Technology

Meta’s Real Antitrust Problems Are Just Beginning

Just over 13 months ago, the Trump-era Federal Trade Commission attempted to split up Facebook. The lawsuit took a long time — it was meant to settle acquisitions made in 2012 (Instagram) and 2014 (WhatsApp) — and was laughed out of court in its original form. The FTC had not made it plausible that Facebook had a monopoly, judge James E. Boasberg ruled at the time, and could therefore not proceed.

Still, Boasberg offered the FTC a second chance: resubmit the case with more evidence to support the pivotal claim, and maybe it could go to court. In the intervening months, President Trump had been removed from office and antitrust crusader Lina Khan took over the reins of the FTC. To no one’s surprise, she accepted Boasberg’s offer to file a revised case. And in a ruling this week, Boasberg ruled that the case can go ahead.

Here’s Cat Zakrzewski with The Washington Post:

The revised complaint contained enough facts to “probably establish” that Facebook has a monopoly on personal social networks, referring to services that allow people to maintain relationships with family and friends online, Boasberg said. Boasberg said the “Achilles heel” of the FTC’s first complaint was that there was no data to support its claim that “no other social network of a comparable scale exists in the United States.” But the revised complaint included data from analytics company ComScore and argued that Facebook’s share of daily active users of apps that provide personal social networks in the United States has exceeded 70 percent since 2016.

“Basically, the FTC has done its homework this time around,” Boasberg wrote.

The homework wasn’t particularly extensive, by the way: This time around, the FTC simply included some Comscore data about the time people spend using Facebook products, along with the number of daily and monthly active users for Facebook and other products in the space. . It remains remarkable, if not surprising, that the Trump FTC failed to clear even that low bar.

Anyway, The New York Times said Boasberg had given the FTC “a major victory in its quest to curtail the power of the largest tech companies.” At the very least, the judge helped the FTC save face: After more than five years of lawmakers and regulators decrying Facebook’s size and influence, it would have been more than embarrassing for the agency to even fail to file its case. to be brought to court.

And yet, as I wrote when the case was filed, every passing year has weakened the FTC’s monopoly case, and the agency has struggled throughout 2021 to keep it viable. While the agency failed, TikTok was born and reached a massive reach — by 2021, it was the most visited website in the world, according to Cloudflare. The government would argue that TikTok is fundamentally different from Facebook, claiming that the latter has a monopoly in something called “personal social networking services.” And yet anyone can open Facebook or Instagram and see day after day how they gradually take over more and more features from TikTok, the app from which it is supposedly so different.

Meanwhile, Facebook is now Meta and “a metaverse company.” Questions about whether it’s possible to compete with Instagram or WhatsApp feel like questions of more interest to historians than to the next generation of entrepreneurs, who are pleased (and perhaps foolish) now that the entire internet — including social networks — is on the blockchain. rebuilds.

One of the oldest arguments against Facebook’s break-up was that the market would eventually end the company’s dominance after all, and probably much sooner than a lawsuit could. There is no doubt that Facebook is still dominant in social networks. But there are cracks in his armor.

All of this makes it notable that, although Boasberg allowed the case to go ahead, he wrote that “the bureau may well be given a long task in proving his allegations.” Time and again in the 48-page indictment, he notes that he is not yet allowed to judge the veracity of the facts in the FTC’s case. Instead, his job is to determine whether the facts, if true, raise plausible allegations of wrongdoing. And at this point, he decides, they do.

(He quickly dismissed another portion of the lawsuit, alleging that Facebook illegally restricted the transfer of data to third-party developers. That particular policy ended in 2013, making any wrongdoing seem old news, even by the standards of this case.)

Don’t get me wrong: I believe Facebook did making social networks less competitive when it took over Instagram and WhatsApp. And we’ll never know what consumer benefits we would have seen if those companies had remained independent.

But 2014 is a long time ago. And the coming lawsuit and inevitable appeals will take many years to come. At this point, even if the government is doing Successfully forcing a spin-out from Instagram and WhatsApp, those companies will be reborn in a world that moves on.

The good news for consumers and for the competition is that the FTC is also going ahead. Even if this lawsuit ultimately fails, the agency has indicated by filing that it will intensively investigate all future efforts by Meta to acquire other social networking products. And as new social networks emerge in the future, the lessons learned from Instagram and WhatsApp will almost certainly inspire much stricter assessments of future acquisitions in the space. (It’s already happening: In November, the UK blocked Meta from buying a GIF search engine.)

Even better, from my perspective, the FTC has begun to focus its attention where it really belongs: on Meta’s efforts to conquer all of the biggest studios and talent in virtual reality and augmented reality. When I wrote about that topic last June, Meta had already purchased Big Box VR, Unit 2 Games, Beat Games, Sanzaru Games, and Ready at Dawn. Then, in October, it made one of its largest purchases in space to date: Los Angeles-based VR company Within, makers of the groundbreaking fitness app Supernatural, for a reported $400 million.

Meta owns the Oculus App Store and has perfect knowledge about which games sell well and convert Quest owners into everyday users. In that sense, it’s the company’s follow-up to Onavo, the Facebook app that once provided vital early warnings about budding competitors. In 2022, what Meta wants to buy in VR is much more important for the future than what Facebook bought ten years ago.

That’s why I thought it was heartwarming to see The information reported last month that the FTC has opened a formal investigation into Meta’s acquisition of Within:

Meta’s first five VR app acquisitions went off without a hitch because they were too small to trigger a cursory review by US antitrust regulators. But those regulators are delaying the more than $400 million supernatural deal, according to two people with knowledge of the situation. Shortly after Thanksgiving, the Federal Trade Commission opened an in-depth investigation into the acquisition, meaning Meta may not be able to complete the acquisition for another year, assuming the agency doesn’t formally challenge the deal in court, causing additional delays.

This is where the FTC’s focus really belongs: not on the distant past, but on the present yet up for grabs, where Meta is pumping her profits into selling the Quest 2 below cost – with great success this holiday season – and in acquiring all the most widely used software in the space.

What happens to Instagram and WhatsApp still matters a lot. But what happens on next-generation platforms could be far more important. The bad news is that the FTC’s current lawsuit came too late to make a difference. The good news is that it seems determined not to make the same mistake twice.