(Bloomberg Opinion) — Regulators just opened a new front in their battle to contain the biggest U.S. technology companies’ power and influence, with dual lawsuits from the Federal Trade Commission and a group of state attorneys general accusing Facebook Inc. of violating antitrust laws and seeking remedies that may lead to a breakup of the social media giant. It’s a worthy effort.
The suits contend that Facebook’s “buy-or-bury” strategy, specifically its purchases of Instagram and WhatsApp, squashed emerging competitive threats, thereby unfairly maintaining the company’s monopoly over social networking. The FTC wants court action to require that Facebook unwind those two takeovers; provide advance notice and seek approval for future mergers; and prohibit the company from leveraging its current social media market dominance to stifle future competition. Facebook, in an emailed statement, responded that “antitrust laws exist to protect consumers and promote innovation, not to punish successful businesses,” adding the FTC had cleared its prior acquisitions.
The proposed remedies are bold, but they fit the offense and make sense if the goal is more competition. While it is true, as Facebook has argued, that Instagram’s success wasn’t a foregone conclusion and took investment on the company’s part to make the app what it is, there is also no question that there is too much market concentration today. Facebook, after all, owns the two most successful social networking apps in Facebook and Instagram, along with a leading messaging app in WhatsApp. More than 3 billion people using one of Facebook’s platforms each month. I argued earlier this year for a breakup of 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’s not all that needs fixing. According to the FTC, Facebook only allowed third-party applications access to its platform if they vowed not to offer features that compete with its core Facebook functions or promote other social networks. This type of egregious anticompetitive behavior deserves to be banned. And requiring pre-approval for future deals seems logical as the company is seemingly undeterred even with the heightened scrutiny it’s been hit with this year. Last month, Facebook announced the purchase of Kustomer Inc., a developer of customer-service messaging software, for a reported $1 billion. Without any restrictions, Facebook will likely to continue its buying spree, absorbing technologies and cutting off potential new upstarts before they can thrive.
The complaints follow the Department of Justice’s lawsuit against Google parent Alphabet Inc. that accused the company of abusing its search engine to stifle competitors. And the FTC complaint is similar to October’s U.S. House antitrust report, which said Facebook had used data advantages to identify nascent competition to “acquire, copy, or kill these firms.” This is a concerted effort, and not just in the U.S. — European regulators are also on the case.
It won’t be an easy, or quick, fight. Facebook is the world’s most powerful social media company, with a market value of almost $800 billion and scores of lawyers at its disposal. It may be difficult for the various government agencies and regulators to get the most aggressive remedies implemented in a timely fashion. And the FTC’s final prosecution is further complicated by the likely eventual leadership change next year under a Biden administration.
Regardless of what happens with these suits, Congress, for its part, can take steps to rein in Facebook and the rest of Big Tech, and perhaps more quickly, too. Led by Democratic Representative David Cicilline of Rhode Island, head of the House antitrust subcommittee, lawmakers can pare down the most ambitious aims outlined in their report on Big Tech and focus next year’s legislative agenda on something that can pass easily on a bipartisan basis. Already, some Republicans have said they support a subset of the report’s recommendations, such as increasing funding for the antitrust agencies and lowering the bar for regulators to block transactions. Specifically, they back a new policy that would shift the “burden of proof” to the companies themselves to prove a prospective deal is not anticompetitive.
If Cicilline focuses legislation on areas with support from both sides of the aisle, new laws with real antitrust teeth could pass soon, before any court judgments. Either way, Facebook and its Big Tech brethren aren’t likely to come out of this the same.
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 an earlier career as an equity analyst.
