Facebook, Letitia James, and the (anti)competitive spirit
Modern life is completely dominated by just a few corporations. That’s a discordant thing to realize in a nation that prides itself on an excess of choice. If you search “nightlight” on Amazon, you get 11,000 results. “Coffee mug” gets 100,000.
We cannot possibly scroll through 100,000 coffee mugs, and there’s simply no rationale for having that many options except…we like it. We demand it. We clamor for a variety of choices so vast they’re incomprehensible.
Except when it comes to tech. For fun, try to find any facet of your life that doesn’t bear the imprint of one of these four: Google, Apple, Amazon, Facebook. And now, in a report by the House Judiciary Subcommittee on Antitrust those behemoths have been found (and this is so unsurprising I almost fell asleep typing this sentence) to be anti-competitive.
“To put it simply, companies that once were scrappy, underdog startups that challenged the status quo have become the kinds of monopolies we last saw in the era of oil barons and railroad tycoons.”
Amazon accounts for nearly 40% of all e-commerce sales in the United States. Google has created an “ecosystem of interlocking monopolies” virtually shutting out any competitors, and robbing consumers of their choice. I already talked about the monopolistic power of the App Store (there’s literally no other place for app developers and consumers to go).
And then there’s Facebook.
Copy, Acquire, Kill
Facebook is synonymous with social media, and it’s difficult to imagine a world without it. Which is a little staggering, because it seems like just a handful of years ago it was that weird college-only site where people would send each other imaginary beers. And you didn’t care whether you were on it or not because it was honestly kind of dumb.
Now? Facebook is not only the center of the social media universe, but actively seeks to destroy anyone who gets in their way.
And they’ve done a pretty damn good job. Everything from Rel8tion to WhatsApp to FriendFeed — any company that presented even the ghost of a threat — has been purchased, and either dissolved or turned into a home field advantage.
82 companies in all.
In an email to a CTO, Mark Zuckerberg said he had “been thinking about … how much [Facebook] should be willing to pay to acquire mobile app companies like Instagram … that are building networks that are competitive with our own.”
And buy them they did, for $1 billion.
According to an Instagram whistleblower, the acquisition was brutal, with constant infighting, and with Zuckerberg slowing down Instagram’s growth to benefit its new parent company. The whistleblower called it “collusion, but within an internal monopoly. … It’s unclear to me why this should not be illegal.”
Oh, It Is
Now, NYAG Letitia James is leading the charge, along with 46 other states, the District of Columbia, Guam, and the FTC, in accusing Facebook of quashing the competition and exercising a stranglehold over social media.
“For nearly a decade, Facebook has used its dominance and monopoly power to crush smaller rivals and snuff out competition, all at the expense of everyday users.”
AG James’s investigations already led to a lawsuit against Google, in which the DoJ claimed Google was illegally protecting a monopoly.
“For many years,” the complaint said, “Google has used anticompetitive tactics to maintain and extend its monopolies in the markets for general search services, search advertising and general search text advertising — the cornerstones of its empire.”
Sound familiar? It should. Anyway, monopolies all look the same from way out here in the cheap seats.
There’s no slam dunk here. Antitrust suits are hard to prove at the best of times; when you have mergers and acquisitions that were approved by the FTC when they happened, it’s hard to argue they were illegal in retrospect.
It’s possible, though. And it would remake the global tech market.
Breaking Up is Hard to Do
Back when John D Rockefeller, JP Morgan, Andrew Carnegie, and Cornelius Vanderbilt ran companies that secured America’s position as a global, economic superpower, crushing the competition and bullying small companies was the American way.
In 1890, Congress unanimously passed the Sherman Antitrust Act which said, “If we will not endure a king as a political power we should not endure a king over the production, transportation, and sale of any of the necessaries of life.” Rockefeller’s Standard Oil was the first casualty, then American Tobacco and Northern Securities.
In approving the breakups, Congress added the rule of reason, which said not all big companies, and not even all monopolies, are damaging the economic environment of their competitors. It is up to the courts (not the executive branch) to make that decision.
In the 130 years since, we’ve seen very little trust-busting. And now, hoodie-wearing, silicon valley giants have taken the place of top-hatted Carnegies.
But they’re the same guys, in the end.
What would trust-busting even look like in these roaring 20s? Well, that’s above my pay grade. Ben Evans suggests regulation might be the key in some cases, but notes that it’s very hard to predict.
Anything can be done wrong. Anything can be abused — competition, choice; even the very antitrust laws we want to invoke now can be used to simply strengthen the dominant company.
Without question, though, this lawsuit is historic. And either way, the American market will never be the same.
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