FTC Sues Facebook for Illegal Monopolization
FTC (PDF, TidBITS, NBC, NY Times):
The Federal Trade Commission today sued Facebook, alleging that the company is illegally maintaining its personal social networking monopoly through a years-long course of anticompetitive conduct. Following a lengthy investigation in cooperation with a coalition of attorneys general of 46 states, the District of Columbia, and Guam, the complaint alleges that Facebook has engaged in a systematic strategy—including its 2012 acquisition of up-and-coming rival Instagram, its 2014 acquisition of the mobile messaging app WhatsApp, and the imposition of anticompetitive conditions on software developers—to eliminate threats to its monopoly. This course of conduct harms competition, leaves consumers with few choices for personal social networking, and deprives advertisers of the benefits of competition.
The FTC is seeking a permanent injunction in federal court that could, among other things: require divestitures of assets, including Instagram and WhatsApp; prohibit Facebook from imposing anticompetitive conditions on software developers; and require Facebook to seek prior notice and approval for future mergers and acquisitions.
Investors clearly don’t think they’re actually going to bust up Facebook, but investors are often totally wrong. The thing I’d be really worried about, if I were Zuckerberg, is the broad bipartisan nature of the regulators behind this. It’s hard to believe you could get 48 attorneys general behind any major initiative today.
I am not a lawyer or an antitrust expert, but as someone who has observed the technology industry for a long time, it seems important to note that things in the industry are speeding up. The government watchdogs need to be mindful that the time it takes from being an upstart to a giant is getting shorter and shorter.
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What we need — and soon — is a new framework that thinks about monopolies from a more future-oriented perspective. Market share is such an industrial metric to think about in this digital age.
Update (2020-12-16): Nick Heer:
The rest of the Times paragraph makes other arguments that Wu and Hemphill end up refuting in their piece: the government does not necessarily have to prove that acquisitions would have been significant competitors, nor should this case have a chilling effect on smaller acquisitions. It is worth reading as a preface for much of the reporting that will undoubtably be published over the next several years as this case is argued.
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> the time it takes from being an upstart to a giant is getting shorter and shorter
For important sectors, the opposite has happened. It did not take very long for Facebook, Twitter, and YouTube to become the dominant players in their respective markets. And now — over a decade later — they've only gotten larger, consolidated more power, and strengthened their network effects. It's gotten to the point where it seems impossible to unseat them, even as we see the role they play in the unraveling of a common fact base, putting democracy itself in danger.
