Last week, a federal judge dismissed two anti-trust lawsuits that were filed against Facebook at the end of last year: one from the FTC, and one from a coalition of Attorneys General from 46 states. The dismissal of the FTC’s case, in particular, is noteworthy because of how forcefully and stridently the text of the judge’s opinion thunders in determining that the FTC failed to establish that Facebook has a monopoly. From the opinion:
The FTC has failed to plead enough facts to plausibly establish a necessary element of all of its Section 2 claims — namely, that Facebook has monopoly power in the market for Personal Social Networking (PSN) Services. The Complaint contains nothing on that score save the naked allegation that the company has had and still has a “dominant share of th[at] market (in excess of 60%).” … Such an unsupported assertion might (barely) suffice in a Section 2 case involving a more traditional goods market, in which the Court could reasonably infer that market share was measured by revenue, units sold, or some other typical metric. But this case involves no ordinary or intuitive market. Rather, PSN services are free to use, and the exact metes and bounds of what even constitutes a PSN service — i.e., which features of a company’s mobile app or website are included in that definition and which are excluded — are hardly crystal clear. In this unusual context, the FTC’s inability to offer any indication of the metric(s) or method(s) it used to calculate Facebook’s market share renders its vague “60%-plus” assertion too speculative and conclusory to go forward.
The opinion was issued by Judge James E. Boasberg, who was appointed to the District Court by Obama. While the suit filed by the states was thrown out entirely, Judge Boasberg did not throw out the FTC’s case but instead gave the Commission — whose new chair, Lina Khan, was appointed in mid-June — 30 days to re-file it.
It does seem irrationally celebratory and misplaced to declare Facebook’s victory in the FTC case as being overwhelming or absolute given that Judge Boasberg accepted the FTC’s definition of the market in which Facebook operates (Personal Social Networking, or PSN) and will allow the FTC to re-file its suit. But it’s clear from the text of Judge Boasberg’s opinion that the FTC must go to much greater lengths to clarify and support its assertion that Facebook has a monopoly in the market for PSNs. Judge Boasberg is clear in the excerpt above in believing that the FTC’s argument is insufficient. That language sharpens still towards the end of the opinion, when Judge Boasberg reveals that he would be a capable business analyst if his career in law ever flounders:
What about the share of total time spent by users on PSN services? Plaintiff says nothing about that metric in its Complaint. And although it seems tenable at first glance, that metric may also be of limited utility … Put another way, the uncertainty left open by the Complaint as to exactly which features of Facebook, Instagram, et al. do and do not constitute part of their PSN services, while not necessarily rendering the alleged PSN-services market implausible, compounds the trouble created by the FTC’s vaguer-still allegations regarding Facebook’s share of that market … It is almost as if the agency expects the Court to simply nod to the conventional wisdom that Facebook is a monopolist … To merely allege that a defendant firm has somewhere over 60% share of an unusual, nonintuitive product market — the confines of which are only somewhat fleshed out and the players within which remain almost entirely unspecified — is not enough.
The FTC’s failure to make the case that Facebook wields monopoly power over the market for PSNs using relevant, credible metrics in the original filing of the lawsuit calls into question its ability to do so in a subsequent re-filing. Perhaps the appointment of Lina Khan to FTC chair provides the commission with renewed moral zeal in pursuing “Big Tech,” but a deficit of vigor isn’t an obvious culprit for this dismissal. Can Facebook or any other pervasive social platform be policed capably by organizations that don’t understand the underlying business models that enable them?
The Judge’s opinion in the FTC case called to mind Mark Zuckerberg’s infamous “Senator, we run ads” retort to Orrin Hatch when asked how the company makes money during Congressional testimony in 2018 following the Cambridge Analytica revelation. These businesses are inscrutable black boxes to the authorities and legislative bodies that are tasked with constraining their natural tendencies toward excess: of data collection, of competitive suppression, etc.
And what we see happening with a dearth of effective regulation is a form of self-regulation that’s really designed to confuse any helpful, progressive analysis of the competitive landscape. App Tracking Transparency, Apple’s new privacy policy, is the perfect example of this: it is regulatory capture not through bribery or paid influence from special interests but through distraction. Ostensibly, from the perspective of users, App Tracking Transparency is a privacy protection mechanism that empowers consumers with choice related to how their data is utilized in service of personalized advertising, and by whom. But in reality, App Tracking Transparency simply suppresses competition within the digital advertising market and privileges Apple’s position as a gatekeeper for the iOS ecosystem.
But App Tracking Transparency is dressed up in verbiage that absolves it from scrutiny by the press and presumably by regulatory authorities: “privacy” and “consumer choice” and “data protection” and “tracking.” Big Tech can use Privacy as a red herring to bamboozle its way out of regulation because Senators can’t articulate how social platforms generate revenue, and the FTC, while certain that a specific company is a monopoly, can’t quite put its finger on why.
Google announced last week that it will delay the phasing out of 3rd-party cookies in its Chrome browser until 2023, partly to allow it to cooperate with the UK’s Competition and Markets Authority. But Google introduced the Privacy Sandbox in August 2019, and it declared that it would transition away from 3rd party cookies by 2022 in January 2020, 18 months ago. At this point: can sclerotic regulatory bodies influence the machinations of Big Tech, or do they merely provide convenient, credible air cover for privacy policy postponements and thinly-disguised unilateral market grabs like App Tracking Transparency?
Photo by Pierre Bamin on Unsplash
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