Facebook and antitrust: A slam-dunk case, or a decades-long fight in the making?

It’s not surprising that the announcement last week of an antitrust lawsuit against Facebook has gotten a lot of media attention. Mammoth cases like this one (which involves the Federal Trade Commission and 46 states) are extremely rare. There have only been half a dozen or so of this magnitude in the last 50 years, and only the Microsoft case from the late 1990s and possibly the AT&T breakup even come close to this one in size and impact. But the history of such cases shows that what almost inevitably happens is not a swift victory for justice (however one might define that term) but years, and in some cases decades of protracted legal wrangling, a process that is almost mind-numbingly boring for most people, satisfying no one apart from the legions of corporate lawyers and academics for whom it provides something close to full employment. After all that, the ending is likely to be a carefully negotiated settlement.

Even more than Microsoft, this case in particular is complicated by the fact that antitrust law was designed as a weapon to go after railroads and oil magnates who controlled access to physical goods with obvious market value, not a corporation whose product costs nothing and is used daily, according to the company anyway, by billions of people. On top of that, the last several decades of antitrust court decisions have cemented the idea that the main target of antitrust law is consumer harm, which is traditionally defined as either high prices, the restriction of choice, or both. The former makes no sense in the context of Facebook, and even the latter is a stretch. The FTC’s argument is that harm should be broadly defined to mean a lack of privacy, the sharing of personal data, etc., but that is likely to be an uphill climb. Not that it isn’t true, but the concept has not been established yet in a legal sense, and courts may be skeptical of it (it was initially advanced by legal scholar Dina Srinivasan in a paper titled “The Antitrust Case Against Facebook”). And the question of whether Facebook has prevented users from exercising freedom of choice also requires the FTC and the states to jump through some large hoops.

The complaint argues that Facebook has a monopoly over a specific market, which it defines as “personal social networking,” i.e. the sharing of information with family and friends. But there is no consensus on whether that is even a discrete market, let alone whether Facebook controls enough of it to matter in a legal sense. A court could decide that TikTok is fundamentally in the same market, or Snapchat for that matter, and between them they have almost half a billion users and significant market strength. And if Facebook doesn’t control a monopoly on anything, then the anti-competitive behavior it has engaged in (of buying Instagram and WhatsApp for example) just becomes the normal kind of competitive behavior that all large technology companies engage in. We may all believe and understand that Facebook is huge and powerful, but that’s not enough to meet the antitrust test — the FTC has to show that it became that way illegally, and/or maintains that position through illegal means.

New from CJR: A court case reveals the dance between reporter and source

As indicated by their statement of claim, the FTC and the states are obviously going to be making the most of the thousands of emails they have from Mark Zuckerberg to various staff members, showing what they believe to be anti-competitive behavior — the Facebook CEO saying they need to “crush” potential competitors or acquire them, etc. The social network, meanwhile, will likely focus on the amount of time that has gone by since the Instagram and WhatsApp acquisitions, both of which were approved by the FTC. “With seemingly no regard for settled law or the consequences to innovation and investment, the agency is saying it got it wrong and wants a do-over,” Facebook’s general counsel said in a blog post responding to the lawsuit. Legal observers have pointed out that the commission always reserves the right to re-open such cases, but it’s still going to look odd that regulators waited for eight years to revisit the Instagram deal, and the FTC’s claim that it posed a “significant threat” to Facebook at the time it was acquired borders on the ridiculous. Facebook will likely also argue that Instagram has only become as dominant as it has because of the resources Facebook has poured into it.

There is one potential bright spot for those who are concerned about putting a crimp in Facebook’s behavior. If this case takes a similar trajectory to the Microsoft antitrust action, the simple act of suing the social network — and all of the documentation of anti-competitive behavior such a lawsuit entails — can be enough to restrict a company’s activity to the point where remedies are achieved even before a settlement is reached. A number of academics have argued the government’s antitrust case against Microsoft caused the company to become much less aggressive in terms of its behavior towards competitors and the market as a whole, and may have caused it to react slowly to the rise of new challenges like the smartphone, which opened the door for competitors like Google and Apple. In other words, competition could win even if the case never gets to court.

Here’s more on Facebook and antitrust:

• Straightforward and easy: Columbia Law professor Tim Wu has said that the FTC case against Facebook is “a straightforward and easy case,” because emails show that the company acquired Instagram and WhatsApp to squelch competition, and that is explicitly prohibited by the Sherman Act. “It wasn’t legal when John D. Rockefeller did it, and it’s still not legal,” Wu writes in an op-ed for the New York Times. “The investigative journalist Ida Tarbell wrote memorably of Rockefeller’s aggressive approach to acquisition: ‘And nothing was too small: the corner grocery in Browntown, the humble refining still on Oil Creek, the shortest private pipeline. Nothing, for little things grow.’”
• Significant hurdles: But the case against Facebook also faces some significant hurdles, also according to the Times, including the fact that the FTC will have to prove that the world would have been better off if Facebook had not been allowed to acquire Instagram and WhatsApp. “But it’s “hard to prove a hypothetical,” said William Kovacic, former chairman of the Federal Trade Commission. For what it’s worth, antitrust expert Wu says that much of this is wrong, and that it is based on “a controversial theory and misreading of precedent that comes out of a paper funded by Facebook and published in a corporate-funded journal.”
• In defence of breakups: In a new paper titled “In Defense of Breakups,” Rory Van Loo, an associate professor of law at Boston University and a fellow with the Yale Law School Information Society Project, writes about how in most antitrust cases, “after establishing that an anticompetitive merger or other act has occurred, there is great skepticism of breakups as a remedy. Judges, scholars, and regulators see a breakup as extreme, frequently comparing the remedy to trying to ‘unscramble eggs.'” But Van Loo argues that these criticisms are based on outdated information, and that breakups can be done well if they are done properly.
• More integrated: The longer the Facebook antitrust case drags on, the more integrated the company will get with Instagram and WhatsApp, and the harder it will be to separate them, says Facebook expert Sarah Frier. While the company complains about various aspects of the FTC case, she writes, “behind the scenes, the company is likely to make a more nuanced argument: that these products are no longer distinct entities, and breaking them up, as exciting as it sounds, would be incredibly technically difficult. While the products are distinct to users, they share back-end resources for infrastructure, advertising, operations and more.”

Other notable stories:

• A new project called the Tiny News Collective has launched, backed by LION Publishers and News Catalyst, aimed at helping start local news organizations by providing resources, training and technology. The initial goal is 10 new local outlets throughout the country by April, and a total of 500 within three years. For up to $100 per month, the project will provide all the technology an online newsroom needs, including a publishing system, a website and a newsletter platform. Tiny News Collective also hopes to provide services including libel insurance, accounting, legal assistance and payroll and administrative support. Applications to be part of the first cohort will open in January, and no background in entrepreneurship or even journalism is required.
• The Times-Picayune and the New Orleans Advocate have launched the Louisiana Investigative Journalism Fund, a public fund-raising effort aimed at adding more staff to the papers’ investigative team. Led by Gordon Russell, Managing Editor for Investigations, the papers say they plan to double the size of their current staff by adding an editor, a data expert and two additional reporters. This expanded team “will allow us to publish more projects, which involve fighting for and examining voluminous public records, analyzing data and carefully cultivating sources.” The fund says it plans to raise $1.5 million to support its efforts for the next three years.
• An award-winning 2018 New Yorker story — about a Japanese company that provides actors who pretend to be girlfriends, boyfriends and other family members — now carries a large editor’s note admitting that three pivotal people in the story (Yūichi Ishii, founder of the company, and two alleged clients, Reiko Shimada and Kazushige Nishida) made false biographical claims to the writer and a fact checker for the magazine. The truth about their identities “contradict fundamental aspects of these individuals’ stories, and broadly undermine the credibility of what they told us,” the note says. “A Theory of Relativity” won a National Magazine Award for feature writing from the American Society of Magazine Editors in March 2019.
• Shinhee Kang writes for CJR about some of the best coverage of the pandemic this year, including a series of stories by Ed Yong for The Atlantic, who wrote prodigiously about the pandemic. Among his anthology of indispensable works was one titled How the Pandemic Defeated America, and “this unsparing account of America’s abject failure to meet the coronavirus when it arrived at its shores stands out,” says Kang. “One sentence—comprising 212 words, punctuated by 7 semicolons, and beginning with ‘No one should be shocked…’—must be the most incisive of the year.” Others who are part of the roundup include Donald McNeil for the New York Times and Mary Annette Pember for Indian Country Today.
• Google announced a list of projects that have been selected for the second round of the company’s Google News Initiative’s North American Innovation Challenge, a contest that it says is designed “to encourage a spirit of experimenting.” The 33 projects that were included this year all involve diversity, equity and inclusion, Google says, and are all focused on serving specific communities. The Innovation Challenge received 215 applications from the US and Canada, and will fund 33 projects totaling $5.9 million, the company said. For example, Ryerson University in Canada was selected for JeRI: The Journalism Representation Index, an AI-powered tool that scores the institutional power of sources cited in news stories.
• Ryan Lizza, Politico‘s chief Washington correspondent, and Rachael Bade, now of the Washington Post but formerly of Politico, will join the Politico Playbook franchise in 2021, according to a report from Axios. The company also plans to add several other high-profile names to the roster in the coming weeks, the report says. While Lizza and Bade are likely to anchor the team’s main newsletter product, Axios said the company is in talks with other reporters about heading up other Playbook-related products, like Playbook-branded newsletters and audio briefings.
• On CJR’s podcast The Kicker, editor/publisher Kyle Pope talks with Lisa Edmiston, a New York City middle-school principal, about being sick with COVID-19 for the second time, and the story the press is missing. Among other things, Edmiston says the pandemic has highlighted urgent inequities within the city’s public schools. The media has devoted its energy to the debate over whether to keep schools open, she says, but that obscures an even bigger story that Edmiston says isn’t getting the attention it deserves.
• Facebook told employees on Tuesday that it’s developing a tool to summarize news articles so users won’t have to read them, as well as a neural sensor to detect people’s thoughts and translate them into action, according to BuzzFeed News. Those announcements and product demos were part of an end-of-year, company-wide meeting. 
• Mike Rispoli of News Voices and Tauhid Chappell, who is the News Voices Philadelphia program manager, write for the Nieman Journalism Lab that most crime coverage “is terrible. It’s racist, classist, fear-based clickbait masking as journalism. It creates lasting harm for the communities that newsrooms are supposed to serve. And because it so rarely meets the public’s needs, it’s almost never newsworthy, despite what Grizzled Gary in his coffee-stained shirt says from his perch at the copy desk.” The two say this should be the year where the media finally abolishes the crime beat, or at least significantly reinvents it.

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