FTC’s Second Crack at Facebook Carries a Lot of Weight
(Bloomberg Opinion) -- The many reports pointing to the death of the government’s antitrust case against Facebook Inc. were greatly exaggerated. The Federal Trade Commission has decided not to give up.
On Thursday, the regulatory agency refiled its federal lawsuit against the internet giant, contending the company violated antitrust laws by using a “buy-or-bury” strategy to crush nascent competitors and stifle innovation. It comes nearly two months after U.S. District Judge James Boasberg dismissed the initial version for lacking the data to prove Facebook had a monopoly in social networking. At the time, many outlets and commentators called the judge’s decision a huge victory for the company and an indication the FTC might not try again.
Well, the government’s case is fully alive and back in play. In the latest filing, the FTC has provided facts to back up its claims. It includes figures from a third-party research firm that show Facebook’s share of the U.S. “personal social networking” market has surpassed 80% since 2012 for time spent by users. The agency also offered similar dominant figures for monthly and daily active users while noting Facebook itself used the same metrics and sources for its internal documents. This level of numerical detail was absent in the original complaint.
The FTC also did a better job of defining “personal social networking” by providing better examples. The market, as described by the government, consists of online services that are used to maintain relationships with friends and family and where users can share posts and experiences in a common social space. The agency argues Twitter Inc., ByteDance Ltd.-owned TikTok and Alphabet Inc.’s YouTube are in different categories because they aren’t used primarily to foster personal connections but are oriented more toward broader-based content consumption.
The government’s new evidence is compelling, and its general argument that Facebook’s social-networking monopoly has led to stagnating innovation is valid. And I agree that if the social-networking market was more competitive with stronger independent players, consumers would have better alternatives for data privacy and less unwanted advertising.
This latest development is also a precursor for a larger back-and-forth between Facebook and the FTC that shouldn’t be overlooked. Beyond what happens with this particular lawsuit, Facebook will likely face other regulatory challenges from the agency in the coming year.
The impetus will be the FTC’s newly installed chair, Lina Khan. Judging from her previous commentary, her appointment in June has serious negative ramifications for Facebook. During her Senate Commerce Committee nomination testimony earlier this year, Khan outlined some of her possible priorities in looking at the business practices of big technology companies. She cited concerns about the concentration in the digital ad market and the safety of children on the internet and questioned whether ad-based business models that harvest personal behavioral data violate privacy laws. She also vowed to investigate the opaque nature of social media content algorithms and how they work. Ultimately, she might as well have said, “Facebook, you’re in my cross hairs.”
The company’s recent actions show it is worried about what Khan might do. Facebook filed a petition last month seeking her recusal from any deliberations regarding the agency’s antitrust suit. (The FTC said on Thursday that its general counsel had reviewed Facebook’s petition and that the agency’s Office of the Secretary had dismissed it.) And it seems as if Facebook is trying to get ahead of possible moves by the FTC as well. In late July, the company announced a policy that limits the ability of Instagram advertisers to target children younger than 18 based on their interests or activity, coincidentally similar to what Khan has said about getting safeguards for kids.
The battle between Facebook and the FTC is just beginning. The government has now rebuilt its antitrust case on a solid foundation. And it will likely pursue behavioral remedies that target the central nature of the company’s business model — the collection and exploitation of its users’ personal data. These are hazards Facebook will need to take seriously.
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.
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