Facebook in the crosshairs of the authorities

A recent publication by Bloomberg showed that the Federal Trade Commission of the United States FTC is preparing a possible antitrust suit against Facebook [1], for possible market abuse. The lawsuit would be added to the investigation on the same subject carried out by Letitia James, general attorney of the state of New York [2] and to the repeated complaints presented by the Democratic congresswoman Elizabeth Warren [3], who proposes to divide the company.The case joins multiple investigations on the same topic, made in other countries around the world.

Why is Facebook in the crosshairs of the competition authorities?

By: Gabriel E. Levy B. – www.galevy.com

Just a few weeks ago, in a previous article [5], we analyzed how the CMA Competition and Markets Authority of the United Kingdom concluded, on the results of a study on online advertising, that “competition in the digital advertising market is not working well, which is causing substantial damage to consumers and the society” [6]. This study suggested an immediate market intervention to limit Facebook‘s dominant and monopolistic position, even suggesting a corporate separation of its own brands: WhatsApp and Instagram.

The British report ensures that, protected by such strong ownership advantages as net neutrality, economies of scale and privileged access to user data, big tech has such power that potential rivals can no longer compete on an equal footing, severely affecting the balance of the market and harming the consumer’s interests.

“Weak competition in search and social media leads to reduced innovation and choice, and consumers submitting more data than they would like. Weak competition in digital advertising increases the prices of goods and services throughout the economy and undermines the ability of newspapers and other media to produce valuable content, to the detriment of a wider society”. Report Fragment [8].

Only a few weeks after the revealing publication of the British CMA, in the United States, it was filtered through the specialized media Bloomberg that the Federal Trade Commission of the United States FTC, prepares a possible antitrust lawsuit against Facebook, since the agency would be investigating the social network since June 2019 to determine if its past acquisitions (Instagram and WhatsApp) violated the antitrust laws of the United States of America, as recently analyzed by the Latin American Regulation Observatory Observacom [9].

“Although the FTC approved these mergers, it has the authority to review its decisions and take the cases to the Court to determine if they were to the detrimental to competition”. [10]

The same Federal Commission, in mid-2019, imposed on Facebook a historic fine of 5 billion dollars for having allowed the data leakage of millions of users around the world. This, the highest fine ever imposed on a technology company in the US, was the result of the scandals arising from the unethical behavior of the Cambridge Analytica company, Facebook contractor, that illegally used user data for the purpose of altering the course of the elections that led to Brexit, as well as the presidential elections in various countries around the world, including the United States [11].

Similarly, in mid-2019, the aforementioned general attorney of the state of New York, Letitia James, decided to open another investigation against Mark Zuckerberg‘s social media, this time focused on the “dominance of Facebook in the industry and the possible anticompetitive conduct derived from that domain [12]”.

For his part, Facebook co-founder, Chris Hughes wrote an opinion article in the New York Times, in which he claimed that Mark Zuckerberg’s influence led to “sacrificing safety and civility in exchange for clicks” [13]. Hughes went even further in proposing that Facebook should be broken up, given the “uncontrollable power” of this company [14].

“Since Zuckerberg controls the majority of Facebook’s voting shares, the board of directors functions more like an advisory committee, leaving Zuckerberg to decide on his own the configuration of the algorithms behind Facebook, Instagram and WhatsApp, sacrificing intentionally safety and civility in exchange for clicks”

Google and Amazon are also in the crosshairs of the authorities.

Just a few weeks ago, the United States House of Representatives Antitrust Subcommittee summoned the CEOs of Alphabet (Google), Apple, Facebook and amazon, for a free statement, since as David Cicilline, Head of the House of Representatives Antitrust Subcommittee expressed: “These companies have too much power, which prevents news forms of competition” [16].

From the European Union, Margrethe Vestager, Commissioner for Competition, said this year that there is a clear concern on the part of the European Community regarding the monopolistic position of several US companies such as Google, Amazon and Facebook. For this reason, authorities are working on new strategies and on establishing basic rules for sharing data in digital markets, through the so-called Digital Services Act -DSA-, which would force large companies to offer their smaller rivals access to data in reasonable, standardized and non-discriminatory terms [17].

The report from the Competition and Markets Authority of the United Kingdom CMA, also mentions Google as responsible, together with Facebook, for the constraint on free competition in the advertising market in the United Kingdom, considering that the company uses techniques that limit new market players from being able to compete on equal terms [18].

Last September 21st The Washington Post announced that the United States Department of Justice will inform the general attorneys of all the states of the union that it will file an antitrust lawsuit against Google, setting in motion a historic “legal confrontation between the United States government and the giant of searches and advertising” [19]. It cannot be ruled out that in the next few weeks it announces a similar procedure against Facebook.

In another latitude of the planet, for some months, the Australian authorities have been seeking to implement a mechanism that forces Google and Facebook to pay the media for the use and exploitation of their content, by issuing a law. This has caused both companies to threaten to suppress all news of their services, in a conflict in which the authorities have been against the wall, due to the complexity of the situation and the probable blackmail from US companies [20].

The constipation of the advertising market

The main concern of the different authorities around the world, in addition to the privacy and competition scenarios raised above, turn around the advertising market, which every day focuses on platforms such as Facebook and Google, concentrating the investments of large agencies and transnationals around the world. This entails a type of monopolization that, on one hand, affects the media that are essential to the health of a democracy and, on the other hand, reduces the possibility that new platforms can compete effectively [21].

In Conclusion, Everything seems to indicate that Facebook, the platform that at the time was considered an innovative and disruptive social medium, became a headache for authorities around the world, who now see with concern how it has insanely concentrated the advertising market with Google, generating a dominant position that damages the media and prevents the entry of new platforms to the market. Taking into account such serious threats to democracy as the one that occurred with Cambridge Analytica, this reality could be enough argument to justify interventions by the competition authorities, as may happen in the coming months in the United States, the United Kingdom, the European Union and Australia, as long as the power of influence of the digital giants in public opinion, as well as the aggressive lobby, do not prevent such interventions.

Image: BP Miller on Unsplash.com

 [1] Bloomberg article about possible lawsuit against Facebook

 [2] Journalistic report about the investigation by the general attorney of New York

[3] Journalistic article about complaints from the democratic congresswoman.

[4] Andinalink article about British CMA report

[5] Andinalink article about British CMA report

[6] Report published by British CMA

[7] Andinalink article about British CMA report

[8] Andinalink article about British CMA report

[9] Analysis by Observacom about possible lawsuit from the FTC

[10] Analysis by Observacom about possible lawsuit from the FTC

[11] Journalistic article about fine to Facenook

[12] Journalistic article about investigation by Letitia James

[13] Opinion article published in the New York Times

[14] La República newspaper analysis about the opinion article by Cris Huges in TNWT

[15] Opinion article published in the New York Times

[16] Analysis by Observacom about the appearance of Facebook before the House of Representatives in the USA.

[17] Article by Hipertextual about the EU decision of new game rules in the digital market

[18] Report published by the British Competition and Markets Authority

[19] Article by The Washington Post about Justice Department announcement

[20] Article by El País from Spain about conflict in Australia

[8] Andinalink article about British CMA report

Disclaimer: This article corresponds to a review and analysis in the context of digital transformation in the information society, and is duly supported by reliable and verified academic and/or journalistic sources. This is NOT an opinion article and therefore the information it contains does not necessarily represent the position of Andinalink, or its authors’ or the entities with which they are formally linked, regarding the issues, persons, entities or organizations mentioned in the text.