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(Bloomberg opinion) – Regulators have just opened a new front in their battle to contain the power and influence of America’s largest tech companies, with dual lawsuits from the Federal Trade Commission and a group of state attorneys general indicting Facebook. Inc. to violate antitrust laws and seek solutions that could lead to a breakdown of the social media giant. It is a worthy effort.
The lawsuits contend that Facebook’s “buy or bury” strategy, specifically its Instagram and WhatsApp purchases, squashed emerging competitive threats, unfairly maintaining the company’s monopoly on social media. The FTC wants a court action to require Facebook to undo those two acquisitions; notify in advance and seek approval for future mergers; and prohibit the company from taking advantage of its current dominance in the social media market to stifle future competition. Facebook, in an emailed statement, responded that “antitrust laws exist to protect consumers and promote innovation, not to punish successful companies,” adding that the FTC had approved its previous acquisitions.
The proposed remedies are bold, but they fit the infraction and make sense if the goal is more competition. While it is true, as Facebook has argued, that Instagram’s success was not a foregone conclusion and required an investment by the company to make the app what it is, there is also no question that there is too much concentration today. market. Facebook, after all, owns the two most successful social media apps on Facebook and Instagram, along with a leading messaging app on WhatsApp. More than 3 billion people use one of Facebook’s platforms every month. Earlier this year, I defended breaking up Facebook and Instagram, saying a split would be good for industry innovation, competition and consumer choice in a critical area that is only growing in importance. That argument still stands.
That is not all that needs fixing. According to the FTC, Facebook only allowed third-party apps to access its platform if they promised not to offer features that compete with their core Facebook functions or to promote other social networks. This kind of egregious anti-competitive behavior deserves to be banned. And requiring pre-approval for future deals seems logical, as the company is apparently undaunted by even the heightened scrutiny it has suffered this year. Last month, Facebook announced the purchase of Kustomer Inc., a developer of customer service messaging software, for a total of $ 1 billion. With no restrictions, Facebook is likely to continue its shopping spree, absorbing technologies and eliminating potential new upstarts before they can thrive.
The complaints follow a Justice Department lawsuit against Google’s parent company Alphabet Inc., which accused the company of abusing its search engine to stifle competitors. And the FTC’s complaint is similar to the October US House antitrust report, which said Facebook had used the advantages of the data to identify emerging competition to “acquire, copy or eliminate these companies.” This is a concerted effort, and not just in the US, European regulators are on the case as well.
It won’t be a quick or easy fight. Facebook is the most powerful social media company in the world, with a market value of nearly $ 800 billion and dozens of attorneys at your disposal. It can be difficult for the various government and regulatory agencies to implement the most aggressive remedies in a timely manner. And the final prosecution of the FTC is further complicated by the likely eventual change in leadership next year under the Biden administration.
Regardless of what happens to these lawsuits, Congress, for its part, can take action to slow down Facebook and the rest of Big Tech, and perhaps faster too. Led by Democratic Representative David Cicilline of Rhode Island, head of the House of Representatives antitrust subcommittee, lawmakers can narrow the more ambitious goals outlined in their Big Tech report and focus next year’s legislative agenda on something that can easily pass. in a bipartisan way. Some Republicans have already said they support a subset of the report’s recommendations, such as increasing funding for antitrust agencies and lowering the bar for regulators to block transactions. Specifically, they support a new policy that would shift the “burden of proof” to the companies themselves to demonstrate that a potential deal is not anti-competitive.
If Cicilline focuses the legislation in areas with support from both sides of the aisle, new laws with real antitrust teeth could soon be passed, before any court ruling. Either way, Facebook and its Big Tech brethren aren’t likely to come out of this the same way.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Tae Kim is a Bloomberg Opinion columnist covering technology. He previously covered technology for Barron’s, following a previous career as an equity analyst.
