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Investors don’t seem to care
LETITIA JAMESThe New York attorney general could not be more forceful in describing the antitrust case filed on December 9 against the world’s largest social network. “By using its vast trove of data and money, Facebook has crushed or hindered what the company perceived as potential threats. They have reduced options for consumers, stifled innovation and degraded the protection of privacy for millions of Americans, ”he stated, summarizing the allegations. Forty-five states joined his bipartisan coalition against the giant. Separately, the Federal Trade Commission (FTC) sued Facebook for monopolistic practices on social media and demanded solutions, including breaking up the company.
A few years ago the action coordinated by 46 states and the FTC that it could split Facebook was unthinkable, says Lina Khan, an antitrust scholar at Columbia Law School. But the case is more than a strict competition law. Controversies around Facebook’s privacy practices, the spread of fake news and conspiracy theories on the platform, and their exploitation by authoritarian regimes mean that regulators and politicians are determined to force change.
Will they be successful? The cases seem strong. Experts consider Facebook to be the cheapest antitrust fruit, along with Google (which the US Department of Justice sued for alleged monopoly abuse in October). Amazon and Apple are in the crosshairs, but those cases will take longer, if they come, says an antitrust expert.
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Facebook’s lawsuits focus on its acquisitions. The firm maintained its monopoly on personal social media by systematically buying off potential competitors, they both argue, notably Instagram in 2012 and WhatsApp in 2014. A smoking gun could be Onavo, an Israeli firm Facebook bought in 2013, to protect assets. user data, the firm said. The lawsuits claim that it in fact used Onavo to track the popularity of rival apps and select acquisition targets. Another alleged anti-competitive practice was blocking rival app developers from their platform. As harm to the consumer is difficult to prove against the mostly free products of big technologies, the lawsuits prove a novel argument: that it damages the privacy of users and the choice of advertisers.
Facebook will argue that its market is social media, which is broader and more competitive than social media. TikTok, a Chinese-owned short video app, is now more popular than Instagram among American teens. The internal Facebook emails on which the lawsuits are based barely paint a picture of a lazy monopolist; Zuckerberg and his lieutenants see competitive threats everywhere. Facebook can also argue that splitting it up is next to impossible. Last year it began to integrate Instagram, WhatsApp and Messenger more deeply. And the FTCThe complaint does not mention that it removed the Instagram and WhatsApp offers. The government “now wants to do it again,” sending a chilling warning to US companies that “no sale will be final,” Facebook said.
The markets ignored the news. Facebook shares fell 2%, in line with the rest of the big technologies. Investors view forced divestitures as unlikely, says Brent Thill of Jefferies, an investment bank, or spy on even more money to come from divestitures. ■
This article appeared in the Business section of the print edition under the title “The Battle Begins.”
