Pixel Envy

Written by Nick Heer.

Mistakes Often Made in Describing the Facebook Antitrust Case

Earlier this week, the U.S. Federal Trade Commission sued Facebook for illegal monopolistic behaviour. They were joined by attorneys general from forty-six states plus the District of Columbia and Guam, but excluding Alabama, Georgia, South Carolina, and South Dakota, for whatever reason. There is a lot to go through in the suit and it will take years to play out in court.

The government is alleging that Facebook should not have acquired Instagram or WhatsApp and is demanding the divestment of both; it is also saying that the terms under which Facebook offered some APIs were illegally anticompetitive, which is a potentially worrisome complaint. Spinning off its biggest acquisitions will involve technical hurdles that Facebook began rolling out — very deliberately, you might say — earlier this year. Contrary to what Matt Stoller says, this is not a matter of “essentially copying and pasting some code”. But that does not mean it should not be done if the legal arguments are sound.

Because this is such a complex case, the reporting around it must be careful and well-sourced, but it is likely that much of it will not be. For example, here’s the Financial Times’ editorial board claiming the burden of proof that will be required to satisfy the government’s claims:

[…] There are significant hurdles for the case to clear, not least the fact that the FTC approved both of the acquisitions, that of Instagram in 2012 and WhatsApp in 2014. The courts will have to consider whether the acquisitions were lawful then, not whether they would be lawful today. […]

Tim Wu and Scott Hemphill argue that this is an inaccurate way of viewing this case:

In 2012 and 2014, the FTC declined to take action against the acquisitions of Instagram and WhatsApp. As a legal matter — which matters, since we are speaking of a legal action — declining to take action has no binding effect on future enforcement actions. That is a well established principle not just in antitrust, but any area of law enforcement. Indeed, we applaud criminal prosecutors when they revisit cold cases with new evidence.

This is an important rule, because non-action might become action in the face of new evidence, and indeed that is what the FTC has in this case. In 2012, the durability of Facebook’s monopoly was unclear, and it was widely thought that Google+ would emerge as a major competitor to Facebook. But here in 2020 we know that the monopoly was durable, and that Google+ was not significant. Beyond that, more emails have come out, more third party testimony, and more evidence of a general, serial campaign to eliminate competitive threats, large and small. And the anticompetitive effects — less privacy, more ads, and so on — are now matters of fact rather than prediction.

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. That’s why I made it the main link for this post.