Is Facebook a monopoly? | The Economist
AT LAST IS event. Or so thought the critics of big technologies. President Joe Biden has appointed one of their own, Lina Khan, to head the Federal Trade Commission (FTC). A congressional committee has approved six bills to curb Alphabet, Amazon, Apple and Facebook. Then, on June 28, a federal judge brought a strong dose of realism by summarily dismissing two antitrust cases against Facebook.
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The unexpected move, which sent Facebook’s market value past $ 1 billion, was a reminder that in America, the surge in “techlash” can yield meager results (see graph 1). Judge James Boasberg, appointed by the former boss of Mr. Biden, Barack Obama, dismissed one of the cases, brought by 46 states, on a technical point. The complaint, which accused Facebook of acquiring nascent competitors, such as Instagram in 2012 and WhatsApp in 2014, to consolidate its dominance on social media, was deemed too late. More deeply, the judge found the second case, filed by the FTC, “Legally insufficient”. “It’s almost as if the agency expects the court to just nod at conventional wisdom that Facebook is a monopolist [in social-networking],” he wrote.
This indeed seems to be what FTC expected. He claimed that Facebook had a “dominant market share (over 60%)” without explaining what that market is. And he defined “personal social network” to exclude things like work networks (LinkedIn) or video sharing sites (YouTube).
To give the FTC its due, the demarcation of digital markets is devilishly delicate. Like Facebook, most social media companies don’t charge users, so the typical approach of looking at an industry’s consumer derivative sales is unnecessary. Facebook has paying customers, companies that buy ads on its platforms, but the extent of that market is also unclear. If all American online advertising counts, its share is 25%, according to an estimate of The Economist (see graph 2). Looking only at social media advertising, it reaches 60% in America (although Facebook’s share of the world is declining). But what qualifies as social media is amorphous, as features and rivals appear and crumble.
The judge acknowledged that Facebook had market power (“no one who hears the title of the 2010 film ‘The Social Network’ wonders what company it is”) and he gave the FTC 30 days to show it more precisely. However, he also rejected one of the agency’s main claims. the FTC accused Facebook of stifling competition by blocking rivals from its platform. According to Supreme Court precedents, the judge pointed out, such conduct is legal: monopolists have no “obligation to negotiate”.
This can make sense in the analog world. Critics like Ms. Khan argue that in the digital world, where dominant platforms look a lot like piped-owned utilities, that equates to a license to kill the competition. If more big-tech cases fail, as can happen with those involving Apple and Google, it would give weight to demands for antitrust reform. Even that may not be enough to get one of the six bills, or something like them, through the blocked Senate. Despite a bipartisan consensus in Washington that big tech is too powerful, Democrats and Republicans are unlikely to agree on the details of what to do about it. ■
This article appeared in the Business section of the Print Publishing under the headline “Is Facebook a Monopoly?”