The Legal Future of Big Tech
As Silicon Valley giants expand market share, monopoly power presents new opportunities for litigators
Over a century ago, U.S. legislators passed the Sherman Anti-Trust Act to resolve a number of issues related to monopolistic trade practices: large oil and steel firms merging and stifling competition; railroads price discriminating to keep rivals out; and collusive backdoor agreements that undermined the American ideal of free markets. Theodore Roosevelt and subsequent presidents used the Sherman, and later Clayton, Acts to break up these large companies, allowing for lower consumer prices, greater competition, and more economic freedom for all.
Google, Amazon, and Facebook are a far cry from Rockefeller’s Standard Oil or Carnegie’s U.S. Steel — the Internet has changed the way we think about business and offers a different conception of markets. But these three companies share a common theme this year as Big Tech faces a litany of new lawsuits from third parties, state prosecutors, and government agencies.
Silicon Valley technology firms, as with many US industries in the last 40 years, have trended towards centralization and horizontal integration. This presents a number of new opportunities to exercise the type of anti-trust litigation that hasn’t been seen since AT&T was dispersed in 1982.
Facebook vs. The Feds
Facebook emerged as the first target of prosecutors in the past year. On December 9th, 2020, the Federal Trade Commission (FTC) along with attorneys general in 48 states and two territories filed a lawsuit claiming that “the company is illegally maintaining its personal social networking monopoly through a years-long course of anticompetitive conduct”¹.
Prosecutors allege that Facebook’s two main mergers, Instagram (acquired in 2012) and WhatsApp (2014), were acquired with the purpose of thwarting competition.
And they have some palpable evidence. The following document, made public at Mark Zuckerberg’s July congressional hearing, connotes anticompetitive strategy.
Zuckerberg and other Facebook employees maintain that the Instagram acquisition was a necessary investment in a company that wasn’t big enough, nor would become big enough, to hurt them. A mutually beneficial deal. However, Zuckerberg did state that Instagram “can hurt us meaningfully without becoming a huge business” and “it is better to buy than compete”².
While large companies buy startups all the time, and can do so usefully, Facebook may struggle explaining language that viewed Instagram as a threat when their case goes to trial in 2023.
The $19 billion WhatsApp deal brings less internal evidence to the table, but it does raise suspicions since it was carried out shortly after WhatsApp messaging usage — its primary market — surpassed that of Facebook’s less popular Messenger. One could see a potential attempt to horizontally integrate, dominating not only the social media market but also the direct messaging industry.
Finally, the FTC highlights the importance of Facebook’s “anticompetitive conditions” towards third party software developers who use their Application Program Interfaces (APIs), which allow independent developers’ apps to directly work with Facebook. The company allegedly offered access of their APIs to developers only on the condition that they not use competitors’ APIs (Twitter, Google). This could constitute a form of price setting, wherein Facebook uses its monopoly power over a service to force consumers and smaller firms to comply.
Google’s 30 Plus Plaintiffs
Google follows next in the series of tech litigation, with over 30 state attorneys general filing suit in regards to anticompetitive search and search advertising practices³. This will mark the third time Google has faced lawsuits for such alleged behavior.
The Justice Department suggests that Google has used its monopoly leverage to strike collusive deals with LG, Apple, and Samsung to ensure that Google is the default search engine used on their devices⁴.
Google has responded that it is relatively easy to switch one’s preferred search engine, and that the reason they get so much traffic is due to the superior nature of their product.
However, the DOJ claims that Google has used their profits as a monopoly to buy “preferential treatment” from other companies in the industry: integration of their software rather than competitors’, default installation, etc.. As such, they’ve created a “continuous and self-reinforcing cycle of monopolization”.
It makes sense that a trillion dollar company with such clout could promote this cycle: they use their attractive product to monopolize market share and gain leverage, which is exercised to prevent new entrants and ensure further monopolization.
Prosecutors might face challenges with this case, though. Unlike the FTC’s case against Facebook, the DOJ doesn’t have internal memos of Google strategizing takeovers. Their success might simply be the outcome of a great product, relegating this case to an issue of company size rather than any malicious attempt to dominate the market.
Nonetheless, small businesses and competitors certainly struggle finding standing in Google’s algorithm. The DOJ may be able to argue on their behalf, leaving this tech giant’s future uncertain.
Bezos’ Parler Problem
Perhaps the most politically divisive of these antitrust cases is that filed by nascent social media site Parler against Amazon earlier this month⁵. While not explicitly seeking a breakup, Parler alleges that Amazon exercised monopoly power in an attempt to shut them down.
The site, a network similar to Twitter, aims to be a haven for free speech with less content moderation than its peers. In the wake of Twitter’s ban of President Trump, millions of conservatives flocked Parler— some of whom used the app to plot violence at the Capitol Building on January 6th.
Amazon Web Services, Amazon’s web hosting platform, soon after suspended Parler’s access for violating its terms of service, citing un-removed violent posts. Apple, Google, and Facebook cut off access accordingly as well⁶.
Parler’s lawsuit states that Amazon did not provide the contractually agreed upon 30 day notice for removal. Also, they allege that Amazon engaged in anticompetitive practices following a hosting deal signed with Twitter. Twitter also hosted violent content pertaining to the Capitol riots, but was not removed by Amazon.
On one hand, Amazon looks strongly favored in this case. The suspension could be seen as prevention of imminent threats of organizing violence. Parler did a poor job at removing these posts and perhaps swift action was necessary to stem damage to life or property. Many have cited Amazon’s autonomy as a private business to do what they wish; at the moment, this is true.
From Parler’s perspective, things appear different. The small start-up is apolitical and did not ask to be the brand ambassador for right-wing extremism. Their inability to remove violent content could potentially be excused, given that their usage surged by 1 million consumers in a matter of days — hardly enough time to scale content moderation.
The broader question of this case goes beyond Parler: it asks us to consider whether we can trust a monopolistic tech firm to uphold unbiased free speech in a public utility role, while still rightfully taking down threatening posts that are not protected by the first amendment.
As public opinion turns against Big Tech, Jeff Bezos too might find himself the object of scrutiny in future Congressional hearings and litigation.
Viability
It is important, in spite of potentially strong allegations of anticompetitive behavior by Big Tech, to take these three cases with a grain of salt. It is not insignificant that states are making tangible progress in holding large companies accountable, but their arguments aren’t guaranteed wins.
Facebook, Google, and Amazon are some of the most powerful entities in our economy, employing the best legal teams in the country, and the government has not succeeded in breaking up a monopoly since 1982.
No matter the outcome of the litigation, we are certainly learning a lot about the enormity of Big Tech’s role in our politics and our economy — a trend that can only amplify if left unchecked.
Main Sources
- Lordan, B. (2020, December 09). FTC Sues Facebook for Illegal Monopolization. Retrieved January 27, 2021, from https://www.ftc.gov/news-events/press-releases/2020/12/ftc-sues-facebook-illegal-monopolization
- Canales, K. (2020, December 10). ‘It’s better to buy than compete’: The FTC is using Mark Zuckerberg’s own words against him. Read the Facebook CEO’s crucial emails here. Retrieved January 27, 2021, from https://www.businessinsider.com/ftc-facebook-lawsuit-makes-zuckerberg-emails-public-instagram-whatsapp-competition-2020-12#:~:text=The%20lawsuit%2C%20filed%20Wednesday%2C%20includes,company%20before%20it%20acquired%20them.
- Paul, K. (2020, December 19). ‘This is big’: US lawmakers take aim at once-untouchable big tech. Retrieved January 27, 2021, from https://www.theguardian.com/technology/2020/dec/18/google-facebook-antitrust-lawsuits-big-tech
- US DOJ. (2020, October 21). Justice Department Sues Monopolist Google For Violating Antitrust Laws. Retrieved January 27, 2021, from https://www.justice.gov/opa/pr/justice-department-sues-monopolist-google-violating-antitrust-laws
- Canales, K. (2020, December 10). ‘It’s better to buy than compete’: The FTC is using Mark Zuckerberg’s own words against him. Read the Facebook CEO’s crucial emails here. Retrieved January 27, 2021, from https://www.businessinsider.com/ftc-facebook-lawsuit-makes-zuckerberg-emails-public-instagram-whatsapp-competition-2020-12#:~:text=The%20lawsuit%2C%20filed%20Wednesday%2C%20includes,company%20before%20it%20acquired%20them.
- Chappell, B. (2021, January 11). Parler Sues Amazon, Seeking To Restore Web Service. Retrieved January 27, 2021, from https://www.npr.org/2021/01/11/955664150/parler-files-lawsuit-against-amazon-seeking-to-restore-web-service
