Opening Moves: The United States v. Big Tech
The rise of America’s tech giants has posed a unique challenge to regulators. The sheer speed in which todays tech giants went from mere “Dot-Com start-ups” in dorm rooms and garages to the top of the Fortune 500 is unprecedented. On top of this, Congress is facing a significant problem; they are just beginning to understand the businesses in which they’re attempting to regulate.
In October the Department of Justice filed a lawsuit against Alphabet, the parent company of Google, making it the first shot fired in what will be a long multi-front war against Big Tech by the Federal Government. Today, the state of California has filed to join that lawsuit. The Justice Department’s lawsuit is alleging that Google has violated antitrust laws through their partnerships with Apple and Samsung to be the default search engine on their devices.
The suit also alleges that Alphabet pressured other device makers that used its operating system, Android, to preload its search engine and its other applications on devices powered by its software.
On Wednesday, the Federal Trade Commission and a bipartisan group of 46 states filed broad antitrust lawsuits against Facebook. The FTC lawsuit is alleging that Facebook acquired what the agency has deemed as “competitors” to prevent them from becoming future threats and demonstrated “anticompetitive behavior”. They also highlighted Facebooks conduct towards other potential competitors.
The lawsuits also cited further evidence of Facebook’s monopolistic behavior and attitudes through its rules on how third-party apps could or couldn’t leverage Facebook’s platform and userbase. The FTC released a statement saying these measures “have served to hinder, suppress, and deter the emergence of promising competitive threats”.
The lawsuit outlines that Facebook’s alleged misconduct has resulted in consumer harm. Their claim is that internet users and consumers have less options to choose from between social media platforms, resulting in poorer user experiences, and that the tech industry has been hurt from “reduced investment in potentially competing services”. If the suits are successful, they could potentially breakup the social media giant and force Facebook to divest Instagram and WhatsApp.
The FTC’s lawsuits present many different challenges. First, the agency had signed off on both transactions at the time the deals were struck. The goal of the lawsuits seems to directionally flawed. Arguing that the acquisition of Instagram in 2012 was monopolistic is debatable. At the time Instagram only had 35 million users, Facebook however had over 1 billion. Was Facebook buying a future competitive threat or did it acquire a company with a complimentary product to its own suite of products, nurture it, use its existing talent, resources, and expertise to help build it to what it is today? What could be more apparently prosecutable, however, is Instagram’s cloning of features from competitors like Snapchat and Byte Dance’s TikTok under Facebook.
WhatsApp was an acquisition for positioning and expanding Facebook’s reach further on an international level. However, making that argument in a court is going to be difficult and something that we should all be eager to watch from the bleachers. It’s unclear how Facebook has planned to fully monetize WhatsApp as it is a messaging application that doesn’t serve its users advertisements. The app also claims it has end to end encryption, meaning perhaps the behavioral data isn’t being leveraged in any way. It’s also unclear how much money is being made from its business API. WhatsApp is primarily used more abroad than within the United States. What is clear though, Facebook saw a $19 billion reason to purchase the company and they likely believe they will see a return on that investment materialize in some form.
These lawsuits have been the second significant step that the Federal Government has taken to rein in Big Tech. In October, the Department of Justice filed a lawsuit against Google for alleged illegal monopolization of the search and online ad markets. The lawsuit against Alphabet has some teeth; Google is a nearly immovable and unavoidable fixture if you are doing business on the internet and it leverages it for everything it’s worth.
A better path to reigning in these tech giants could be through regulation, not anti-trust. The federal government has been foaming at the mouth to take a swing at these companies and the cases being brought aren’t what will serve the greatest public good. Anti-trust laws were designed to break up Bell System and Standard Oil and using them on tech companies that are vastly different in nature is a tricky business. The argument could also be made that breaking up these companies could seriously put us at a disadvantage on a global level against rivals with tech giants of their own.
The goal should be to limit what data can be collected and how these companies and others at companies at scale can use this data while also bringing public transparency to their data collection practices. In approaching anti-competitive behaviors by these organizations, we have to consider that these monopolies are largely user elected monopolies and instead just limit these companies’ ability to entrench themselves into the firmament of the internet.
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