Is Facebook a monopoly?

(Via POLITICO)

The idea of breaking up Facebook is gaining attention like never before — from the campaigns of presidential candidates like Elizabeth Warren and Bernie Sanders to the stunning proposal from Chris Hughes, one of the social network’s cofounders, to split the company apart to curb its “monopoly” power.

But busting up the nation’s tech giants would be much harder than making a campaign pledge. Corporate breakups are a huge, and rare, undertaking for the government, and a social media company like Facebook presents unique challenges that didn’t exist with past antitrust successes like the dismembering of AT&T in the 1980s.

Here are some of the obstacles standing in the way of turning this rallying cry into reality:

1) Proving Facebook is a monopoly
The social network is certainly big and powerful — with more than 2 billion users worldwide, a huge share of online advertising revenue and tentacles that include onetime rivals like WhatsApp and Instagram.

But it’s debatable whether Facebook meets the legal definition of a monopoly, a company with lasting, unchecked power to raise prices or exclude competitors. The answer could depend on how antitrust enforcers define Facebook’s market — a question that has become less clear as the company has expanded.

Facebook argues it has fierce competition on all sides of its business. It’s a giant of digital advertising, but is second to Google in global market share and faces competition from companies like Amazon, according to research firm eMarketer. It also competes with Apple and Snapchat as a messaging platform.

“Facebook is in an amorphous, fast-changing market,” said Adam Thierer, a senior research fellow at the Mercatus Center at George Mason University. That makes the monopoly question “convoluted and hard for the government to prove” compared with previous antitrust cases that centered on industries like oil or railroads, he said.

Facebook critics argue there’s a monopoly case to be made against Facebook, because it dominates users’ online attention and grabs control of their data. But Facebook is not the sole power in the social media market. And that makes it different from AT&T and its Bell System, which had a nationwide stranglehold on local telephone operators, long-distance service and telephone equipment before its breakup in the 1980s.

A decade later, the Justice Department struggled to prove that another big tech company — Microsoft — held a monopoly on personal computing through its control of Windows and Internet Explorer.

“AT&T was able to so thoroughly control the sector that nothing happened that it didn’t want to see happen in terms of the introduction of new services,” said Phil Verveer, who worked on the AT&T case while at the Justice Department. “That was not the case with Microsoft, and it might not be the case with Facebook either.”

2) Deciding what to break up
In past marquee antitrust cases, the road map for a breakup was relatively straightforward. The Standard Oil case, decided by the Supreme Court in 1911, saw that company split up largely along geographic lines. AT&T was a heavily regulated company with separate businesses for long-distance and local telephone lines, making the lines of division clear.

Facebook doesn’t have such easily identifiable boundaries. Social networking works only through reaching as many people as possible and connecting them with others, making the idea of separating parts of the business much more complex.

“In the internet age, those kinds of options just don’t exist,” said Andrew Schwartzman, an attorney with Georgetown’s Institute for Public Representation.

Critics like Warren and Hughes have talked up the idea of cleaving off Instagram and WhatsApp, which Facebook acquired in 2012 and 2014, respectively. Even though they appear to consumers as distinct apps, however, they are already deeply integrated with Facebook. Instagram, for example, uses the same advertising technology as Facebook.

What’s more, CEO Mark Zuckerberg recently announced the two platforms will be enmeshed even more tightly with the core social network, an effort he said will make the services easier to use and more secure. It could also make them even harder for regulators to unwind.

“There may well be sound business reasons to do it,” Schwartzman said of the changes Zuckerberg announced, “but certainly one benefit of that would be it would make it harder to break them up.”

3) Antitrust cases take time and money
The Justice Department’s antitrust lawsuit against AT&T, and its unsuccessful battle to break up Microsoft, were yearslong affairs that started under one presidential administration and ended in another. That means whoever wins the White House in 2020 could well be out of office before a potential case against Facebook is decided or settled.

The AT&T case began in 1974 and ended in 1982, after which the government spent another two years implementing an agreement that split up the company into eight smaller entities.

The government spent another decade in the 1990s and early 2000s waging an antitrust war against Microsoft for anti-competitive behavior, arguing that its operating system and internet browser should be separated. But by the time the court approved a settlement in 2002, requiring changes to the company’s business practices but leaving Microsoft intact, the penalties did not have much impact, Verveer said.

“Technology will change, business models will change, consumer preferences will change,” he said. “You could end up at the end of a long process with something that frankly doesn’t make very much difference because the world has moved on.”

That’s one reason some Facebook critics, including former DOJ antitrust official Gene Kimmelman, argue that imposing restrictions on how social media companies use data could be a more effective strategy than breaking them up.

A lengthy lawsuit against Facebook would also consume a lot of resources at the DOJ, which might have to hire outside attorneys and other experts as it did in the Microsoft case. The expense could even require additional appropriations from Congress, Schwartzman said.

“It is a really daunting enterprise,” Schwartzman said. “The likelihood the Justice Department or Federal Trade Commission would be able to undertake such an activity is remote.”

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Crediti foto: Fabrice Coffrini/AFP