US watchdogs’ attempts to rein in the power of Facebook have fallen at the first hurdle. An unfavourable ruling by a judge will be leapt on by both sceptics of regulatory intervention and those agitating for profound change beyond the appointment of Lina Khan, an outspoken critic of Big Tech, to chair the Federal Trade Commission.
Monday’s ruling, in two cases brought against the social media company by the FTC and more than 40 states, drew an immediate response, with Facebook’s shares leaping by 4 per cent to propel it into the club of companies with a $1tn market capitalisation. Meanwhile, Bill Kovacic, a former FTC chair, predicted the ruling will be “held out as the precise example of why we need to change the law”. He is right but for the wrong reasons.
The FTC alleged Facebook abused its dominance through a “buy and bury” approach to potential competitors, using its deep pockets to acquire those it worried most about and cutting off access for others. Relief sought by the FTC included the forced divestment of Instagram and WhatsApp, two acquisitions the same regulator waved through more than seven years ago.
Judge Boasberg’s opinion is nuanced. Crucially, he does not dismiss the FTC’s case against Facebook, merely this iteration of its argument. His 53-page decision gives several pointers as to how the FTC could be more successful next time. Regulators now have 30 days to refile their arguments.
As it was, those arguments failed to properly define the market Facebook allegedly abuses. With such a vague description of the personal social network market, Boasberg had to focus instead on how much market share Facebook enjoys. But this too was hazily described as “in excess of 60 per cent”. Market dominance is generally defined in the US as above 65 per cent (the EU uses a noticeably lower threshold, of 50 per cent). If the FTC decides to have another run at its lawsuit, more clarity will be vital.
The bigger problem for regulators, and politicians, is articulating what harms Big Tech is inflicting. In the new digital economy it is personal information, not currency, that is bartered for convenience. But this was not the subject of the Facebook lawsuit, and there is a question as to whether antitrust law, as currently construed, could adequately frame those arguments.
Consumer prices were always one metric for anti-competitive behaviour. It became the overwhelming metric 40 years ago with a reinterpretation of antitrust law that put faith in markets over government: if prices were not rising, consumers were not harmed. Followers of the “New Brandeis” school, such as Khan, believe that tech companies should be thought of as public utilities, requiring interventions that consider total welfare rather than pure economic efficiency. A new school of thought would take time to take hold. Courts are inherently conservative in their application of the law, particularly so the current composition of the Supreme Court that may also be loath to hand regulators more power.
As sclerotic as the political process may be, it may be the quicker route, particularly with a clutch of bills recently advanced by the House Judiciary Committee. Despite Republicans’ natural pro-business stance, there is current bipartisan support for curbing the power of Big Tech: President Joe Biden must not squander it if he is serious about reform. As for Khan, her immediate task is to appoint litigators who can be more forensic in framing the law. The harder job for her will be to walk the tightrope between applying those laws as they stand, and agitating for new ones.
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