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Gene Kimmelman, former head of the public interest group Public Knowledge, former Justice Department official and current member of Biden’s transition team, likes to say that antitrust is a very powerful but very limited tool of government. Antitrust, as it is currently conceived and practiced, is in fact limited. It cannot improve worker safety or increase wages. It cannot give the public clean water or clean air or reverse climate change. It cannot guarantee the safety and efficacy of the drugs.
Or rather, antitrust can do these things only if the normal, unregulated forces of competition drive them. The scope of antitrust is limited to competition. Its objective is to stop unfair methods of competition and unreasonable restrictions on trade, attack monopolies that have been obtained or maintained by anticompetitive means instead of merit-based competition, to block, condition or undo mergers that would substantially reduce competition .
But even in its purview, current antitrust is restricted. It has no authority to dismantle a monopoly or a dominant market position that has been obtained or maintained through economic forces such as economies of scale, network effects, or high switching costs. You cannot indefinitely impose one condition after another on companies in the hope of manufacturing competition where it would not naturally exist in the market.
Complaints against Facebook released this week by the Federal Trade Commission and 48 attorneys general, led by Letitia James of New York, reveal these limits. They tell the story of a company that achieved a strong position in the social media services market by providing innovative privacy-preserving functionality, but maintained it through anticompetitive mergers with fledgling rivals and unfair refusals to deal with independent competitors that it couldn’t. to buy. Having competed in the beginning by offering strong privacy protection, it used its market power and lack of genuine alternatives to gradually erode user privacy. A judge will now determine whether this “buy or bury” story is an accurate description of Facebook’s motivation in its mergers with WhatsApp and Instagram and its denial of access to data, APIs and other input to a variety of rivals.
Innocent observers of the complexities of the antitrust tradition can be forgiven for thinking that if Facebook used its market power to exploit user data and degrade privacy, remedies to restore competitive conditions would automatically improve user privacy. . However, they would be wrong.
The proposed remedies are unlikely to create real competition for Facebook, and any competition it may stimulate will not do much to improve user privacy.
The behavioral conditions proposed to make it easier for Facebook’s rivals to access the necessary information could be beneficial. But the history of such conduct forcing competition in the absence of regulatory oversight is not promising. Twenty years ago, the court imposed behavioral restrictions on Microsoft to end its anti-competitive conduct against its rivals, but Microsoft still maintains its monopoly on the personal computer operating system and associated productivity software to this day.
Splitting up Instagram and WhatsApp as separate standalone services could allow them to morph into full-service social media companies and go head-to-head with Facebook’s established service. Their large established user base could help them overcome the effects of the network and switching costs that prevent startups from challenging Facebook on social media.
But there’s a good chance the market has already tilted. There are few people in the United States who want social media services who are not yet using Facebook or some other social media service. Unlike the start of a market where a company can grow by attracting new customers to the business, new entrants now have to grow by stealing customers from incumbents or by persuading them to use both services. As the AG complaint points out, Facebook users have already invested time and effort over a period of years building their friends, interests, and followers on Facebook, and they have very little incentive to abandon that or attempt to replicate it on a new service.
What about enhanced privacy?
Divestment would likely result in reversing the data links that combined separate user files on Facebook, Instagram, and WhatsApp into a single profile. This is a modest improvement in user privacy, which could also be achieved by prohibiting data sharing between Facebook services, or allowing it only with the affirmative consent consent as the German competition authority is seeking.
Are independent startups likely to take advantage of this privacy advantage? It is not crazy to expect it. Before its acquisition by Facebook, WhatsApp was a privacy-friendly messaging service that avoided advertising. But a spin-off WhatsApp and a standalone Instagram would almost certainly support themselves through advertising. This is especially true if they are trying to compete with a free full service incumbent.
New social media competitors may start with a less detailed data set than they did when they were part of the Facebook family, but once they commit to an advertising model, the hope that in the future they will provide a better privacy protection. that Facebook evaporates. As the investigation on competition in digital markets published in October 2020 by the House Antitrust Subcommittee points out in various places, online services are forced to collect and exploit user data to survive in the fiercely competitive market. of advertising dollars. Any ethical scruples against the exploitation of your consumers’ data will erode in the face of this competition. Additionally, many users like the benefits they experience with personalized recommendations for friends, interests, groups, and followers that can only come from intensive data collection and analysis.
None of the complaints attempt to trace Facebook’s slow recognition of the need for vigorous content moderation to the lack of competitive alternatives. But perhaps the new social media competitors spawned from a divestment would do a better job of moderating content than Facebook. But this is not likely. As Dipayan Ghosh and others have pointed out, the same incentives to maximize engagement that drive advertising and personalization on social media lead to misinformation and radicalized content. Content moderation runs counter to these incentives and without regulatory oversight is doomed to be inappropriate. New social media companies will have to build a content moderation function from scratch and with no external regulation, they are highly unlikely to be better at that than Facebook, which has already invested huge sums and innovative techniques trying to engage users in what interests them. while limiting the spread of harmful and illegal content.
If policymakers want to boost competition on social media, the tools antitrust policy offers are limited. Recognizing this, the UK announced in November 2020 that it will establish a digital market unit to oversee a pro-competitive code of conduct for large technology companies. On December 15, the European Commission plans to publish its Digital Markets Law to establish ex ante rules to boost competition in digital markets. In the US, the House Competition Subcommittee recommended similar updates to the US competition policy regime that could usefully supplement antitrust action under existing law. The measures recommended in these proposals include data sharing and interoperability for social media companies.
But it’s simply the hope that even these news measures will bring genuine competition to markets like search and social media that have already leaned toward a dominant provider. It’s worth a try, but policymakers need to be clear that installing lasting competition in these markets, even with improved tools, is a long shot.
And even the successful installation of the competition is not enough to protect privacy and free expression. Advocates and academics recognize these antitrust limits. In a thoughtful discussion, legal scholar Carl Shapiro has pointed out that antitrust is not “designed or equipped” to deal with privacy and content moderation issues. It is not clear, he adds, “that increased competition would provide consumers with greater privacy or better combat information clutter: unregulated competition could trigger a race to the bottom.” Addressing these important issues, he concludes, “requires sector-specific regulation …”
If the Biden Administration and lawmakers in Congress want better privacy and content moderation on social media services, they shouldn’t wait for the results of current antitrust cases or delay until new competition tools are available. They should now move forward with regulatory measures. In the past, policymakers have established strong regulatory agencies to enforce worker safety, environmental protection, product safety, consumer financial protection, and drug safety and efficacy. They should do the same for privacy and content moderation. The application or reform of the antitrust laws does not have to interfere with this necessary reactivation of the regulation of the public interest, but it does not replace it.
