The Washington Post - USA (2020-12-11)

A18 EZ RE THE WASHINGTON POST.FRIDAY, DECEMBER 11 , 2020

the list — that feature nowhere in

the actual complaints.

Such questions may be particu-

larly tricky in the case of Google,

given that the FTC aggressively

and publicly pursued the compa-

ny over several of the same issues

featured in the October complaint

before accepting a weak voluntary

agreement in 2013 that, based on

the government’s recent claims,

did little to curb the company’s

allegedly monopolistic ambitions.

The politics surrounding Sili-

con Valley surely have changed

since the tech-friendly Obama ad-

ministration, but it ’s less clear that

the viability of the legal argu-

ments has — especially as the

federal judiciary has grown more

conservative with four years of

appointments by Trump.

The anti-monopoly research

group Open Markets Institute ar-

gued that the passage of time has

made government antitrust en-

forcement more viable.

“They were still seen as Ameri-

ca’s darling superstars, our suc-

cess stories,” when regulators pre-

viously looked at Google and Face-

book, said Sally Hubbard, director

of enforcement strategy for the

Open Markets Institute. “But as

companies get to become long-

standing, durable monopolies,

they start to treat people badly —

they start to treat their consumers

badly, they start to treat their em-

ployees badly, they start to treat

other businesses badly. Because

that’s wh at monopolies do. And so

people started to see the harm.”

As in the Google case, the one

against Facebook relies on old,

familiar stories. The same federal

government that filed suit

Wednesday claiming antitrust vi-

olations in the acquisition of Ins-

tagram and WhatsApp approved

both of those deals at the time. But

here is where the efforts of govern-

ment officials to personalize their

case against Facebook could play

an important role.

For a company devoted to earn-

ing the most possible money for

the most possible years — a de-

scription that applies to most of

corporate America — any public

battle exists on several planes at

once. There’s winning in court,

with judges. Then there’s winning

in the court of public opinion, with

current and potential future cus-

tomers, not to mention advertis-

ers that have, at times, asserted

themselves against even the most

powerful tech companies.

Facebook’s response Wednes-

day was heavy on the legal aspects

of the case, with the company’s

general counsel, Jennifer

Newstead, issuing a statement

ready for a c ourtroom: “People

and small businesses don’t choose

to use Facebook’s fr ee services and

advertising because they have to,

they use them because our apps

and services deliver the most val-

ue.”

But after years of declining pub-

lic affection for Facebook and

Zuckerberg personally — not to

mention deterior ating relations

with Congress, state regulators

and leaders of both major parties

— there is an unquestioned cost to

a long, drawn-out battle that

might ultimately require Zucker-

berg to take the stand.

The be st dramas need villains.

It’s clear state and federal regula-

tors pursuing Facebook already

have settled on theirs. And he ’s not

the character you met in “The

Social Network.”

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[email protected]

across unrelated markets.

“There has to be a w ay to pr e-

vent” Facebook, Google and other

companies from being “able to

reuse their preexisting data ad-

vantage, buy a start-up in a brand-

new market and then dominate

the market” without relying only

on “reactive and retroactive” ideas

of how a m onopoly works, Malik

said.

Then there is the challenging

question of: Why is the govern-

ment acting against Facebook and

Google now?

This is complicated by the polit-

ical backdrop of President

Trump’s years of open warfare

against Silicon Valley companies

for a variety of supposed harms —

with unproven claims of bias

against conservatives at the top of

necessarily would lead to less col-

lection and exploit ation of cus-

tomer data — especially in a coun-

try where the nation’s legisl ators,

unlike those in many other parts

of the world, have enacted few

laws to protect that same personal

data. Using antitrust law to secure

consumer privacy that Congress

has so far neglected requires mul-

tiple logical steps, each of which

would face scrutiny in court.

“We need our rules and think-

ing to be of the future and not from

100 years ago,” said Om Malik, a

partner at the Silicon Valley ven-

ture capital firm True Ventures.

He argued that the companies

should be able to still buy smaller

firms to expand their core busi-

ness without gobbling up side

companies so that they can sprawl

define the nature of the harm

Facebook has inflicted on its cus-

tomers, long a sticking point when

government trustbusters scruti-

nize services that are free to use,

making the potential for higher

costs a n onissue.

Evidence abounds in the com-

plaints of ruthless tactics and

damage to competitors — some-

thing more important to Euro-

pean antitrust law than the weak-

er U.S. versions — but the argu-

ments about the consequences of

Facebook’s monopolistic behavior

come down to this: A freer, more

competitive market would lead to

better products with more strin-

gent privacy protections.

That might be true, but it’s not

inherently obvious that more

thriving social media companies

trict of Columbia and Guam —

offer what they say is extensive

evidence of a k ind of Silicon Valley

thuggery by Zuckerberg. But some

of the drier legal arguments are

harder to follow and less immedi-

ately convincing, as they call for a

variety of sanctions, including

breaking off Instagram and

WhatsApp from Facebook.

Antitrust experts reviewing the

complaints seized on familiar is-

sues that have bedeviled antitrust

scrutiny of technology companies

for years, starting with the uncer-

tainty over what market, exactly,

Facebook is monopolizing. Are the

key competitors vanquished rivals

such as Myspace, or thriving social

media platforms Twitte r, Linked-

In, TikTok and WeChat (the last

two of which are owned by Chi-

nese companies)?

“There’s a practical problem in

arguing that they’re stifling com-

petition, except for all of these

competitors,” said Jessica Mel-

ugin, an associate director at the

Competitive Enterprise Institute,

a free-market think tank in D.C. “I

mean, come on, the New York

attorney general went on Twitter

to talk about her case... and

there ’s a l ot of complaining about

monopolies on other social media

websites.”

Adding to this confusion is

that Google, another alleged mo-

nopolist in the U.S. government’s

telling, has a walk-on role in the

complaint against Facebook, as

the creator of failed social net-

work Google Plus. So, the argu-

ment goes, both companies are

dangerous monopolies in th e

same technology industry, but

different parts of that industry.

This will surely resonate with

many people familiar with to-

day’s technology industry, domi-

nated as it is by a handful of

powerful players that prey on

weaker rivals and arguably stifle

innovation, but it’s one more logi-

cal step that government officials

will have to prove in court.

The complaints also strain to

if they defy him, according to the
123-page complaint from state of-
ficials.
One anecdote central to the cas-
es depicts Instagram co-founder
Kevin Systrom seeking advice
from a company investor while
considering a $ 1 billion offer to
sell his company to Facebook in
2012: “Will he go into destroy
mode if I say no?”
The answer: “Probably.”
Systrom soon decided to sell,
taking an offer that, in the telling
of the state and federal officials, he
couldn’t really refuse.
The dramatic language, bol-
stered by damaging emails un-
earthed by investigators, paints
Zuckerberg as Silicon Valley’s
leading villain, one whom the
public might be persuaded to
loathe, as some already do. It’s
particularly striking, coming two
months after the Justice Depart-
ment’s antitrust complaint
against Google, which is long on
charts, data and industry analysis
but does not even name the com-
pany executives whose decisions
led to the allegedly monopolistic
actions.
“The prose of the complaints is
very different because of the be-
havior and the paper trail,” said
Gene Kimmelman, a former Jus-
tice Department antitrust official
now working as a senior adviser to
the public interest advocacy group
Public Knowledge. “Facebook was
‘Move fast and break things,’ so
Zuckerberg was not careful, espe-
cially in those earlier years.”
Many of the anecdotes in the
federal and state antitrust com-
plaints against Facebook recount
familiar, factual tales long shared
within the technology industry.
But the decision to vilify one of the
21st century’s most successful en-
trepreneurs — not to mention the
creator of the industry leader in a
competitive global market — w as
a tactical choice likely to fuel the
all-out battle brewing between a
bipartisan group of government
officials and a spectacularly
wealthy private company.
Zuckerberg already vowed, in
July, to “go to the mat and...
fight” efforts to break up his crea-
tion. It’s an approach that he alone
could decide to pursue given his
controlling power over Facebook’s
voting shares — something that
no individual at Google’s parent
company, Alphabet, has.
“Google is much more of a m a-
chine, while Facebook is essential-
ly a machine built around an iden-
tity of one, which is Zuck. Every-
one at the company tries to essen-
tially act how Zuck would,” said
Ashkan Soltani, who was the for-
mer chief technologist at the Fed-
eral Trade Commission from 2014
to 2015 and the technical lead on
the 2011 FTC privacy case against
Facebook.
While Facebook can afford the
world’s best lawyers, it also has the
abilit y, should it choose to do so, to
deliver its counterarguments di-
rectly to billions of users world-
wide by activating the most far-
reaching communications net-
works in world histor y. This is an
asset that Standard Oil, AT&T and
Microso ft, in landmark antitrust
cases of pr evious generations, did
not have.
Such political factors may ulti-
mately prove important. The au-
thors of the lawsuits filed Wednes-
day — one by the FTC and a l onger,
more elaborate one by the attor-
neys general of 46 states, the Dis-

FACEBOOK FROM A

Cases paint Zuckerberg as Silicon Valley’s main villain

MANDEL NGAN/POOL/AGENCE FRANCE-PRESSE/GETTY IMAGES

Facebook CEO Mark Zuckerberg testifies before a House Judiciary subcommittee in July. The authors of the lawsuits against Facebook

offer what they say is evidence of a kind of Silicon Valley thuggery b y Zuckerberg.  For more, visit wapo.st/FacebookAnalysis

BY HEATHER KELLY

san francisco — Facebook is
too big, has too much power and
snuffs out too many competitors,
according to lawsuits filed by the
Federal Trade Commission and
48 states and jurisdictions on
Wednesday. The complaints ac-
cuse Facebook of being an illegal
monopoly that hurts everyone
from regular Instagram posters
and advertisers to any company
that tries to challenge the social
media giant on its turf.
In a p air of complaints, the
states’ attorneys general and the
FTC laid out their cases against
Facebook and recommendations
for what should be done next.
Here’s what it means for you.

What’s the goal of the
lawsuits?

Facebook is a social media
monopoly, the complaints say. At
the heart of its dominance is a
pair of companies it purchased
six and eight years ago, respec-
tively: Messaging app WhatsApp
and photo-sharing site Insta-
gram. The FTC did not block
either move.
The complaints direct Face-
book to sell off those the compa-
nies and change its policies for
how it deals with third-party
developers. That’s because Face-

book has a policy against devel-

opers who make apps that copy

any existing Facebook feature on

its platform, which the com-

plaints say is anti-competitive.

What will it mean for

Facebook, Instagram and

WhatsApp users?

In the short term, not much —

unless they h appen to enjoy fol-

lowing news about complex anti-

trust battles. The filings are just

the first step in what is likely to be

a dr awn-out, expensive legal bat-

tle with an unknown outcome

that could take years. Facebook is

unlikely to make any major

changes to its p ractices or struc-

ture at this stage.

However, if the government is

successful and Instagram and

WhatsApp become independent

companies again, any outward-

facing changes for users could

range from subtle (the removal of

“from Facebook” on WhatsApp)

to unfortunate (an uptick in

spam and misinformation on Ins-

tagram). Since Facebook bought

Instagram in 2012 for $1 billion

and WhatsApp in 2014 for $19 bil-

lion, it has made changes slowly

and let the brands appear largely

independent so as not to lose

loyal users. (Consider how many

people are still fans of Instagram

while railing against and even

quitting Facebook.)

The big gest alterations to the

services have happened behind

the scenes with complex integra-

tions of the technology that keep

the apps running. For example,

Facebook and Instagram share

the same advertising service, as

well as the data collected about

users and fed into it. The compa-

ny is merging the direct messag-

ing services on Instagram, Face-

book and WhatsApp so that com-

munications can take place

across platforms.

WhatsApp and Instagram also

share much of Facebook’s mas-

sive security, moderation and

misinformation apparatuses. If

split, Instagram and WhatsApp

might have to re-create on their

own those same systems that try

to keep users safe.

“A lot of those things are better

with more scale,” said Matt Per-

ault, director of the Center on

Science and Technology Policy at

Duke University. “It’s likely that

the products could get worse if

separated.”

What’s the harm in Facebook

buying other companies?

The lawsuits allege that Face-

book’s pattern of buying up or

squashing competitors has

turned it into a monopoly, mak-

ing it difficult for smaller services

to succeed. One benefit of being

so large is that Facebook can

easily copy a rival’s most appeal-

ing feature for its own 3 billion

monthly users across its apps,

removing any appeal that a com-

petitor may have had. For exam-

ple, when Snapchat’s “stories”

feature was at its peak, Facebook

added a nearly identical version

to Instagram and later Facebook.

(Twitter recently added its own

copycat feature.)

Antitrust investigations tradi-

tionally have focused on consum-

er welfare and economic impact,

but “free” services such as Google

and Facebook could force the

government to focus on the con-

sumer-harm side, Perault says.

According to the complaints,

Facebook’s “buy or bury” strategy

hurts consumers by limiting in-

novation. If no competing op-

tions can take off, people won’t

have the opportunity to switch.

One of the key areas harmed,

the complaints allege, is privacy.

Facebook changed the privacy

policies of the companies it

bought and took steps that the

complaints say hurt people’s pri-

vacy, such as sharing phone num-

bers between the apps for fea-

tures such as suggesting contacts

you might know. The complaints

also claim that advertisers are

hurt by a lack of transparency, as

well as the negative effect on

their brand if seen next to objec-

tionable content such as hate

speech.

Facebook, however, points out

that other social media compa-

nies have managed to launch and

grow during its reign. Twitter,

TikTok and Snap are all surviving

and mostly gaining users, though

the latter has struggled at times

to add users. While Google may

have killed off Google Plus, its

subsidiary YouTube is arguably a

social network itself, with more

than 2 billion users worldwide.

What happens next?

The lawsuits have been more

than a year in the making, but

they are still just at the initial

stages. The government will have

to prove its case in court. The

company is processing the com-

plaint and determining what the

next steps will be, but it plans on

digging in for a long fight. The

battle is expected to play out for

years in court filings, trials and

news releases.

What does Facebook have to

say?

Facebook quickly defended it-

self with a statement and blog

post written by its general coun-

sel, Jennifer Newstead. In it,

Facebook calls the lawsuits “revi-

sionist history” and claims that

the FTC’ s previous reviews of the

Instagram transaction — as well

as the European Commission‘s

review of the WhatsApp sale —

make both purchases “settled

law.” (The FTC’ s 2012 review did

not culminate with an “approval,”

but rather allowed the deal to

proceed.)

The company says the two

apps are only as big and powerful

as they are because of Facebook’s

investment. Requiring Facebook

to sell them would hurt innova-

tion, it says.

Facebook adds that consumers

have more options now than ever,

and that people choose its prod-

ucts because they want to — not

because the products are used by

more than 3 billion people global-

ly and therefore the most domi-

nant single service for connecting

with others.

[email protected]

Suits against Facebook have been filed, but that won’t change your feed yet

If the government wins,

changes for users could

range from subtle to

unfortunate.

MICHAEL COHEN/GETTY IMAGES FOR NEW YORK TIMES

One anecdote central to the cases depicts Instagram co-founder Kevin Systrom, above, seeking advice

from a c ompany investor while considering a $1 billion offer to sell his company to Facebook in 2012.