The ongoing battle accuses the tech giant of squashing and purchasing competition to avoid threats to its monopoly.
Despite its recent Meta rebrand, Facebook still faces one of the biggest challenges ever brought by the federal government against a tech company.
Earlier this month, the social media giant sought the outright dismissal of the antitrust lawsuit brought by the Federal Trade Commission. That suit was prompted by concerns after Facebook purchased upstart rivals Instagram and WhatsApp in 2012 and 2014, respectively. The high-profile case accuses the company of engaging in a “systematic strategy (of) illegally maintaining its personal social networking monopoly through a years-long course of anticompetitive conduct.” In other words, Facebook stands accused of eliminating threats to its alleged monopoly.
“Facebook lacked the business acumen and technical talent to survive the transition to mobile,” Holly Vedova, the acting director of the bureau of competition at the agency, recently said in a statement. “After failing to compete with new innovators, Facebook illegally bought or buried them when their popularity became an existential threat.”
While it is not the only suit of this nature, as others have been accused of copying competitors’ technology or gobbling them up via purchase, it is an important one as officials in Washington, D.C., consider challenging Big Tech’s market power. For these officials, the antitrust focus is largely on the dominant Big Tech firms Google, Amazon, Facebook and Apple, collectively known as GAFA.
Facebook became a one-stop shop to spread misinformation, and that drew the FTC’s attention. –Dr. Raju Parakkal
To get a better sense of what this could mean to users of Facebook and other social-media platforms, as well as to the landscape itself, we turned to Dr. Raju Parakkal, international political economist and associate professor of international relations within the University’s College of Humanities and Sciences.
Dr. Parakkal spoke about the history of antitrust legislation in the United States, what these battles over digital dominance mean to the public discourse and the impact the lawsuits—and pending legislation—could conceivably have on the way we consume news.
By way of background, he notes that such oversight relies on three main laws: the Sherman Anti-Trust Act, the Clayton Act and the FTC Act. All three are applicable to the Facebook case in some way, due to Facebook’s “direct connection with people.”
The FTC is heavily outgunned by the expertise of private, antitrust law firms and simply cannot match up to their firepower. –Dr. Raju Parakkal
Those laws are designed to ensure that no entity “abuses its dominance,” in regard to market share limiting consumer options. The bigger an entity becomes—as with Facebook’s acquisitions of WhatsApp and Instagram—the more difficult it is for competitors to enter the marketplace.
“Remember MySpace?” asks Dr. Parakkal about the erstwhile centerpiece of the social-media landscape. “Now, it’s all Facebook, and it’s almost impossible to compete with Facebook. The fact that it can decide—through its algorithms—what people like you and I should be reading, with around 36 percent of news read by Americans coming through Facebook, is of major concern. Facebook became a one-stop shop to spread misinformation, and that drew the FTC’s attention.”
At a time when six bills are pending in Congress related to Big Tech, the antitrust case is both complex and difficult for the FTC, with courts already having sided with Facebook’s argument that there’s no evidence that the platform is dominant. What the FTC has are theoretical arguments, not legal proof, says Dr. Parakkal, who is currently working on a paper about the issue as an Arlen Specter Center research fellow for 2021-22.
“The FTC is heavily outgunned by the expertise of private, antitrust law firms and simply cannot match up to their firepower,” he says. “They have said that if you want us to battle, we need more personnel with the right skills and training. Where would attorneys rather go: to the FTC or to a firm representing Facebook that offers them much higher pay?”
Still, Facebook does represent digital dominance through “big data and network effects,” he suggests. To understand the former, think about shopping (or even browsing) online and the targeted ads you receive in the aftermath.
“Whether it’s to our benefit or not, that gives them market power,” Dr. Parakkal says. “It’s so difficult for consumers to switch out and for competition to come in.”
As to the latter, he used Google as an example of a network shared by many, which gives it greater value.
“The ‘switching costs’ of moving away from Google and Facebook are financial, emotional and so high that people just say, ‘I’m just going to stay with Google and Facebook since all my family and friends are on there.’ That inertia adds to Big Tech’s digital dominance,” he adds. “Those barriers to market entry come with higher economic and social costs for the country and society.”
Unless the FTC lawyers can bring in some really convincing evidence, this will be very difficult for them. –Dr. Raju Parakkal says
Much like with the noteworthy Standard Oil and AT&T antitrust cases of the past, the FTC—and its parent agency, the Department of Justice—are attempting to “get in there and break Facebook up,” though there is no concrete picture of what that would look like being offered.
“I can’t put a finger on what exactly the FTC wants, though (like AT&T’s case) it doesn’t want a dozen Facebooks resulting from the case,” Dr. Parakkal says. “Do they want some government control over it? Yes. But, they’ve really never clearly articulated what would happen after they break it up.”
That, coupled with evidentiary challenges that have left the FTC unable to articulate a legally compelling argument yet, and the competitive disadvantages in representation, leaves Dr. Parakkal skeptical.
“It’s one thing to pass bills in Congress, but it’s another thing to convince folks, in an evidence-based manner, especially when American antitrust courts have traditionally favored the corporations,” he says. “Unless the FTC lawyers can bring in some really convincing evidence, this will be very difficult for them.”
They’ve given a warning to Facebook and potential Facebooks that somebody is watching over them, that they can’t do what they used to do. –Dr. Raju Parakkal
Despite that skepticism, Dr. Parakkal says there have already been some benefits to the added scrutiny, with Facebook making some “cosmetic changes to rein in ‘fake news’ and violent language and actions.”
“Facebook does not want to get dinged on those things because the FTC lawyers could use them as evidence against them. It’s a good thing that they’re cleaning up,” he says. “Let’s say the suits fizzle out. At least they’ve given a warning to Facebook and potential Facebooks that somebody is watching over them, that they can’t do what they used to do.
“Even if the suits don’t go anywhere, just the fact that that warning is out there means something positive came out of this. Still, for the time, effort and tax money, there should be better results.”