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Facebook: The Antitrust Lawsuit That Threatens its Future


By Kate Begley, BSc Politics and International Relations at the University of Bristol


United States Government has threatened to break up Facebook as it sues for what they believe are breaches of antitrust law. Facebook’s influential position in American politics and beyond is being questioned, but how serious is the threat?


On 9 December 2020, the Federal Trade Commission (FTC) announced that the United States Government, with a broad corporation of states, is suing Facebook for monopolistic practices (FTC, 2020a). Facebook is worth more than $70 billion and made more than $18.5 billion in 2019 (FTC, 2020a). In a statement Ian Conner, Director of the Bureau of Competition, referred to the harm Facebook's monopoly does to its users and advertisers; '[denying] consumers the benefits of competition' (FTC, 2020a). As part of the government's case, FTC has pointed to Facebook's Acquisitions. These include the purchase of Instagram in 2012 for $1 billion and Whatsapp in 2014 for $19 billion (ibid). In both cases, the government claims "Facebook chose to buy an emerging threat rather than compete" (ibid). The case against Facebook also includes what it sees as Facebook's anticompetitive behaviour toward software developers—preventing perceived competitors from connecting with Facebook's interface. The government's complaint calls for the disinvestment of Instagram and Whatsapp significantly breaking up Facebook's portfolio and implementing regulation around any future deals (ibid).


Historically the FTC's response to startup acquisitions has been described as a 'rigid policy of near-universal inaction' (Bryan and Hovenkamp, 2020). This can be explained by referring to the 'Chicago School' on antitrust. The group of academics, including Robert H. Bork, author of 'The Antitrust Paradox', promoted significant restraint when prosecuting against monopolies and acquisitions (Bork, 1993). The work of Bork and his colleagues has had a profound influence on antitrust court rulings. In their response to the case Jennifer Newstead, Vice President and General Counsel at Facebook highlighted FTC inaction at the time of Facebook's acquisitions (Jennifer Newstead, 2020). When Facebook purchased Instagram, it returned no profit, and few could predict the extent of its growth. This reflects the difficulty of reviewing startup acquisitions as they occur; our understanding of the effect they will have on the market can only be 'speculative'. Retrospectively challenging these acquisitions might be difficult. But the FTC says it frequently reviews mergers and if they have broken antitrust law there is ground to take action and increasing academic support (FTC, 2020a) (FTC, 2020b). Hovenkamp, a significant antitrust theorist, supports action against Facebook (Bryan and Hovenkamp, 2020). He explains that technology has changed the landscape since Bork wrote his seminal work and thus 'While much of what Bork said may still apply, it often does so less categorically" (Hovenkamp 2014). Support for the FTC case also comes from Tim Wu, a Columbia University professor and author 'The Curse of Bigness: Antitrust in the New Gilded Age'. Wu sees this case as 'long overdue' and underlines the precedent for breaking up monopolies in the US, the most recent being Microsoft and AT&T as well as Standard Oil, American Tobacco and IBM (Wu, 2020).


The FTC case comes at a time of increasing political motivation to curtail the power of Facebook and other 'big tech'. Senator, Elizabeth Warren, a key member of congress supporting the increased regulation on 'big tech' put the issue at the centre of her presidential bid. In October, the Department of Justice sued Google for monopolistic practices, and in the same month, a Democrat-sponsored report also recommended breaking up Facebook (as well as Google, Apple and Amazon). The report suggests that its monopoly means "Facebook competes more vigorously among its products—Facebook, Instagram, WhatsApp, and Messenger—than with actual competitors" (Subcommittee on Antitrust, Commercial and Administrative Law of The Committee on the Judiciary, 2020).


Following January's violent protests at the Capitol, Twitter and Facebook have suspended the former Presedent's accounts. Both Trump's use of social media to goad his supporters and the decision to shut down his account reveal large tech companies' immense power in our political discourse. The influence of Facebook places CEO Mark Zuckerburg right at the centre of American and International politics. While more people question the power held in such companies, the likelihood of quick political action is slim with a lack of consensus amongst Democrats who control the Senate by deciding vice president's vote.


An increasing number of scholars and political actors are questioning tech giants' power within our political landscape. But while support for change is there, political and legal action will not come quickly. The broader political motivation for tech regulation is growing, but significant legislative change demands much more support if the status of Facebook is going to change. Antitrust cases typically take years to play out. Forcing Facebook to divest such profitable platforms as the FTC calls for would be an extraordinary event in the tech world, something we haven't seen since Microsoft. Facebook's position might be secure for now, but it should not be taken for granted.



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Bibliography


Robert H. Bork, (1993) Antitrust Paradox: A Policy at War with Itself. New York: Simon & Schuster.


Kevin A. Bryan, and Erik Hovenkamp, (2020) 'Startup Acquisitions, Error Costs, and Antitrust Policy', The University of Chicago Law Review, 87(2), pp. 331–356. Available at: https://www.jstor.org/stable/26892414 (Accessed: 8 January 2021).


FTC (2020a) FTC Sues Facebook for Illegal Monopolization, Federal Trade Commission. Available at: https://www.ftc.gov/news-events/press-releases/2020/12/ftc-sues-facebook-illegal-monopolization (Accessed: 22 January 2021).


FTC (2020b) The FTC's Facebook Suit: Questions and Answers, Federal Trade Commission. Available at: https://www.ftc.gov/news-events/facebook-q-a (Accessed: 22 January 2021).


Jennifer Newstead (2020) 'Lawsuits Filed by the FTC and the State Attorneys General Are Revisionist History', About Facebook, 9 December. Available at: https://about.fb.com/news/2020/12/lawsuits-filed-by-the-ftc-and-state-attorneys-general-are-revisionist-history/ (Accessed: 22 January 2021).


Subcommittee on Antitrust, Commercial and Administrative Law of The Committee on the Judiciary (2020) Investigation of Competition in Digital Markets: Majority Staff Report and Recommendations.


Tim Wu, (2020) 'Opinion | Facebook Cannot Buy Its Way Out of Competition', The New York Times, 12 December. Available at: https://www.nytimes.com/2020/12/12/opinion/facebook-antitrust.html (Accessed: 22 January 2021).




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