By now, just about anyone you know as probably told reminded you that 2020 royally sucked. Everyone can relate to the reality of this dumpster fire, but today I want to focus on one particularly positive (depending on your point of view) morsel to rise out of the 2020 inferno: a willingness by US regulators to break up Big Tech.
First, let me make some disclaimers. I’m by no means an expert in anti-trust or law in general, though I have read many books on the subject and have followed its intersection with the tech giants for several years. At first, it might seem a bit strange to write about antitrust in a surveillance post, but I hope by the end of this the connection will become clear. So stick with me.
The State of Surveillance
Happy new year everyone! I hope you all are feeling pumped up for 2021. I'm personally ready to wipe the slate clean…
If you engage with the digital world in any meaningful way, then you’ve witnessed an all-encompassing transformation of the internet’s communication and power structure in the past decade.
Google and Facebook, once quaint startups spawned from cramped Ivy League door rooms have transformed into multi-billion dollar companies with services used by nearly half the planet and the ability to influence everything from consumer shopping habits to major elections.
One cannot exist in the digital landscape without engaging with these two companies. Combined, Facebook and Google make up nearly 70% of all advertising on the internet. As illustrated through Facebook’s 2018 Cambridge Analytica scandal, these companies are able to target individuals with advertising down to an incredibly granular level thanks to the nearly limitless amount of data they have received through users, both willingly and unwillingly. This story has developed for years, in relatively plain sight with little meaningful objection by US regulators.
That changed though in 2020.
First, the US Justice Department launched an investigation into Google, claiming the search engine had engaged in anti-competitive practices to shore up its control over online search results. Much of that case revolves around Google’s deals with Apple to ensure its search engine would be prioritized on Apple devices. According to The New York Times, Google pays Apple around $8 to $12 billion per year to ensure Google is the default search engine on iPhones. That reportedly makes up between 15 to 20 percent of Apple’s total yearly profits. Let that sink in.
Just a few months later, the Federal Trade Commission and officials from more than 40 US states launched two separate lawsuits against Facebook, formally accusing the company of illegally squashing completion.
The Facebook lawsuits specifically center around the company’s 2012 acquisition of Instagram for $1 billion, and its subsequent gobbling up of WhatsApp in 2014 for $16 billion. The Facebook lawsuit says that the nearly $600 billion company should break off Instagram and WhatsApp and that more restrictions should be placed on the company over future deals. Further, the FTC suit says the buying of these two exploding startups was an attempt to stem off competition as part of a “bury or buy” strategy.
The FTC was split on a vote of 3–2 on whether to pursue the new Facebook case. Notably, calls to regulate Facebook and Big Tech generally are one of the only cases of modern political interest with bipartisan support. Both President Donald Trump and Massachusetts senator Elizabeth Warren have called for major tech reform. Strange bedfellows to be sure.
But, things are not all so clear. The particulars of how one would break up such a massive company are daunting. Facebook and its supporters have also accused the FTC in particular of asking for a “do-over.”
That’s because, in the past, the FTC did in fact sign off on both the Instagram and WhatsApp acquisitions. Facebook also scoffs at the labeling of it by academics, journalists, and politicians as a “monopoly.” Facebook has pointed to the rise of Tik Tok and Parler — a conservative social media company — as examples of major competition in the social media sphere.
For what it’s worth, that’s a pretty shitty argument. Parler (which you likely hadn’t even heard of before the last paragraph) is going nowhere fast, and TikTok exists as a totally separate entity from Facebook. Facebook is pretty much a prerequisite for online life.
As for the claim that the FTC is seeking a “do-over,” that complaint is largely based on a misconception. While it may be annoying for companies, the FTC and other regulators are allowed to amend their decision after the fact. Following the 2012 FTC investigation into the Instagram purchase, the FTC closed with this statement, quoted in this Politico article.
This action is not to be construed as a determination that a violation may not have occurred. The Commission reserves the right to take such further action as the public interest may require.
The better argument Facebook has going for it to stop a breakup, and one that may ultimately shift the very conception of antitrust law in general is the claim that it can’t be harming consumers because its products are free.
Since the 1970s, antitrust has centered around the “consumer welfare principle.” In short, this principle states, (and again, I’m not a lawyer) that it’s okay for companies to grow big — really big even — so long as the result of getting bigger does not harm consumers.
Supreme Court Justice Louis Brandeis reportedly helped usher in the framework of this reasoning in a 1911 testimony stating: “I have considered and do consider, that the proposition that mere bigness can not be an offense against society is false because I believe that our society, which rests upon democracy, cannot endure under such conditions.”
When companies don’t face real competition, the thinking goes, they are free to pursue harmful practices.
In previous high-profile antitrust cases — from the breakup of Standard Oil in the early 1900s to the dissolving of Bell in the 80’s — regulators were able to prove harm to consumers broadly by showing an increase in price. Without any real completion to speak of, both of these monopolies were able to shove higher prices down the throats of consumers for products they needed. There was nowhere else to go.
Exact parallels allude Big Tech. Rather than raise prices, Facebook and Google’s surveillance ad model means their profits are “free.” At least monetarily.
As Shoshana Zuboff describes elegantly in The Age of Surveillance Capitalism, Facebook and Google services are not really so much a product as they are an extraction tool. To steal a now bludgeoned phrase, “you are the product.” In this dynamic, the glitz Instagram and handy Gmail Inbox are more akin to an oil rig, slowly dipping in and out of your life, sucking out a steady stream of data.
With that in mind, any breakup of Big Tech, which relies on a surveillance capitalism business model will need to find another way to prove harm. The two recent Facebook lawsuits are hoping they’ve found their smoking gun with privacy.
For many reasons I won’t go into here, Facebook won the social media game. As it grew and its competition died out though, something changed. Slowly but surely, Facebook compromised privacy and security in the name of growth.
This shift is documented in great detail in a 2019 watershed paper by researcher Dina Srinivasan titled, appropriately, “The Antitrust Case Against Facebook.” Echoes of the arguments presented in this paper can be felt reverberating through each of the lawsuits grabbing attention today. It’s worth a read.
While Facebook initially sold itself as a bastion of privacy, that couldn’t be further from the truth in 2020. Srinivasan says as much in the paper.
Facebook’s pattern of false statements and misleading conduct induced consumers to trust and choose Facebook, to the detriment of market competitors and consumers’ down welfare.
By eliminating competition, through both litigate means and the strong arm purchasing of the likes of Instagram, Facebook eliminated any meaningful competition that could offer people social media with greater levels of privacy. Thanks to network effects helping Facebook gain over 2 billion users, it’s effectively impossible for any such competitor to arise. Facebook thus sets the “price” on privacy and you just have to take it. You could leave, of course, but for many working in the 21st century, to be removed from social media is to cease to exist.
“Today,” Srinivasan writes, “accepting Facebook’s policies in order to use its service means accepting broad-scale commercial surveillance.”
In a nutshell, legislators are hoping this long tale deception of users, this dismantling of their personal privacy in the name of profit will be enough to prove consumer harm.
Shifting The Narrative
It’s by no means hyperbole to say that a successful break up of Facebook under this logic would flip the script of antitrust altogether. Such a reimagining of antitrust could have wide impacts on industries outside tech, from finance to healthcare and beyond.
Even if the rationale appears sound though, there’s a whole heap of practical concerns that could complicate breaking up Facebook. For one, actually, finding a way to disentangle Instagram and WhatsApp from Facebook could prove a challenge. Facebook has spent the past few years integrating the three, both as a service and business. Alternatively, some academics like Menesh Patel of UC Davis Law say disintegration may not be the most effective solution.
“Even if it’s feasible, a breakup may not be ideal because it may not be a remedy that addresses the competitive harm,” Patel told Politico.
If the FTC and states show the Instagram and WhatsApp deals were “bad because of the impairment to consumer privacy … it’s unclear to me whether the breakup would be the thing that solves the problem.
Reigning in Surveillance Capitalism
But there’s another greater issue here that focusing too narrowly on the privacy issue risks missing and that’s the risk posed by private companies that are so large and so powerful that they can effectively ignore the will of any given country.
In its truest essence, this is the real threat of monopoly power. It has less to do with prices and markets, and much more to do with power and accountability. If anyone has played Cyberpunk 2077, then you have a clear visual example of what a society looks like when corporations hold infinitely more political authority than elected representatives.
Having capitalism without monopolies necessarily requires government intervention at some level. The venture capitalist and early Facebook investor Roger McNamee nailed the situation in a recent op-ed for Time.
Entrepreneurial capitalism is not a natural state. It requires the government to set rules and enforce them fairly,” he said in Time. “Changes in the structure of the economy, as occurred with industrialization and the information economy, change the balance of economic power, creating a window of opportunity for concentration of economic power.
He went on:
Concentrated economic power poses a threat to democracy and self-determination, so it makes sense to regulate it.
That sentiment, more so than any of the particulars in anti-trust laws, seems to me underpin the real reason why the end of 2020 could spell good news. Change is brewing.
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