On Wednesday, December 9, 2020, the Federal Trade Commission filed an antitrust lawsuit against Facebook. The lawsuit accuses Facebook of engaging in anticompetitive behavior, specifically focusing on the acquisition of Instagram in 2012 for $1 billion, and WhatsApp in 2014 for nearly $20 billion.

It asks the federal court to force the sell-off of assets such as Instagram and WhatsApp, each application which has over a billion users. On the same day, 46 Attorneys general filed their own lawsuit against Facebook, and this seems to be just the beginning of things for Facebook.

As a digital marketing agency that runs Facebook Ads and Google Ads for clients, this is huge news! So I decided to write up my opinion about this and how I think it’ll affect businesses leveraging Facebook Ads to grow their business.

Why Facebook is Getting Sued

Over the past 2 years or so, Facebook, Google, Amazon, and other big tech companies have been under more scrutiny for a myriad of reasons ranging from privacy concerns and political advertising, to anti-competitive and monopolistic behavior. During this time, they’ve been called to testify before congress to defend their various business models and business practices.

Highlights of the Big Tech’s Antitrust Hearings:

 

As legislators have been trying to wrap their head around our modern digital landscape, the challenge has been trying to figure out what to do about Big Tech’s power that appears to be increasing exponentially, along with their profits.

Everyone agrees it’s time to regulate big tech but the challenge has been on how to do that.

Though the flurry of antitrust lawsuits has been coming in recent months – Google got hit with 3 antitrust lawsuits thus far – throughout the past 2 years lawmakers dug up quite a bit of information about these companies, including some blunt emails between Facebook CEO, Mark Zuckerberg and Facebook’s CFO. In this NPR podcast, they discuss a series of emails found regarding the acquisition of Instagram in order to “neutralize a competitor”.

What Is The Facebook Antitrust Lawsuit About?

These lawsuits aim to break up Facebook for engaging in monopolistic behaviors. The leading social networking site has acquired 82 other companies since being founded in 2004. The most influential and politically aggravating of the purchases were Instagram in 2012 for 1 billion dollars and WhatsApp in 2014 for 19 billion dollars. The antitrust lawsuits aim to address the bipartisan concern of the increasing amount of power Facebook and its CEO, Mark Zuckerberg, have piled up.

“Facebook has maintained its monopoly position by buying up companies that present competitive threats and by imposing restrictive policies that unjustifiably hinder actual or potential rivals that Facebook does not or cannot acquire,” the commission said in the lawsuit filed in federal court in Washington, D.C.

The antitrust lawsuits are powered by anti-monopoly advocates intending to resolve issues of lack of privacy, capitalization, and a damaged American Economy.

How Businesses Are Hurting Because of Facebook’s Monopoly

I’ll start off with the disclaimer that we’re not legal experts, but as an online advertising agency that relies heavily on placing advertisements on Facebook, Instagram, Google, and Amazon, we’re intimately familiar with the platforms along with the often aggravating changes to their platforms. So from this point forward, I’m simply expressing my opinion and sharing from my experience serving thousands of businesses over the years.

If you’re a small business or a startup, chances are you’re not buying Super Bowl commercials or spending millions of dollars on advertising through traditional advertising channels. One of the big promises of technology is that it’ll democratize access and make it easier for the little guys to succeed. So your only options for advertising become Facebook, Google, or Amazon.

This, unfortunately, is more a curse than a blessing as Big Tech monopolizes the lifeblood of your business and forces you to only advertise on their platforms if you want to succeed. When they make a policy change or Facebook’s AI goes haywire, your small business is often left out in the cold.

Advertising on other platforms to grow your business could be an option, if Facebook hadn’t bought them up for billions or if they had let the competition actually have a chance at establishing a user base outside of Facebook’s ecosystem.

Will Facebook Be Forced to Break Up? What We Think.

With the internal emails in the hands of congress, proof of intent from Mark Zuckerberg and his colleagues to buy out competitors and engage in monopolistic behaviors seems plentiful. However, even with the email evidence, the possibility of Facebook breaking up and divesting Instagram and WhatsApp seems unlikely, and in my opinion, falls short of the solution to regulate Big Tech.

While there is certainly evidence against Facebook in regards to their acquisition of Instagram, I do not believe that this is even the biggest problem and it’ll be tough to make them sell off or spin off Instagram and WhatsApp.

If, however, evidence were to surface of Facebook collaborating with other platforms such as Google and Twitter, to control or suppress particular subjects, things could go south for Facebook real fast.Fave

As I was editing this article on December 17th, 2020, a lawsuit was filed in which Texas accused Google and Facebook of an illegal conspiracy to monopolize the online advertising ecosystem.

Though this is changing seemingly every week, as of right now I don’t think there is enough evidence that supports Facebook is doing anything seriously illegal to harm consumers or stifle competition. To me, it seems they’re just being an aggressive business looking to expand and dominate their market. Isn’t that capitalism?

Snapchat said no to Facebook’s acquisition offers and last I checked, they’re still a public company and they still have a healthy user base. TikTok is a bigger threat to Snapchat than Facebook is now. Sure Facebook copied Snapchats core feature and called it “Stories”, but Twitter copied Snapchat too and even Microsoft’s LinkedIn copied them. Companies can still stand up to Facebook and have some success.

What about Instagram’s Acquisition? Instagram had 13 employees at the time of acquisition. Instagrams acquisition wasn’t that big of a deal and don’t forget, it was initially approved by regulators.

I think an important thing to remember is how fast things change and how ‘easy’ it is for a newcomer to take market share. When Facebook made it’s grand entrance, Zuckerberg was coding it from his dorm room. The same thing can still happen today. What’s stopping someone from firing up a new social media site and having it grow to millions of users within a short time frame? Not Facebook.

When this new social media app or site grows, what’s stopping it from continuing to innovate and stay ahead of Facebook so that even if Facebook copies it’s features, they can hold on to the user base?

Sure, Facebook can be an intimidating force, but competition can still sprout and can still succeed. The barrier to entry in tech companies is not that high. The infrastructure needed to compete is not the same as it was in antitrust cases of AT&T or Standard Oil. Twitter, Pinterest, TikTok, Yelp, Snapchat, and many other services are still around. Facebook has features that all of them have, yet President Trump wasn’t firing off Facebook posts or Instagram selfies at 2am, he was Tweeting.

Not only that, it’s not obvious that Facebook is harming their customers. In short, the mission of antitrust laws is to protect individuals and businesses by promoting vigorous competition and protect consumers from anticompetitive mergers and business practices. The Federal Trade Commision states “Aggressive competition among sellers in an open marketplace gives consumers — both individuals and businesses — the benefits of lower prices, higher quality products and services, more choices, and greater innovation.” With that being said, when you compare Facebook’s antitrust lawsuits to other prevalent antitrust lawsuits, the harmful intent is not as clear.

For example, in the antitrust case against AT&T, it was clear who the monopolization of the company would be harming. It should also be noted that his case lasted seven years before the decision was made to break up the telephone and telegraph company into seven different companies that would each be responsible for serving a different region of the country.

Another comparison to support the idea that Facebook’s case falls short of proof of mal intent can be drawn from the Standard Oil antitrust case. In this instance, corporations were purchasing railroads, controlling the means of transportation and production of oil. If one company has control over all of this, it’s incredibly difficult for anyone to compete or enter the market, and the harm to customers and the US economy could have been massive.

Although the above cases are from earlier, simpler times, the premise remains the same- the consumer is undoubtedly being harmed by the monopolization of those industries.

Facebook’s antitrust lawsuit on the other hand, does not unquestionably suppress the well being of consumers. While I agree that Facebook engaged in aggressive business practices that toe the line of illegal monopolization, I find it hard to see how the lawsuits will prove that the corporation is clearly, without a doubt, harming their customers.

And that’s part of the problem…

The laws aren’t equipped to handle these modern day issues, so the lawsuit focuses on what they can grasp, like Instagrams acquisition and Facebook’s alleged intent to neutralize a competitor.

What’s Next… A Closer Look

I believe that Facebook will be regulated somehow. I believe it must be regulated.

How? I’m not sure but I do think this flurry of lawsuits will help clarify that and maybe bring antitrust laws into the 21st century. The harm being done to people and organizations doesn’t fall neatly within the boxes currently defined, and the damage is often a slow erosion that shifts the landscape of our markets and tears at the fabric of our society.

Is that dramatic? Not really. If you think about it, Facebook controls the levers that influence over 2 billion people all over the world. A .01% change in the direction of their algorithm can have dramatic effects.

Just think of how Google Maps changes your behavior if there’s an accident on the highway and traffic stalls. If you’re stuck in bumper to bumper traffic and the GPS tells you to exit the highway and take a residential street, will you not change your behavior and trust Google’s algorithm in an effort to get to your destination faster?

This literally changes human behavior. Now imagine that magnified times millions of people across billions of interactions. In this example, it’s benign, even welcomed (unless you’re the homeowner in an otherwise quiet residential street that now has to deal with an uptick in noisy cars coming through trying to avoid the traffic).

Facebook has the same power but often the effects aren’t as obvious and the behavior changes or changes in psychology are far more difficult to pinpoint. This power, or the power to change the algorithm, is in the hands of a tiny number of people sitting behind computer screens.

Though this antitrust case might fail in proving malicious intent, it will succeed in at least examining the myriad of issues a bit more closely and checking the power one corporation has over its users. We hope you found this article helpful. Feel free to leave a comment or contact us!