Instagram and WhatsApp.

Neither the FTC complaint nor another one filed yesterday by 48 attorneys general bothers proving consumer harm, which has historically been the standard when it comes to antitrust law enforcement.

New Tools to Attack Private Enterprise

“This is what is part of what is so concerning about using antitrust as a tool in the techlash,” Jennifer Huddleston, director of technology and innovation policy at the American Action Forum, tweeted yesterday. “The consumer welfare standard provides an objective take. Doing away with it or overly expanding market definitions or consumer harm would impact far more than just ‘Big Tech.'”

In fact, many on the left have admitted all along that this is their plan. David Dayen at The American Prospect perhaps put it the most succinctly: the antitrust arguments against Facebook, Google, Apple, and Amazon represent the government “using tech as simply a case study on what an invigorated legislative body can do to rein in the corporate power of any type.”

Reigning in “corporate power of any type” sounds like something that traditional Republicans wouldn’t want to go along with. But in the Trump era, much of the right has abandoned any free market or deregulatory principle that conflicts with punishing people or platforms that have pissed them off.

Larger consequences and disasters be damned—GOP lawmakers and enforcers are all in if it can be used to perform Sticking It to Big Tech to their base.

“Today’s actions by the Federal Trade Commission and state attorneys general against Facebook are the perfect example of political theater dressed up as antitrust law,” said Jessica Melugin of the Competitive Enterprise Institute (CEI) in a statement. “The FTC suit asserts that Facebook acquired Instagram and What’s App to suppress competition. But when viewed through the lens of the U.S. antitrust law standard of consumer harm, the question becomes, so what? Facebook’s superior resources and expertise took Instagram from a modest and glitchy app to one with a billion users as of 2018.”

Melugin also notes that “three of the top five apps in the App Store in recent weeks didn’t exist when Facebook purchased Instagram. Parler, MeWe and TikTok are all proof that Facebook’s social media business faces fierce competition in an innovative sector.”

Is Facebook a Monopoly?

Both the FTC suit and the one from the attorneys general “appear to have a lot more meat to them than the Department of Justice’s astoundingly weak case against Google,” writes Mike Masnick at Techdirt. (More on that case here and here.) “And yet… I’m still somewhat surprised at some of the claims made in both lawsuits that seem somewhat disconnected from reality.”

Masnick sees some potential merit in claims about Facebook’s application programming interface (API). But he notes that the antitrust angle is fundamentally flawed:

… 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. The FTC case argues that the “market” here is “personal social networking,” which seems like a fairly narrowly defined market:

Facebook holds monopoly power in the market for personal social networking services (“personal social networking” or “personal social networking services”) in the United States, which it enjoys primarily through its control of the largest and most profitable social network in the world, known internally at Facebook as “Facebook Blue,” and to much of the world simply as “Facebook.”

In the United States, Facebook Blue has more than [REDACTED] daily users and more than [REDACTED] monthly users. No other social network of comparable scale exists in the United States.

Of course no one denies that Facebook is the largest, but does that automatically make it a monopolist? In the space of “personal social networking,” you could easily argue that there are a number of significantly sized competitors, including Twitter, Snap, YouTube, and TikTok (which, notably, is a relatively new entrant that was able to build up a large audience, despite the presence of Facebook).

Another hurdle here is that the FTC and the Department of Justice initially had no problem with Facebook acquiring Instagram and WhatsApp:

… both the Instagram and Whatsapp decisions were reviewed at the time—and approved by the FTC and the DOJ. If anything, this all feels a bit like revisionist history to go back many years later and say “well these were obviously anti-competitive” when they certainly didn’t appear to be at the time of acquisition. And, yes, the lawsuits have quotes from people inside Facebook noting that Instagram and WhatsApp could potentially represent a competitive threat, but merely buying up some potential competitors doesn’t automatically mean that it’s anti-competitive behavior.

Masnick concludes that the FTC and attorneys general “complaints are stronger than the DOJ’s complaint against Google. That’s not to say that they are particularly strong.”

Who Does Breaking Up Facebook Really Help?

The remedies the FTC is seeking are “especially onerous,” notes The New York Times.

The agency wants to force Facebook to divest of WhatsApp and Instagram and prevent them from acquiring any other apps in the future.

Ian Conner, the F.T.C.’s head of competition enforcement, said the remedies would help restore competition and “provide a foundation for future competitors to grow and innovate without the threat of being crushed by Facebook.”

[…]Facebook, however, will be able to show that Instagram and WhatsApp grew dramatically after being acquired. The company has said it invested millions of dollars in the apps after they were purchased, helping them amass billions of users and turning them into prime communication channels around the world.

“These transactions were intended to provide better products for the people who use them, and they unquestionably did,” Jennifer Newstead, Facebook’s general counsel, wrote in a blog post on Wednesday.

And if the FTC suit is unfounded, the suit launched by the attorneys general is doubly so. There’s no reasonaside from attention seeking and trying to shake Facebook down for settlement moneywhy state attorneys general need to duplicate the FTC lawsuit.

“State antitrust actions, like this one against Facebook, don’t protect the public and should be preempted by federal enforcement,” suggests CEI’s Mario Loyola. “States don’t need to bring additional antitrust actions for the exact same conduct in dozens of different jurisdictions. All too often, the only real reason that states bring such cases is to shake down private industry in a rent-seeking exercise and shield their favored constituents from interstate competition.”


QUICK HITS

  • The U.S. Court of Appeals for the 4th Circuit ruled this week that “Devion Gentry—a Muslim incarcerated at Nottoway Correctional Center in Burkeville, VA—can continue his lawsuit challenging a Virginia prisons’ requirement that he shave his beard in violation of his right to practice his Muslim faith,” notes the group Muslim Advocates.
  • Small blessings: A new study finds “no evidence of any increase in stillbirths regionally or nationally during the COVID-19 pandemic in England when compared with the same months in the previous year.”
  • Another day, another round of lawmakers lying about the federal communications law Section 230 in attempts to give themselves greater control over online speech. The latest bills to this effect come from Sen. Mike Lee (R–Utah) and Rep. Tulsi Gabbard (D–Hawaii):
  • In other ridiculously bad tech ideas…
  • “An Associated Press investigation has identified at least six sexual misconduct allegations involving senior FBI officials over the past five years, including two new claims brought this week by women who say they were sexually assaulted by ranking agents,” the news agency reports.

  • President Donald Trump’s obsession with abolishing Section 230 seems to be shared by folks in the Biden administration. “In a move that is not very encouraging, Biden’s top tech policy advisor, Bruce Reed, along with Common Sense Media’s Jim Steyer, have published a bizarre and misleading ‘but think of the children!’ attack on Section 230 that misunderstands the law, misunderstands how it impacts kids, and which suggests incredibly dangerous changes to Section 230,” notes Techdirt.


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About The Author

Elizabeth Nolan Brown

Founded in 1968, Reason is the magazine of free minds and free markets. We produce hard-hitting independent journalism on civil liberties, politics, technology, culture, policy, and commerce. Reason exists outside of the left/right echo chamber. Our goal is to deliver fresh, unbiased information and insights to our readers, viewers, and listeners every day. Visit https://reason.com

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