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Over the past few years, Facebook has managed to dodge any major repercussions stemming from its anticompetitive business practices. Politicians and legislators have talked about breaking up Facebook into a set of smaller companies. And Internet pundits have expounded at length about the ways Facebook throws around its weight when it comes to working with partners and vendors. But this time around, things are looking serious. Facebook could be in trouble, this time for real. Antitrust cases are starting to mount against Facebook – including one blockbuster antitrust case led by New York State that has the backing of 45 other U.S. states – and the buzz is growing that the U.S. government now wants to break up the world’s biggest social network.
What’s different this time around?
While Facebook remains the largest social network in the world, it’s not like it doesn’t have a set of other competitors. How, exactly, can antitrust lawyers maintain that Facebook has a monopoly on social media when consumers are free to check out rival services like Twitter or SnapChat? And Facebook maintains that these social networks are not the only competitors out there – as CEO Mark Zuckerberg sees it, Facebook is actually competing with all the other apps and services on your mobile phone for your daily attention. Thus, you could throw companies like Apple and Google into the mix.
Plus, the standard argument that Facebook (and its army of lobbyists) has used in the past is that Facebook is a free service. So how do you prove that a product that is offered for free is harming people? And, indeed, this has been a hard argument to counter. Think about it for a moment – doesn’t the classic “monopolist” use all of its market power to jack up prices and do everything they can to squeeze money out of consumers? Facebook doesn’t charge anything for you to use it.
But here’s where things get interesting – the argument being pushed now is that Facebook is harming consumers by rolling back privacy protections. As Facebook has evolved over the years and gained competitive market power, it has also steadily rolled back all the privacy protections once granted to consumers. When Facebook faces competition, it must preserve privacy protections. But as soon as these competitors are removed (as happened when Facebook acquired both Instagram and WhatsApp), it can then backslide on these privacy protections.
What would a Facebook breakup look like?
While momentum is definitely building for a Facebook breakup, it’s not going to be an easy task dismantling the social media giant. For one, the FTC approved the Instagram deal back in 2012 and the WhatsApp deal back in 2014. So how can the government reasonably argue that these acquisitions were OK back then, but not now? The answer might lie in a treasure trove of documents and internal memos that the government has acquired over the years. These potentially show that the Facebook management team has taken advantage of its increased heft and size to exert monopolistic pricing power on advertisers and roll back consumer protections when it comes to privacy.
That being said, it’s hard to imagine how a world with a “broken up” Facebook would look much different from the one today. If Facebook and Instagram were different companies, you’d still have different apps on your phone, just like you have today. All of the changes would really happen behind the scenes, with the apps not able to communicate your data and privacy information back and forth. And, of course, any strategic initiatives underway today – such as merging all the messaging services of Facebook – would have to be shelved immediately. Let’s just hope that, this time around, government regulators actually understand how Facebook works, and just how important consumer privacy is to millions of people around the world.