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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsThe Government Didn't Foresee How Facebook Would Behave
Todays antitrust regulators should rein in the tech giants.https://www.theatlantic.com/ideas/archive/2021/01/we-didnt-always-know-how-facebook-would-use-its-power/617877/
The U.S. government almost never jumps at its first chance to confront an emerging monopoly. But regulators have a long history of getting it right the second time. Standard Oil controlled Americas petroleum market for years before the Justice Department sued the company under the Sherman Antitrust Act; the federal government helped enshrine AT&Ts telephone monopoly for decades before deciding to break up Ma Bell. But now that federal and state enforcers are turning their attention to the power of large tech companies, lawyers for Facebook are insisting that the government already missed its only opportunity. In lawsuits filed late last year, the Federal Trade Commission and 48 state attorneys general zeroed in on Facebooks acquisitions of Instagram in 2012 and WhatsApp in 2014. Back then, the FTC issued what are known as no action letters. The companys main defence to the new lawsuits is that agency enforcers declined to block the transactions when they had the chance. The new lawsuits, Facebooks general counsel has insisted, are revisionist historymisbegotten attempts at a do-over.
Since the FTC litigation was filed, Joe Biden has been sworn in as president. While his administration may be less prone to criticizing Silicon Valley via Twitter than former President Donald Trump was, Democrats may be more receptive to calls for an aggressive new approach to antitrust enforcement. But if Facebooks position is any indication, tech companies will try to use lax antitrust enforcement in the past as grounds to demand similar treatment going forward. That argument shouldnt fly. Regulatory agencies need the flexibility to respond to changing conditions, new facts, and new ideas about how markets workor dont work. As a legal matter, Facebooks argument here is flat-out wrong. The FTCs failure to block the acquisitions of Instagram and WhatsApp did not give Facebook carte blanche for all subsequent misbehaviour. Indeed, the FTCs letters explicitly reserved the right to take such further action as the public interest may require. And the FTC has intervened in other cases after initially withholding judgment. Since 2000, regulators have challenged at least four other mergers that had previously been reviewed.
The problems that some mergers can create are not always obvious in advance. When the Facebook founder Mark Zuckerberg proposed buying Instagram, his companys displacement of the former social-networking leader, Myspace, was still being touted as proof that disrupting digital markets was easy. As FTC officials tried to peer into the future back in 2012, they might have reasonably asked whether Facebook or Instagram would even exist a few years down the road. Today, no crystal ball is needed. Facebook is still the worlds biggest social network, more than a decade after it dethroned Myspace. And the relevant legal questiondid Facebook acquire its rivals in order to stifle innovation and competition?can be answered by looking at what the company has actually done. After buying Instagram, the FTC alleges, Zuckerbergs firm shut down its own efforts to build a better photo-sharing app and tamped down promotions of Instagram out of fear of cannibalizing the flagship Facebook product. Those crucial facts simply werent available to regulators before the deal went through.
Some of Facebooks defenders argue that any corrective action under these circumstances would be a mistakehindsight bias, as two of them argued over the summer. But prosecuting an antitrust case in light of new facts isnt a do-over. Its simple law enforcement. Whats more, regulators understanding of digital markets has deepened considerably since 2012. Back then, prominent legal expertsincluding Robert Bork, whose legal scholarship helped justify half a century of market consolidationwere arguing that antitrust laws simply dont apply to free products such as online search engines and social-networking sites. But in the past nine years, many more legal scholars and regular internet users alike have come to realize that Facebook and Google dont actually give away their products for free. Users pay for access with some of their most valuable resourcestheir time, attention, and personal information. Concentrating power in the hands of a few massive companies carries huge risks, even in markets without explicit prices.
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