FTC has a “plausible claim” that Facebook is an illegal monopoly, judge says

A worker picks up trash in front of the new logo in front of Meta's headquarters on October 28, 2021, in Menlo Park, Calif.

Enlarge / A worker picks up trash in front of the new logo in front of Meta’s headquarters on October 28, 2021, in Menlo Park, Calif. (credit: Justin Sullivan/Getty Images)

The Federal Trade Commission’s antitrust suit against Facebook may proceed, a federal judge has ruled. The company had filed a motion to dismiss the case, which the judge denied.

US District Judge James Boasberg had invited the FTC to refile the case after throwing out its initial attempt when he found it lacking. “Second time lucky?” Boasberg wrote in yesterday’s opinion. Apparently.

“The core theory of the lawsuit remains essentially unchanged,” he said of the FTC’s refiling. “The facts alleged this time around to fortify those theories, however, are far more robust and detailed than before, particularly in regard to the contours of Defendant’s alleged monopoly.”

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#antitrust-lawsuit, #facebook, #ftc, #lina-khan, #meta, #policy

FTC says health apps must notify consumers about data breaches — or face fines

The U.S. Federal Trade Commission (FTC) has warned apps and devices that collect personal health information must notify consumers if their data is breached or shared with third parties without their permission.

In a 3-2 vote on Wednesday, the FTC agreed on a new policy statement to clarify a decade-old 2009 Health Breach Notification Rule, which requires companies handling health records to notify consumers if their data is accessed without permission, such as the result of a breach. This has now been extended to apply to health apps and devices — specifically calling out apps that track fertility data, fitness, and blood glucose — which “too often fail to invest in adequate privacy and data security,” according to FTC chair Lina Khan.

“Digital apps are routinely caught playing fast and loose with user data, leaving users’ sensitive health information susceptible to hacks and breaches,” said Khan in a statement, pointing to a study published this year in the British Medical Journal that found health apps suffer from “serious problems” ranging from the insecure transmission of user data to the unauthorized sharing of data with advertisers.

There have also been a number of recent high-profile breaches involving health apps in recent years. Babylon Health, a U.K. AI chatbot and telehealth startup, last year suffered a data breach after a “software error” allowed users to access other patients’ video consultations, while period tracking app Flo was recently found to be sharing users’ health data with third-party analytics and marketing services.

Under the new rule, any company offering health apps or connected fitness devices that collect personal health data must notify consumers if their data has been compromised. However, the rule doesn’t define a “data breach” as just a cybersecurity intrusion; unauthorized access to personal data, including the sharing of information without an individual’s permission, can also trigger notification obligations.

“While this rule imposes some measure of accountability on tech firms that abuse our personal information, a more fundamental problem is the commodification of sensitive health information, where companies can use this data to feed behavioral ads or power user analytics,” Khan said.

If companies don’t comply with the rule, the FTC said it will “vigorously” enforce fines of $43,792 per violation per day.

The FTC has been cracking down on privacy violations in recent weeks. Earlier this month, the agency unanimously voted to ban spyware maker SpyFone and its chief executive Scott Zuckerman from the surveillance industry for harvesting mobile data on thousands of people and leaving it on the open internet.

#articles, #artificial-intelligence, #babylon-health, #chair, #data-breach, #digital-rights, #flo, #government, #identity-management, #lina-khan, #open-internet, #security, #security-breaches, #social-issues, #spyfone, #terms-of-service

Biden’s new FTC nominee is a digital privacy advocate critical of Big Tech

President Biden made his latest nomination to the Federal Trade Commission this week, tapping digital privacy expert Alvaro Bedoya to join the agency as it takes a hard look at the tech industry.

Bedoya is the founding director of the Center on Privacy & Technology at Georgetown’s law school and previously served as chief counsel for former Senator Al Franken and the Senate Judiciary Subcommittee on Privacy, Technology, and the Law. Bedoya has worked on legislation addressing some of the most pressing privacy issues in tech, including stalkerware and facial recognition systems.

In 2016, Bedoya co-authored a report titled “The Perpetual Line-Up: Unregulated Police Face Recognition in America,” a year-long investigation that dove deeply into the police use of facial recognition systems in the U.S. The 2016 report examined law enforcement’s reliance on facial recognition systems and biometric databases on a state level. It argued that regulations are desperately needed to curtail potential abuses and algorithmic failures before the technology inevitably becomes even more commonplace.

Bedoya also isn’t shy about calling out Big Tech. In a New York Times op-ed a few years ago, he took aim at Silicon Valley companies giving user privacy lip service in public while quietly funneling millions toward lobbyists to undermine consumer privacy. The new FTC nominee singled out Facebook specifically, pointing to the company’s efforts to undermine the Illinois Biometric Information Privacy Act, a state law that serves as one of the only meaningful checks on invasive privacy practices in the U.S.

Bedoya argued that the tech industry would have an easier time shaping a single, sweeping piece of privacy regulations with its lobbying efforts rather than a flurry of targeted, smaller bills. Antitrust advocates in Congress taking aim at tech today seem to have learned that same lesson as well.

“We cannot underestimate the tech sector’s power in Congress and in state legislatures,” Bedoya wrote. “If the United States tries to pass broad rules for personal data, that effort may well be co-opted by Silicon Valley, and we’ll miss our best shot at meaningful privacy protections.”

If confirmed, Bedoya would join big tech critic Lina Khan, a recent Biden FTC nominee who now chairs the agency. Khan’s focus on antitrust and Amazon in particular would dovetail with Bedoya’s focus on adjacent privacy concerns, making the pair a formidable regulatory presence as the Biden administration seeks to rein in some of the tech industry’s most damaging excesses.

#biden, #biden-administration, #big-tech, #biometrics, #congress, #consumer-privacy, #facial-recognition, #federal-trade-commission, #government, #lina-khan, #privacy, #surveillance, #tc, #united-states

A majority of tech workers support antitrust legislation enforcement

With the arrival of U.S. Federal Trade Commission Chair Lina Khan, breaking up Big Tech has reemerged as a major policy discussion in Washington. The issue seems to be bipartisan, with Republicans and Democrats alike in favor of stemming monopolistic behavior in the tech industry. Of course, the situation on the ground is more nuanced.

One month after the House Judiciary Committee voted to advance five bipartisan bills that would force Amazon, Apple, Microsoft, Facebook and Google to split up or walk away from core businesses, Republican committee members introduced new legislation to give Americans legal recourse against online censorship by Big Tech companies. The more conservative-driven policy measures also propose greater transparency into content moderation practices by Big Tech.

This sparring between lawmakers on how to regulate Big Tech is not expected to end anytime soon. But as the U.S. ushers in a new era of digital transformation accelerated by the pandemic, Congress stands firmly united in the belief that Big Tech’s power must be checked to preserve the free market.

As it stands now, small competitors and consumers alike have little choice but to be tethered to Big Tech to participate in today’s modern economic engine. And coming out of the pandemic, the five biggest tech giants are growing at breathtaking speed unseen before in the history of capitalism.

Big Tech companies have come out strongly against regulation that would break up their business operations, suggesting reform would result in the loss of research and development, impractical market fragmentation and higher service costs to consumers.

A survey commissioned by a tech industry trade group funded by Big Tech companies such as Apple, Facebook and Amazon suggests that Americans view tech regulation as a low priority for Congress. Among those listed as top priority for Americans were the economy, public health, climate change and infrastructure. The survey also revealed that Americans are more likely to oppose regulation if it were to affect offerings like free shipping on Amazon Prime products.

Perhaps this poll and the bipartisan sentiment among elected leaders signals that after COVID-19, society has become aware of its dependency on tech giants, for better or worse. For the last 18 months, American workers have adapted to remote work. They utilize programs run by Big Tech companies to communicate with other employees, to run companies, and to buy groceries and essentials. It is unlikely this dynamic will change, as many companies have announced their transition to a fully remote or hybrid work model.

This topic has raised interest among professionals, more specifically those who work in the tech industry, startups and small businesses. We at Fishbowl thought we’d ask professionals — many of whom work in the tech industry — about breaking up tech giants. Fishbowl is a social network for professionals, so conducting surveys on this and other workplace topics is a natural fit.

The survey ran from July 26-30, 2021, to determine how employees in the field feel about antitrust laws. The survey asked professionals: Do you believe antitrust legislation should be used to break up Big Tech companies like Amazon and Google?

There were 11,579 verified professionals on the Fishbowl app who participated in the survey, and they were given the option to answer either yes or no. The survey was broken down into state and professional industries such as law, consulting, finance, tech, marketing, accounting, human resources, teachers and others.

Here’s what the survey revealed:

Image Credits: Fishbowl

Out of 11,579 professionals, the majority — 6,920 (59.76%) — responded yes to the survey question.

Based on responses, we found that law professionals were the highest group responding in the affirmative to the survey, with 66.67%. Consulting professionals followed with 61.97%, while finance (60.64%) marginally beat out tech (60.03%). Conversely, teachers had the lowest percentage with 53.49%. Human resources (55.65%), accounting (58.51%) and other professional industries (58.83%) trailed behind.

The survey’s data was collected from professionals in 25 U.S. states. The highest percentage responding “yes” was Colorado with 76.83%. In second place was Washington with 73.17%, and Michigan rounded out the top three with 69.70%. Missouri (51.35%) had the lowest percentage of employees responding “yes” to splitting up Big Tech. Following closely behind were Indiana (52.59%) and Massachusetts (52.83%). Overall, the majority of the states involved in the survey agreed that they believed antitrust legislation should indeed break up Big Tech companies.

Tech had the fourth-highest percentage of professionals agreeing that Big Tech companies should be broken up. Some benefits from breaking up Big Tech companies are more opportunities for small businesses — for a tech professional or entrepreneur, this could open up opportunities to launch new products, programs and services. It could also add more jobs for highly skilled professionals. Second, it can reduce data privacy and national security concerns. But some cons of breaking up Big Tech companies include the loss of research and development — large companies provide major funding for artificial intelligence, autonomous vehicles, wearables, robots and more. Ultimately, breaking up Big Tech companies can also increase service costs for professionals and the overall public.

As policymakers continue to negotiate on how to break up Big Tech, the White House is also making moves. President Joe Biden recently named Khan, a professor at Columbia Law School, as chair of the FTC. A staunch critic of Big Tech, Khan’s main priority is to protect the public from corporate abuse and ensure merger guidelines reflect economic realities and empirical learning and enforcement. Simply put, she reviews mergers with skepticism.

And in July, Biden announced his intention to nominate Jonathan Kanter for chief of the Justice Department’s Antitrust Division. Kanter is an antitrust lawyer with over 20 years of experience who has been a leading advocate and expert in the effort to promote strong and meaningful antitrust enforcement and competition policy.

With these additional members, it is expected that there will be an aggressive approach to enforcing antitrust laws across industries, leaving it to Congress to ensure that moving forward things are different.

#amazon, #antitrust, #apple, #big-tech, #column, #congress, #facebook, #google, #government, #joe-biden, #lina-khan, #microsoft, #policy, #tc, #white-house

Move fast and break Facebook: A bull case for antitrust enforcement

This is the second post in a series on the Facebook monopoly. The first post explored how the U.S. Federal Trade Commission should define the Facebook monopoly. I am inspired by Cloudflare’s recent post explaining the impact of Amazon’s monopoly in its industry.

Perhaps it was a competitive tactic, but I genuinely believe it more a patriotic duty: guideposts for legislators and regulators on a complex issue. My generation has watched with a combination of sadness and trepidation as legislators who barely use email question the leading technologists of our time about products that have long pervaded our lives in ways we don’t yet understand.

I, personally, and my company both stand to gain little from this — but as a participant in the latest generation of social media upstarts, and as an American concerned for the future of our democracy, I feel a duty to try.


Mark Zuckerberg has reached his Key Largo moment.

In May 1972, executives of the era’s preeminent technology company — AT&T — met at a secret retreat in Key Largo, Florida. Their company was in crisis.

At the time, Ma Bell’s breathtaking monopoly consisted of a holy trinity: Western Electric (the vast majority of phones and cables used for American telephony), the lucrative long distance service (for both personal and business use) and local telephone service, which the company subsidized in exchange for its monopoly.

Over the next decade, all three government branches — legislators, regulators and the courts — parried with AT&T’s lawyers as the press piled on, battering the company’s reputation in the process. By 1982, a consent decree forced AT&T’s dismantling. The biggest company on earth withered to 30% of its book value and seven independent “Baby Bell” regional operating companies. AT&T’s brand would live on, but the business as the world knew it was dead.

Mark Zuckerberg is, undoubtedly, the greatest technologist of our time. For over 17 years, he has outgunned, outsmarted and outperformed like no software entrepreneur before him. Earlier this month, the U.S. Federal Trade Commission refiled its sweeping antitrust case against Facebook.

Its own holy trinity of Facebook Blue, Instagram and WhatsApp is under attack. All three government branches — legislators, regulators and the courts — are gaining steam in their fight, and the press is piling on, battering the company’s reputation in the process. Facebook, the AT&T of our time, is at the brink. For so long, Zuckerberg has told us all to move fast and break things. It’s time for him to break Facebook.

If Facebook does exist to “make the world more open and connected, and not just to build a company,” as Zuckerberg wrote in the 2012 IPO prospectus, he will spin off Instagram and WhatsApp now so that they have a fighting chance. It would be the ultimate Zuckerbergian chess move. Zuckerberg would lose voting control and thus power over all three entities, but in his action he would successfully scatter the opposition. The rationale is simple:

  1. The United States government will break up Facebook. It is not a matter of if; it is a matter of when.
  2. Facebook is already losing. Facebook Blue, Instagram and WhatsApp all face existential threats. Pressure from the government will stifle Facebook’s efforts to right the ship.
  3. Facebook will generate more value for shareholders as three separate companies.

I write this as an admirer; I genuinely believe much of the criticism Zuckerberg has received is unfair. Facebook faces Sisyphean tasks. The FTC will not let Zuckerberg sneeze without an investigation, and the company has failed to innovate.

Given no chance to acquire new technology and talent, how can Facebook survive over the long term? In 2006, Terry Semel of Yahoo offered $1 billion to buy Facebook. Zuckerberg reportedly remarked, “I just don’t know if I want to work for Terry Semel.” Even if the FTC were to allow it, this generation of founders will not sell to Facebook. Unfair or not, Mark Zuckerberg has become Terry Semel.

The government will break up Facebook

It is not a matter of if; it is a matter of when.

In a speech on the floor of Congress in 1890, Senator John Sherman, the founding father of the modern American antitrust movement, famously said, “If we will not endure a king as a political power, we should not endure a king over the production, transportation and sale of any of the necessities of life. If we would not submit to an emperor, we should not submit to an autocrat of trade with power to prevent competition and to fix the price of any commodity.”

This is the sentiment driving the building resistance to Facebook’s monopoly, and it shows no sign of abating. Zuckerberg has proudly called Facebook the fifth estate. In the U.S., we only have four estates.

All three branches of the federal government are heating up their pursuit. In the Senate, an unusual bipartisan coalition is emerging, with Senators Amy Klobuchar (D-MN), Mark Warner (D-VA), Elizabeth Warren (D-MA) and Josh Hawley (R-MO) each waging a war from multiple fronts.

In the House, Speaker Nancy Pelosi (D-CA) has called Facebook “part of the problem.” Lina Khan’s FTC is likewise only getting started, with unequivocal support from the White House that feels burned by Facebook’s disingenuous lobbying. The Department of Justice will join, too, aided by state attorneys general. And the courts will continue to turn the wheels of justice, slowly but surely.

In the wake of Facebook co-founder Chris Hughes’ scathing 2019 New York Times op-ed, Zuckerberg said that Facebook’s immense size allows it to spend more on trust and safety than Twitter makes in revenue.

“If what you care about is democracy and elections, then you want a company like us to be able to invest billions of dollars per year like we are in building up really advanced tools to fight election interference,” Zuckerberg said.

This could be true, but it does not prove that the concentration of such power in one man’s hands is consistent with U.S. public policy. And the centralized operations could be rebuilt easily in standalone entities.

Time and time again, whether on Holocaust denial, election propaganda or vaccine misinformation, Zuckerberg has struggled to make quick judgments when presented with the information his trust and safety team uncovers. And even before a decision is made, the structure of the team disincentivizes it from even measuring anything that could harm Facebook’s brand. This is inherently inconsistent with U.S. democracy. The New York Times’ army of reporters will not stop uncovering scandal after scandal, contradicting Zuckerberg’s narrative. The writing is on the wall.

Facebook is losing

Facebook Blue, Instagram and WhatsApp all face existential threats. Pressure from the government will stifle Facebook’s efforts to right the ship.

For so long, Facebook has dominated the social media industry. But if you ask Chinese technology executives about Facebook today, they quote Tencent founder Pony Ma: “When a giant falls, his corpse will still be warm for a while.”

Facebook’s recent demise begins with its brand. The endless, cascading scandals of the last decade have irreparably harmed its image. Younger users refuse to adopt the flagship Facebook Blue. The company’s internal polling on two key metrics — good for the world (GFW) and cares about users (CAU) — shows Facebook’s reputation is in tatters. Talent is fleeing, too; Instacart alone recently poached 55 Facebook executives.

In 2012 and 2014, Instagram and WhatsApp were real dangers. Facebook extinguished both through acquisition. Yet today they represent the company’s two most promising, underutilized assets. They are the underinvested telephone networks of our time.

Weeks ago, Instagram head Adam Mosseri announced that the company no longer considers itself a photo-sharing app. Instead, its focus is entertainment. In other words, as the media widely reported, Instagram is changing to compete with TikTok.

TikTok’s strength represents an existential threat. U.S. children 4 to 15 already spend over 80 minutes a day on ByteDance’s TikTok, and it’s just getting started. The demographics are quickly expanding way beyond teenagers, as social products always have. For Instagram, it could be too little too late — as a part of Facebook, Instagram cannot acquire the technology and retain the talent it needs to compete with TikTok.

Imagine Instagram acquisitions of Squarespace to bolster its e-commerce offerings, or Etsy to create a meaningful marketplace. As a part of Facebook, Instagram is strategically adrift.

Likewise, a standalone WhatsApp could easily be a $100 billion market cap company. WhatsApp has a proud legacy of robust security offerings, but its brand has been tarnished by associations with Facebook. Discord’s rise represents a substantial threat, and WhatsApp has failed to innovate to account for this generation’s desire for community-driven messaging. Snapchat, too, is in many ways a potential WhatsApp killer; its young users use photography and video as a messaging medium. Facebook’s top augmented reality talents are leaving for Snapchat.

With 2 billion monthly active users, WhatApp could be a privacy-focused alternative to Facebook Blue, and it would logically introduce expanded profiles, photo-sharing capabilities and other features that would strengthen its offerings. Inside Facebook, WhatsApp has suffered from underinvestment as a potential threat to Facebook Blue and Messenger. Shareholders have suffered for it.

Beyond Instagram and WhatsApp, Facebook Blue itself is struggling. Q2’s earnings may have skyrocketed, but the increase in revenue hid a troubling sign: Ads increased by 47%, but inventory increased by just 6%. This means Facebook is struggling to find new places to run its ads. Why? The core social graph of Facebook is too old.

I fondly remember the day Facebook came to my high school; I have thousands of friends on the platform. I do not use Facebook anymore — not for political reasons, but because my friends have left. A decade ago, hundreds of people wished me happy birthday every year. This year it was 24, half of whom are over the age of 50. And I’m 32 years old. Teen girls run the social world, and many of them don’t even have Facebook on their phones.

Zuckerberg’s newfound push into the metaverse has been well covered, but the question remains: Why wouldn’t a Facebook serious about the metaverse acquire Roblox? Of course, the FTC would currently never allow it.

Facebook’s current clunky attempt at a hardware solution, with an emphasis on the workplace, shows little sign of promise. The launch was hardly propitious, as CNN reported, “While Bosworth, the Facebook executive, was in the middle of describing how he sees Workrooms as a more interactive way to gather virtually with coworkers than video chat, his avatar froze midsentence, the pixels of its digital skin turning from flesh-toned to gray. He had been disconnected.”

This is not the indomitable Facebook of yore. This is graying Facebook, freezing midsentence.

Facebook will generate more value for shareholders as three separate companies

Zuckerberg’s control of 58% of Facebook’s voting shares has forestalled a typical Wall Street reckoning: Investors are tiring of Zuckerberg’s unilateral power. Many justifiably believe the company is more valuable as the sum of its parts. The success of AT&T’s breakup is a case in point.

Five years after AT&T’s 1984 breakup, AT&T and the Baby Bells’ value had doubled compared to AT&T’s pre-breakup market capitalization. Pressure from Japanese entrants battered Western Electric’s market share, but greater competition in telephony spurred investment and innovation among the Baby Bells.

AT&T turned its focus to competing with IBM and preparing for the coming information age. A smaller AT&T became more nimble, ready to focus on the future rather than dwell on the past.

Standalone Facebook Blue, Instagram and WhatsApp could drastically change their futures by attracting talent and acquiring new technologies.

The U.K.’s recent opposition to Facebook’s $400 million GIPHY acquisition proves Facebook will struggle mightily to acquire even small bolt-ons.

Zuckerberg has always been one step ahead. And when he wasn’t, he was famously unprecious: “Copying is faster than innovating.” If he really believes in Facebook’s mission and recognizes that the situation cannot possibly get any better from here, he will copy AT&T’s solution before it is forced upon him.

Regulators are tying Zuckerberg’s hands behind his back as the company weathers body blows and uppercuts from Beijing to Silicon Valley. As Zuckerberg’s idol Augustus Caesar might have once said, carpe diem. It’s time to break Facebook.

#antitrust, #column, #congress, #facebook, #government, #instagram, #lina-khan, #mark-zuckerberg, #messenger, #opinion, #policy, #social, #social-media, #tc, #united-states, #whatsapp

Today’s real story: The Facebook monopoly

Facebook is a monopoly. Right?

Mark Zuckerberg appeared on national TV today to make a “special announcement.” The timing could not be more curious: Today is the day Lina Khan’s FTC refiled its case to dismantle Facebook’s monopoly.

To the average person, Facebook’s monopoly seems obvious. “After all,” as James E. Boasberg of the U.S. District Court for the District of Columbia put it in his recent decision, “No one who hears the title of the 2010 film ‘The Social Network’ wonders which company it is about.” But obviousness is not an antitrust standard. Monopoly has a clear legal meaning, and thus far Lina Khan’s FTC has failed to meet it. Today’s refiling is much more substantive than the FTC’s first foray. But it’s still lacking some critical arguments. Here are some ideas from the front lines.

To the average person, Facebook’s monopoly seems obvious. But obviousness is not an antitrust standard.

First, the FTC must define the market correctly: personal social networking, which includes messaging. Second, the FTC must establish that Facebook controls over 60% of the market — the correct metric to establish this is revenue.

Though consumer harm is a well-known test of monopoly determination, our courts do not require the FTC to prove that Facebook harms consumers to win the case. As an alternative pleading, though, the government can present a compelling case that Facebook harms consumers by suppressing wages in the creator economy. If the creator economy is real, then the value of ads on Facebook’s services is generated through the fruits of creators’ labor; no one would watch the ads before videos or in between posts if the user-generated content was not there. Facebook has harmed consumers by suppressing creator wages.

A note: This is the first of a series on the Facebook monopoly. I am inspired by Cloudflare’s recent post explaining the impact of Amazon’s monopoly in their industry. Perhaps it was a competitive tactic, but I genuinely believe it more a patriotic duty: guideposts for legislators and regulators on a complex issue. My generation has watched with a combination of sadness and trepidation as legislators who barely use email question the leading technologists of our time about products that have long pervaded our lives in ways we don’t yet understand. I, personally, and my company both stand to gain little from this — but as a participant in the latest generation of social media upstarts, and as an American concerned for the future of our democracy, I feel a duty to try.

The problem

According to the court, the FTC must meet a two-part test: First, the FTC must define the market in which Facebook has monopoly power, established by the D.C. Circuit in Neumann v. Reinforced Earth Co. (1986). This is the market for personal social networking services, which includes messaging.

Second, the FTC must establish that Facebook controls a dominant share of that market, which courts have defined as 60% or above, established by the 3rd U.S. Circuit Court of Appeals in FTC v. AbbVie (2020). The right metric for this market share analysis is unequivocally revenue — daily active users (DAU) x average revenue per user (ARPU). And Facebook controls over 90%.

The answer to the FTC’s problem is hiding in plain sight: Snapchat’s investor presentations:

Snapchat July 2021 investor presentation: Significant DAU and ARPU Opportunity

Snapchat July 2021 investor presentation: Significant DAU and ARPU Opportunity. Image CreditsSnapchat

This is a chart of Facebook’s monopoly — 91% of the personal social networking market. The gray blob looks awfully like a vast oil deposit, successfully drilled by Facebook’s Standard Oil operations. Snapchat and Twitter are the small wildcatters, nearly irrelevant compared to Facebook’s scale. It should not be lost on any market observers that Facebook once tried to acquire both companies.

The market Includes messaging

The FTC initially claimed that Facebook has a monopoly of the “personal social networking services” market. The complaint excluded “mobile messaging” from Facebook’s market “because [messaging apps] (i) lack a ‘shared social space’ for interaction and (ii) do not employ a social graph to facilitate users’ finding and ‘friending’ other users they may know.”

This is incorrect because messaging is inextricable from Facebook’s power. Facebook demonstrated this with its WhatsApp acquisition, promotion of Messenger and prior attempts to buy Snapchat and Twitter. Any personal social networking service can expand its features — and Facebook’s moat is contingent on its control of messaging.

The more time in an ecosystem the more valuable it becomes. Value in social networks is calculated, depending on whom you ask, algorithmically (Metcalfe’s law) or logarithmically (Zipf’s law). Either way, in social networks, 1+1 is much more than 2.

Social networks become valuable based on the ever-increasing number of nodes, upon which companies can build more features. Zuckerberg coined the “social graph” to describe this relationship. The monopolies of Line, Kakao and WeChat in Japan, Korea and China prove this clearly. They began with messaging and expanded outward to become dominant personal social networking behemoths.

In today’s refiling, the FTC explains that Facebook, Instagram and Snapchat are all personal social networking services built on three key features:

  1. “First, personal social networking services are built on a social graph that maps the connections between users and their friends, family, and other personal connections.”
  2. “Second, personal social networking services include features that many users regularly employ to interact with personal connections and share their personal experiences in a shared social space, including in a one-to-many ‘broadcast’ format.”
  3. “Third, personal social networking services include features that allow users to find and connect with other users, to make it easier for each user to build and expand their set of personal connections.”

Unfortunately, this is only partially right. In social media’s treacherous waters, as the FTC has struggled to articulate, feature sets are routinely copied and cross-promoted. How can we forget Instagram’s copying of Snapchat’s stories? Facebook has ruthlessly copied features from the most successful apps on the market from inception. Its launch of a Clubhouse competitor called Live Audio Rooms is only the most recent example. Twitter and Snapchat are absolutely competitors to Facebook.

Messaging must be included to demonstrate Facebook’s breadth and voracious appetite to copy and destroy. WhatsApp and Messenger have over 2 billion and 1.3 billion users respectively. Given the ease of feature copying, a messaging service of WhatsApp’s scale could become a full-scale social network in a matter of months. This is precisely why Facebook acquired the company. Facebook’s breadth in social media services is remarkable. But the FTC needs to understand that messaging is a part of the market. And this acknowledgement would not hurt their case.

The metric: Revenue shows Facebook’s monopoly

Boasberg believes revenue is not an apt metric to calculate personal networking: “The overall revenues earned by PSN services cannot be the right metric for measuring market share here, as those revenues are all earned in a separate market — viz., the market for advertising.” He is confusing business model with market. Not all advertising is cut from the same cloth. In today’s refiling, the FTC correctly identifies “social advertising” as distinct from the “display advertising.”

But it goes off the deep end trying to avoid naming revenue as the distinguishing market share metric. Instead the FTC cites “time spent, daily active users (DAU), and monthly active users (MAU).” In a world where Facebook Blue and Instagram compete only with Snapchat, these metrics might bring Facebook Blue and Instagram combined over the 60% monopoly hurdle. But the FTC does not make a sufficiently convincing market definition argument to justify the choice of these metrics. Facebook should be compared to other personal social networking services such as Discord and Twitter — and their correct inclusion in the market would undermine the FTC’s choice of time spent or DAU/MAU.

Ultimately, cash is king. Revenue is what counts and what the FTC should emphasize. As Snapchat shows above, revenue in the personal social media industry is calculated by ARPU x DAU. The personal social media market is a different market from the entertainment social media market (where Facebook competes with YouTube, TikTok and Pinterest, among others). And this too is a separate market from the display search advertising market (Google). Not all advertising-based consumer technology is built the same. Again, advertising is a business model, not a market.

In the media world, for example, Netflix’s subscription revenue clearly competes in the same market as CBS’ advertising model. News Corp.’s acquisition of Facebook’s early competitor MySpace spoke volumes on the internet’s potential to disrupt and destroy traditional media advertising markets. Snapchat has chosen to pursue advertising, but incipient competitors like Discord are successfully growing using subscriptions. But their market share remains a pittance compared to Facebook.

An alternative pleading: Facebook’s market power suppresses wages in the creator economy

The FTC has correctly argued for the smallest possible market for their monopoly definition. Personal social networking, of which Facebook controls at least 80%, should not (in their strongest argument) include entertainment. This is the narrowest argument to make with the highest chance of success.

But they could choose to make a broader argument in the alternative, one that takes a bigger swing. As Lina Khan famously noted about Amazon in her 2017 note that began the New Brandeis movement, the traditional economic consumer harm test does not adequately address the harms posed by Big Tech. The harms are too abstract. As White House advisor Tim Wu argues in “The Curse of Bigness,” and Judge Boasberg acknowledges in his opinion, antitrust law does not hinge solely upon price effects. Facebook can be broken up without proving the negative impact of price effects.

However, Facebook has hurt consumers. Consumers are the workers whose labor constitutes Facebook’s value, and they’ve been underpaid. If you define personal networking to include entertainment, then YouTube is an instructive example. On both YouTube and Facebook properties, influencers can capture value by charging brands directly. That’s not what we’re talking about here; what matters is the percent of advertising revenue that is paid out to creators.

YouTube’s traditional percentage is 55%. YouTube announced it has paid $30 billion to creators and rights holders over the last three years. Let’s conservatively say that half of the money goes to rights holders; that means creators on average have earned $15 billion, which would mean $5 billion annually, a meaningful slice of YouTube’s $46 billion in revenue over that time. So in other words, YouTube paid creators a third of its revenue (this admittedly ignores YouTube’s non-advertising revenue).

Facebook, by comparison, announced just weeks ago a paltry $1 billion program over a year and change. Sure, creators may make some money from interstitial ads, but Facebook does not announce the percentage of revenue they hand to creators because it would be insulting. Over the equivalent three-year period of YouTube’s declaration, Facebook has generated $210 billion in revenue. one-third of this revenue paid to creators would represent $70 billion, or $23 billion a year.

Why hasn’t Facebook paid creators before? Because it hasn’t needed to do so. Facebook’s social graph is so large that creators must post there anyway — the scale afforded by success on Facebook Blue and Instagram allows creators to monetize through directly selling to brands. Facebooks ads have value because of creators’ labor; if the users did not generate content, the social graph would not exist. Creators deserve more than the scraps they generate on their own. Facebook suppresses creators’ wages because it can. This is what monopolies do.

Facebook’s Standard Oil ethos

Facebook has long been the Standard Oil of social media, using its core monopoly to begin its march upstream and down. Zuckerberg announced in July and renewed his focus today on the metaverse, a market Roblox has pioneered. After achieving a monopoly in personal social media and competing ably in entertainment social media and virtual reality, Facebook’s drilling continues. Yes, Facebook may be free, but its monopoly harms Americans by stifling creator wages. The antitrust laws dictate that consumer harm is not a necessary condition for proving a monopoly under the Sherman Act; monopolies in and of themselves are illegal. By refiling the correct market definition and marketshare, the FTC stands more than a chance. It should win.

A prior version of this article originally appeared on Substack.

#amazon, #apps, #cloudflare, #column, #facebook, #federal-trade-commission, #google, #lina-khan, #mark-zuckerberg, #messenger, #monopoly, #opinion, #pinterest, #policy, #snapchat, #social, #social-media, #social-networks, #startups, #tc, #twitter, #whatsapp

Biden nominates another Big Tech enemy, this time to lead the DOJ’s antitrust division

The Biden administration tripled down on its commitment to reining in powerful tech companies Tuesday, proposing committed Big Tech critic Jonathan Kanter to lead the Justice Department’s antitrust division.

Kanter is a lawyer with a long track record of representing smaller companies like Yelp in antitrust cases against Google. He currently practices law at his own firm, which specializes in advocacy for state and federal antitrust enforcement.

“Throughout his career, Kanter has also been a leading advocate and expert in the effort to promote strong and meaningful antitrust enforcement and competition policy,” the White House press release stated. Progressives celebrated the nomination as a win, though some of Biden’s new antitrust hawks have enjoyed support from both political parties.

The Justice Department already has a major antitrust suit against Google in the works. The lawsuit, filed by Trump’s own Justice Department, accuses the company of “unlawfully maintaining monopolies” through anti-competitive practices in its search and search advertising businesses. If successfully confirmed, Kanter would be positioned to steer the DOJ’s big case against Google.

In a 2016 NYT op-ed, Kanter argued that Google is notorious for relying on an anti-competitive “playbook” to maintain its market dominance. Kanter pointed to Google’s long history of releasing free ad-supported products and eventually restricting competition through “discriminatory and exclusionary practices” in a given corner of the market.

Kanter is just the latest high profile Big Tech critic that’s been elevated to a major regulatory role under Biden. Last month, Biden named fierce Amazon critic Lina Khan as FTC chair upon her confirmation to the agency. In March, Biden named another noted Big Tech critic, Columbia law professor Tim Wu, to the National Economic Council as a special assistant for tech and competition policy.

All signs point to the Biden White House gearing up for a major federal fight with Big Tech. Congress is working on a set of Big Tech bills, but in lieu of — or in tandem with — legislative reform, the White House can flex its own regulatory muscle through the FTC and DOJ.

In new comments to MSNBC, the White House confirmed that it is also “reviewing” Section 230 of the Communications Decency Act, a potent snippet of law that protects platforms from liability for user-generated content.

#amazon, #biden, #biden-administration, #big-tech, #chair, #columbia, #competition-law, #congress, #department-of-justice, #doj, #federal-trade-commission, #google, #government, #joe-biden, #lawyer, #lina-khan, #msnbc, #section-230, #tc, #tim-wu, #white-house, #yelp

Facebook tries to beat FTC lawsuit by pushing Chair Lina Khan off the case

Lina Khan speaking and gesturing with her hands at a Senate committee hearing.

Enlarge / Lina Khan speaks to the Senate Commerce Committee on April 21, 2021, when her nomination to the FTC was being considered. (credit: Getty Images | Bloomberg)

In an attempt to avoid government scrutiny, Facebook today petitioned the Federal Trade Commission to have Chair Lina Khan removed from the antitrust case against the social media giant.

Facebook’s petition comes shortly before the FTC must decide whether to continue its lawsuit against Facebook, which seeks to break up the company. The agency would have to submit an amended complaint because a judge dismissed the agency’s first attempt, which was filed by the FTC during the last weeks of the Trump administration.

Today’s Facebook petition was sent to the FTC and Khan, asking them “to recuse Chair Khan from participating in any decisions concerning whether and how to continue the FTC’s antitrust case against the company.” Facebook’s petition comes two weeks after Amazon filed one asking Khan to remove herself “from any antitrust investigation, adjudication, litigation, or other proceeding in which Amazon is a subject, target, or defendant.”

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#amazon, #antitrust, #facebook, #ftc, #lina-khan, #policy

Facebook is shook, asks for removal of FTC Chair Khan from antitrust cases against it

Facebook has joined Amazon in a show of alarm at the sudden rise of antitrust hawk Lina Khan to the position of FTC Chair by asking that she be recused from all decisions relating to the company. The argument, more or less identical to Amazon’s, is that before her appointment, Khan was too outspoken about her professional opinion that companies like these are in violation of antitrust rules.

In a letter filed with the FTC and obtained by the WSJ, which the agency could not provide and declined to comment on, Facebook explained that Khan’s last few years of academic publications and articles in other media amount to cause for recusal from decisions about the company. (I have asked Facebook for a copy of the petition and will update this post if I receive it.)

“Chair Khan has consistently made public statements not only accusing Facebook of conduct that merits disapproval but specifically expressing her belief that the conduct meets the elements of an antitrust offense. When a new commissioner has already drawn factual and legal conclusions and deemed the target a lawbreaker, due process requires that individual to recuse herself,” reads the petition.

Neither the FTC nor Khan in any other capacity have responded to the recusal requests from Facebook and Amazon. She did note in her nomination proceeding that recusal requests like these do happen, and are resolved on a case-by-case basis (unlike automatic recusals for things like financial or personal interest). Perhaps even now she is meeting with the ethics experts at the agency.

Khan has, however, certainly made her policy positions known in numerous articles and papers, many of which have argued that antitrust regulators have been highly conservative in their interpretation and deployment of their legal powers, and equally permissive in their oversight of the current crop of enormous tech companies. Things like acquiring competitors, artificially lowering prices to pressure a market, or misrepresenting the collection and use of customer data have gone either unchallenged or minimally punished.

In particular she acted as counsel for the House’s Investigation of Competition in Digital Markets, an antitrust report issued last fall. Amazon and Facebook lean on cases from 1966 and 1970 where an FTC Commissioner was recused for “prejudgment” of a case during a Congressional investigation in which he participated. It’s a promising hook to hang a case on to be sure, but the circumstances are by no means equivalent. I’m not a lawyer, but it seems to me that no case or even specific allegations have been prejudged, only the general idea that Facebook, Apple, Google, and Amazon all either have monopolies or otherwise possess market power. (They didn’t care much when the report was issued.)

The main finding of the House report, in fact, was arguably that there could be no legal case because existing laws and regulations are insufficient. Certainly Khan has shouted this from the rooftops for some years now — but the conclusion is a legislative matter, not an FTC one. It would be mighty difficult for Khan to have prejudged an antitrust case predicated on laws that haven’t yet been written.

Khan’s FTC has suffered an early setback on her watch though not of her making in the dismissal of some complaints in the agency’s current antitrust case against Facebook. It was for lack of evidence that the company exerts monopoly control over social media that the judge told the FTC to come back and try again. Perhaps Khan intends to remedy that with a supplemented filing, or perhaps she will take the loss and muster her forces for another go in a year or two — but either way it is probably best to resolve the question of her alleged “prejudgment” before that decision is announced. (The FTC declined to speculate as to whether the recusal request would affect the current proceedings.)

But the agency also has explicit backing from the White House in the form of President Biden’s request that it prioritize “dominant internet platforms, with particular attention to the acquisition of nascent competitors, serial mergers, the accumulation of data, competition by ‘free’ products, and the effect on user privacy.” So Khan probably isn’t feeling the sting of the aforementioned legal challenge.

The petitions filed by Amazon and Facebook have near-zero risk for the companies and an outside chance at provoking a recusal, so it makes sense strategically to file them. They also provide breadcrumbs later for their inevitable objections to the FTC’s (under Khan, equally inevitable) allegations of monopolistic practices. The legal repercussions are hard to predict but it is usually better to have a complaint on the table already rather than bring it out late in the process.

Given Chair Khan’s position that the FTC itself needs to be overhauled and empowered in order to bring actions like this against companies like Facebook, it seems clear that all these are merely the opening gambits in a long, long game.

#antitrust, #facebook, #ftc, #lina-khan, #monopoly, #tc

Biden’s sweeping executive order takes on big tech’s ‘bad mergers,’ ISPs and more

The Biden administration just introduced a sweeping, ambitious plan to forcibly inject competition into some consolidated sectors of the American economy — the tech sector prominent among them — through executive action.

“Today President Biden is taking decisive action to reduce the trend of corporate consolidation, increase competition, and deliver concrete benefits to America’s consumers, workers, farmers, and small businesses,” a new White House fact sheet on the forthcoming order states.

The order, which Biden will sign Friday, initiates a comprehensive “whole-of-government” approach that loops in more then twelve different agencies at the federal level to regulate monopolies, protect consumers and curtail bad behavior from some of the world’s biggest corporations.

In the fact sheet, the White House lays out its plans to take matters to regulate big business into its own hands at the federal level. As far as tech is concerned, that comes largely through emboldening the FTC and the Justice Department — two federal agencies with antitrust enforcement powers.

Most notably for big tech, which is already bracing for regulatory existential threats, the White House explicitly asserts here that those agencies have legal cover to “challenge prior bad mergers that past Administrations did not previously challenge” — i.e. unwinding acquisitions that built a handful of tech companies into the behemoths they are today. The order calls on antitrust agencies to enforce antitrust laws “vigorously.”

Federal scrutiny will prioritize “dominant internet platforms, with particular attention to the acquisition of nascent competitors, serial mergers, the accumulation of data, competition by ‘free’ products, and the effect on user privacy.” Facebook, Google and Amazon are particularly on notice here, though Apple isn’t likely to escape federal attention either.

“Over the past ten years, the largest tech platforms have acquired hundreds of companies—including alleged ‘killer acquisitions’ meant to shut down a potential competitive threat,” the White House wrote in the fact sheet. “Too often, federal agencies have not blocked, conditioned, or, in some cases, meaningfully examined these acquisitions.”

The biggest tech companies have regularly defended their longstanding strategy of buying up the competition by arguing that because those acquisitions went through without friction at the time, they shouldn’t be viewed as illegal in hindsight. In no uncertain terms, the new executive order makes it clear that the Biden administration isn’t having any of it.

The White House also specifically singles out internet service providers for scrutiny, ordering the FCC to prioritize consumer choice and institute broadband “nutrition labels” that clearly state speed caps and hidden feeds. The FCC began working on the labels in the Obama administration but the work was scrapped after Trump took office.

The order also directly calls on the FCC to restore net neutrality rules, which were stripped in 2017 to the widespread horror of open internet advocates and most of the tech industry outside of the service providers that stood to benefit.

The White House will also tell the FTC to create new privacy rules meant to guard consumers against surveillance and the “accumulation of extraordinarily amounts of sensitive personal information,” which free services like Facebook, YouTube and others have leveraged to build their vast empires. The White House also taps the FTC to create rules that protect smaller businesses from being pre-empted by large platforms, which in many cases abuse their market dominance with a different sort of data-based surveillance to out-compete up-and-coming competitors.

Finally, the executive order encourages the FTC to put right to repair rules in place that would free consumers from constraints that discourage DIY and third-party repairs. A new White House Competition Council under the Director of the National Economic Council will coordinate the federal execution of the proposals laid out in the new order.

The antitrust effort from the executive branch mirrors parallel actions in the FTC and Congress. In the FTC, Biden has installed a fearsome antitrust crusader in Lina Khan, a young legal scholar and fierce Amazon critic who proposes a philosophical overhaul to the way the federal government defines monopolies. Khan now leads the FTC as its chair.

In Congress, a bipartisan flurry of bills intended to rein in the tech industry are slowly wending their way toward becoming law, though plenty of hurdles remain. Last month, the House Judiciary Committee debated the six bills, which were crafted separately to help them survive opposing lobbying pushes from the tech industry. These legislative efforts could modernize antitrust laws, which have failed to keep pace with the modern realities of giant, internet-based businesses.

“Competition policy needs new energy and approaches so that we can address America’s monopoly problem,” Sen. Amy Klobuchar, a prominent tech antitrust hawk in Congress, said of the executive order. “That means legislation to update our antitrust laws, but it also means reimagining what the federal government can do to promote competition under our current laws.”

Citing the acceleration of corporate consolidation in recent decades, the White House argues that a handful of large corporations dominates across industries, including healthcare, agriculture and tech and consumers, workers and smaller competitors pay the price for their outsized success. The administration will focus antitrust enforcement on those corners of the market as well as evaluating the labor market and worker protections on the whole.

“Inadequate competition holds back economic growth and innovation… Economists find that as competition declines, productivity growth slows, business investment and innovation decline, and income, wealth, and racial inequality widen,” the White House wrote.

 

#amazon, #america, #biden, #biden-administration, #big-tech, #broadband, #competition-law, #congress, #department-of-justice, #executive, #facebook, #federal-communications-commission, #federal-government, #federal-trade-commission, #google, #government, #healthcare, #internet-service-providers, #lina-khan, #president, #tc, #white-house, #youtube

Amazon doesn’t like FTC chair Lina Khan’s views, wants her off investigations

Lina M. Khan testifies during a Senate Commerce, Science, and Transportation Committee nomination hearing on Capitol Hill on April 21, 2021, in Washington, DC.

Enlarge / Lina M. Khan testifies during a Senate Commerce, Science, and Transportation Committee nomination hearing on Capitol Hill on April 21, 2021, in Washington, DC. (credit: Graeme Jennings-Pool/Getty Images)

Amazon filed a 25-page petition today with the FTC asking that Chairwoman Lina Khan recuse herself from antitrust investigations into the company.

Khan, a frequent critic of Amazon and other Big Tech firms, was appointed FTC chair less than two weeks ago. Though there has been plenty of speculation about her first moves, her short tenure to date means she hasn’t had much opportunity to file lawsuits or announce investigations. Amazon’s petition shows that its legal team hasn’t sat idle since her nomination as commissioner and subsequent appointment as chair.

“Although Amazon profoundly disagrees with Chair Khan’s conclusions about the company,” the company wrote in the petition, “it does not dispute her right to have spoken provocatively and at great length about it in her prior roles. But given her long track record of detailed pronouncements about Amazon, and her repeated proclamations that Amazon has violated the antitrust laws, a reasonable observer would conclude that she no longer can consider the company’s antitrust defenses with an open mind.”

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Amazon betrays its fear with petition to sideline FTC Chair and antitrust hawk Lina Khan

Amazon has petitioned that the newly minted Chair of the FTC and implacable critic of the company, Lina Khan, be recused from decisions relating to the company. The company argues that she has been too outspoken about the failure to regulate Amazon to handle matters impartially.

It will be for the FTC to decide, and its oversight committee to supervise, whether Khan will recuse herself; an agency spokesperson declined to comment on the matter.

Amazon’s argument (which you can read below) is that Khan has simply gone too far in her criticism of Amazon prior to her confirmation at the FTC, creating an effective “prejudgment” that precludes her ability to consider cases relating to the company objectively.

Although Amazon profoundly disagrees with Chair Khan’s conclusions about the company, it does not dispute her right to have spoken provocatively and at great length about it in her prior roles. But given her long track record of detailed pronouncements about Amazon, and her repeated proclamations that Amazon has violated the antitrust laws, a reasonable observer would conclude that she no longer can consider the company’s antitrust defenses with an open mind.

But it’s equally plain to “a reasonable observer” that Amazon, one of the largest and most powerful companies in the world, is a natural target for analysis by an expert whose professional opinion is that antitrust regulation is inadequate and dated.

And it was arguably this very idea that set her on the path to her nomination and sudden ascendance to Chair. Her “Amazon’s Antitrust Paradox” paper was not the manifestation of a vendetta against the online services giant — it was an indictment of the aging antitrust doctrine that permitted what she argued amounted to legalized monopolistic behavior.

Amazon may have been the one in the crosshairs, but it was only a stand-in for an entire school of regulatory thought that, Khan has persuasively argued in numerous papers and articles, mindlessly pursued a narrow definition of consumer harms and benefits. There are other ways that a company might act against consumer interests, such as crushing competition in a market by subsidizing costs through dominance of another market — something Amazon has made core to its entire business model.

Furthermore, the position of Chair at the FTC is one of leadership and priority setting, not utter impartiality. The impartiality comes in the form of legal arguments that show a company has, for example, broken the law. Long-held opinions count for nothing with a judge, including Khan’s own public and professionally expressed opinions; should she lead the agency in an effort against Amazon, she will have to support her interpretation of the law with facts and systematic argument.

While one can only speculate at the administration’s true reasoning for its rapid elevation of Khan, it’s hard to imagine that it’s anything but a whole-hearted endorsement of the philosophy and change she advocates.

Khan’s expertise and perspective on antitrust have made Amazon a natural antagonist, not because Khan is a monomaniacal crusader, but because Amazon could very well represent one of the largest regulatory failures in history. To point that out is not grounds for recusal — it may however be grounds for making history.

You can read the full Amazon petition below:

#amazon, #antitrust, #ftc, #government, #lina-khan

A newly tech-skeptical FTC will reportedly review Amazon’s acquisition of MGM

Amazon’s purchase of MGM must pass the scrutiny of the FTC, newly chaired by prominent Amazon critic Lina Khan, the Wall Street Journal has reported. While the $8.45M merger is not likely to be stopped, it may provide early indicators of how the agency is revising its approach to mega-corporations consolidating multiple industries with acquisitions like this one.

The proposed acquisition was announced last month, and the addition of MGM’s 4,000 films and 17,000 shows to the Amazon library would be a potent shot in the arm for Prime Video, which like the Amazon storefront itself is meant to be its customers’ default go-to for on-demand media.

As rights change hands and companies shift tactics, the landscape of streaming is ever-changing; while Netflix has focused on original content (and Amazon is not far behind) and Disney has its own stable of standbys, others have begun snapping up the disparate collections of shows and movies that make up the streaming industry’s lucrative long tail.

Yet there is a valid question among regulators of whether content companies like MGM should be owned by platforms like Amazon. As an independent producer of films and TV a company can secure its own licensing deals and operate in direct competition with similar businesses. As a subsidiary of Amazon, it would likely be in large part reduced to an in-house production company for the retail and web giant, not competing on the merits of its products but as part of a multi-industry empire.

FTC Chair Lina Khan — appointed just last week — has been among the foremost critics of the latter business model. Her now famous “Amazon’s Antitrust Paradox” paper asserted that Amazon uses dominance in one industry, like AWS in web hosting, to shore up other less successful arms, like its nascent delivery service. If the latter would fail without the support of the former, the argument (roughly) goes, the company is potentially engaging in anti-competitive behavior enabled by market power.

That the market power and the behavior are in different verticals excused it under the antitrust doctrine of the recent era (so long as consumers didn’t see price increases), but Khan aimed to challenge that doctrine with her paper — and now, as one of the most powerful regulators in the country, she has been given the chance to shape it firsthand.

Such large deals are always reviewed by federal authorities, and in this case the FTC is reportedly in charge, probably because it has already taken on the role of antitrust investigation into Amazon in other circumstances. It’s also handling Facebook (which it has tangled with repeatedly over the years), while the agency’s enforcement partners at the Justice Department took charge of looking into Google and Apple. (The FTC declined to comment, saying it does not confirm the existence of investigations.)

In this case it seems unlikely that the Amazon purchase of MGM will be blocked, seeing as there is certainly real competition in the space and MGM has not been able to make its own way — a sale is almost inevitable. But the review will take place nonetheless, and it will likely elucidate how the FTC has changed its approach to this type of merger.

It’s entirely possible that even in a light-touch approval of this deal there will be opportunity to see new doctrine in play; for example, Amazon’s arguably monopolistic position in ostensibly unrelated markets is likely to take a greater role than under previous FTC leadership. It may even set the stage for more comprehensive and aggressive reviews to come, or perhaps even rewinding previously approved mergers, something Chair Khan has said is a distinct possibility.

#amazon, #ftc, #government, #lina-khan, #ma, #media, #mgm, #policy

Lina Khan, Big Tech skeptic, named FTC chair mere hours after confirmation

Lina M. Khan testifies during a Senate Commerce, Science, and Transportation Committee nomination hearing on Capitol Hill on April 21, 2021, in Washington, DC.

Enlarge / Lina M. Khan testifies during a Senate Commerce, Science, and Transportation Committee nomination hearing on Capitol Hill on April 21, 2021, in Washington, DC. (credit: Graeme Jennings-Pool/Getty Images)

President Joe Biden named Lina Khan chair of the Federal Trade Commission just hours after her confirmation in the Senate as one of the agency’s five commissioners. It’s an unusual move—newly nominated commissioners are seldom elevated to chair immediately—and it likely signals that the Biden administration will be taking a hawkish approach to antitrust enforcement, particularly when it comes to Big Tech platform companies like Google, Amazon, Facebook, and Apple.

Though Khan is certain to take a harsher view on platforms, the FTC is unlikely to begin dismantling Big Tech tomorrow. “Lina Khan has pushed the academic conversation on tech, and now she has to push the agenda at the FTC,” Shane Greenstein, a professor at Harvard Business School, told Ars. “A lot of the day to day at the FTC has little to do with tech, and a lot of the agenda is just not up to the chairman. It comes inbound from consumer complaints, merger proposals, etc. It will be interesting to see how she manages that—and with a divided Congress. That just has to be challenging.”

While she may have a rocky trail ahead of her, Khan’s confirmation vote of 69-28 was relatively straightforward by modern standards. Her nomination was expected as far back as early March, but her elevation to chair came as a surprise. “If you walk back through the modern or earlier history of the FTC, I can’t remember an instance where the White House has named an individual to be a commissioner, then once that person was confirmed by the Senate, designated that person to be the chair,” William Kovacic, former FTC chair, said to Axios.

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#antitrust, #big-tech, #ftc, #lina-khan, #platforms, #policy

Tech antitrust crusader Lina Khan is confirmed as FTC commissioner

The Senate confirmed big tech critic and prominent antitrust scholar Lina Khan as FTC Commissioner Tuesday, signaling a new era of scrutiny for the tech industry. Khan was confirmed in a 69-28 vote, with Republicans joining Democrats in a rare show of bipartisan support for Khan’s ideas on reining in tech’s most powerful companies.

An associate law professor at Columbia, Khan’s star rose with the publication of a landmark paper examining how the government’s outdated ways of identifying monopolies have failed to keep up with modern business realities, particularly in tech. In Khan’s view, that regulatory failure has allowed the biggest tech companies to consolidate unprecedented wealth and power, in turn making it even more difficult to regulate them.

President Biden nominated Khan back in March, sending an early message that Biden would not extend the warm relationship big tech companies enjoyed with the White House under former President Obama.

Khan’s confirmation is a sign that the agency will be prioritizing tech antitrust concerns, a priority that will run parallel to Congressional efforts to bolster the FTC’s enforcement powers. The FTC famously imposed a $5 billion fine on Facebook for privacy violations in 2019, but the record-setting fine was only a glancing blow for a company already worth more than $500 billion.

Last week, Congress revealed a long-anticipated package of bipartisan bills that, if passed, would overhaul tech’s biggest businesses and redraw the industry’s rules for years to come.

A previous bill proposed by Sen. Amy Klobuchar would set aside a pool of money that the FTC could use to create a new division for market and merger research, one step toward modernizing antitrust enforcement to keep up with relentless growth from tech’s most powerful giants.

#amy-klobuchar, #biden, #big-tech, #competition-law, #congress, #federal-trade-commission, #ftc, #lina-khan, #policy, #senate, #tc, #the-battle-over-big-tech, #white-house

Republicans and Democrats increasingly agree: Big Tech is too powerful

Sen. Roger Wicker (R-MS) and Sen. Ted Cruz (R-TX) are shown at a 2019 hearing. Both senators harshly criticized big technology companies at the 2021 confirmation hearing for Lina Khan to serve on the Federal Trade Commission.

Enlarge / Sen. Roger Wicker (R-MS) and Sen. Ted Cruz (R-TX) are shown at a 2019 hearing. Both senators harshly criticized big technology companies at the 2021 confirmation hearing for Lina Khan to serve on the Federal Trade Commission. (credit: Drew Angerer/Getty Images)

When President Joe Biden chose Lina Khan for one of the Federal Trade Commission’s five seats, it was an ominous sign for the nation’s largest technology companies. While still a law student, Khan made her academic career penning “Amazon’s Antitrust Paradox,” a scholarly 2017 treatise arguing for a tougher approach to regulating the Seattle behemoth.

Prior to law school, Khan worked for Barry Lynn, a scholar who was fired from the centrist New America Foundation over his aggressive criticism of Google, a major New America funder. After law school, Khan worked as the legal director of Lynn’s new organization, the Open Markets Institute.

So if we can expect anyone to push the Federal Trade Commission to enforce antitrust laws more aggressively against big technology companies, it would be Khan. The choice of Khan could also signal that the Biden administration more broadly will take a confrontational posture toward Big Tech.

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Lina Khan’s timely tech skepticism makes for a refreshingly friendly FTC confirmation hearing

One never knows how a confirmation hearing will go these days, especially one for a young outsider nominated to an important position despite challenging the status quo and big business. Lina Khan, just such a person up for the position of FTC Commissioner, had a surprisingly pleasant time of it during today’s Senate Commerce Committee confirmation hearing — possibly because her iconoclastic approach to antitrust makes for good politics these days.

Khan, an associate professor of law at Columbia, is best known in the tech community for her incisive essay “Amazon Antitrust’s Paradox,” which laid out the failings of regulatory doctrine that have allowed the retail giant to progressively dominate more and more markets. (She also recently contributed to a House report on tech policy.)

When it was published, in 2018, the feeling that Amazon had begun to abuse its position was, though commonplace in some circles, not really popular in the Capitol. But the growing sense that laissez-faire or insufficient regulations have created monsters in Amazon, Google, and Facebook (to start) has led to a rare bipartisan agreement that we must find some way, any way will do, of putting these upstart corporations back in their place.

This in turn led to a sense of shared purpose and camaraderie in the confirmation hearing, which was a triple header: Khan joined Bill Nelson, nominated to lead NASA, and Leslie Kiernan, who would join the Commerce Department as General Counsel, for a really nice little three-hour chat.

Khan is one of several in the Biden administration who signal a new approach to taking on Big Tech and other businesses that have gotten out of hand, and the questions posed to her by Senators from both sides of the aisle seemed genuine and got genuinely satisfactory answers from a confident Khan.

She deftly avoided a few attempts to bait her — including one involving Section 230; wrong Commission, Senator — and her answers primarily reaffirmed her professional opinion that the FTC should be better informed and more preemptive in its approach to regulating these secretive, powerful corporations.

Here are a few snippets representative of the questioning and indicative of her positions on a few major issues (answers lightly edited for clarity):

On the FTC getting involved in the fight between Google, Facebook, and news providers:

“Everything needs to be on the table. Obviously local journalism is in crisis, and i think the current COVID moment has really underscored the deep democratic emergency that is resulting when we don’t have reliable sources of local news.”

She also cited the increasing concentration of ad markets and the arbitrary nature of, for example, algorithm changes that can have wide-ranging effects on entire industries.

Lina Khan, commissioner of the Federal Trade Commission (FTC) nominee for U.S. President Joe Biden, speaks during a Senate Commerce, Science and Transportation Committee confirmation hearing in Washington, D.C.

Image Credits: Graeme Jennings/Washington Examiner/Bloomberg / Getty Images

On Clarence Thomas’s troubling suggestion that social media companies should be considered “common carriers”:

“I think it prompted a lot of interesting discussion,” she said, very diplomatically. “In the Amazon article, I identified two potential pathways forward when thinking about these dominant digital platforms. One is enforcing competition laws and ensuring that these markets are competitive.” (i.e. using antitrust rules)

“The other is, if we instead recognize that perhaps there are certain economies of scale, network externalities that will lead these markets to stay dominated by a very few number of companies, then we need to apply a different set of rules. We have a long legal tradition of thinking about what types of checks can be applied when there’s a lot of concentration and common carriage is one of those tools.”

“I should clarify that some of these firms are now integrated in so many markets that you may reach for a different set of tools depending on which specific market you’re looking at.”

 

(This was a very polite way of saying common carriage and existing antitrust rules are totally unsuitable for the job.)

On potentially reviewing past mergers the FTC approved:

“The resources of the commission have not really kept pace with the increasing size of the economy, as well as the increasing size and complexity of the deals the commission is reviewing.”

“There was an assumption that digital markets in particular are fast moving so we don’t need to be concerned about potential concentration in the markets, because any exercise of power will get disciplined by entry and new competition. Now of course we know that in the markets you actually have significant network externalities in ways that make them more sticky. In hindsight there’s a growing sense that those merger reviews were a missed opportunity.”

(Here Senator Blackburn (R-TN) in one of the few negative moments fretted about Khan’s “lack of experience in coming to that position” before asking about a spectrum plan — wrong Commission, Senator.)

On the difficulty of enforcing something like an order against Facebook:

“One of the challenges is the deep information asymmetry that exists between some of these firms and enforcers and regulators. I think it’s clear that in some instances the agencies have been a little slow to catch up to the underlying business realities and the empirical realities of how these markets work. So at the very least ensuring the agencies are doing everything they can to keep pace is gonna be important.”

“In social media we have these black box algorithms, proprietary algorithms that can sometimes make it difficult to know what’s really going on. The FTC needs to be using its information gathering capacities to mitigate some of these gaps.”

On extending protections for children and other vulnerable groups online:

Some of these dangers are heightened given some of the ways in which the pandemic has rendered families and children especially dependent on some of these [education] technologies. So I think we need to be especially vigilant here. The previous rules should be the floor, not the ceiling.


Overall there was little partisan bickering and a lot of feeling from both sides that Khan was, if not technically experienced at the job (not rare with a coveted position like FTC Commissioner), about as competent a nominee as anyone could ask for. Not only that but her highly considered and fairly assertive positions on matters of antitrust and competition could help put Amazon and Google, already in the regulatory doghouse, on the defensive for once.

#amazon, #antitrust, #facebook, #ftc, #google, #government, #lina-khan, #tc

Biden will nominate Big Tech critic and antitrust star Lina Khan to the FTC

Biden didn’t campaign on getting tough against Big Tech, but his early actions are speaking louder than his words.

The White House confirmed its intentions to nominate Lina Khan to the FTC Monday, sending a clear signal that his administration will break from the Silicon Valley-friendly precedents of the Obama era. Politico first reported Biden’s planned nomination of Khan, which will be subject to Senate confirmation, earlier this month.

Lina Khan is a star of the antitrust movement, insofar as a topic like regulating big business can produce one. Khan is best known for a paper she published as a law student in 2017 called “Amazon’s Antitrust Paradox.” The paper argues that thinking about what qualifies as monopolistic behavior hasn’t kept pace with how modern businesses operate, particularly within the tech sector.

She believes that a modernized approach to antitrust must look at market forces in a big picture way instead of only examining traditional measures like price and output:

“My argument is that gauging real competition in the 21st century marketplace — especially in the case of online platforms — requires analyzing the underlying structure and dynamics of markets. Rather than pegging competition to a narrow set of outcomes, this approach would examine the competitive process itself. Animating this framework is the idea that a company’s power and the potential anticompetitive nature of that power cannot be fully understood without looking to the structure of a business and the structural role it plays in markets. Applying this idea involves, for example, assessing whether a company’s structure creates certain anticompetitive conflicts of interest; whether it can cross-leverage market advantages across distinct lines of business; and whether the structure of the market incentivizes and permits predatory conduct.”

As associate law professor at Columbia, Khan also contributed to a comprehensive report from the House’s antitrust subcommittee last year that set the stage for major antitrust reform that could trim back Big Tech’s considerable overgrowth.

Khan isn’t the only high-profile tech antitrust crusader in the Biden administration’s orbit. In early March, Biden named Columbia law’s Tim Wu to shape technology and competition policy at the National Economic Council. Wu came up with the term “net neutrality” and is well known as an advocate for an open internet. In 2018, Wu authored “The Curse of Bigness: Antitrust in the New Gilded Age,” a treatise calling out corporate consolidation in tech as a looming political and economic threat.

Sen. Amy Klobuchar, who is leading tech-focused antitrust reform efforts through the Senate’s own antitrust subcommittee, praised Khan’s nomination. “We need all hands on deck as we work to take on some of the biggest monopolies in the world, and President Biden is making his commitment to competition policy clear,” Klobuchar said in a statement provided to TechCrunch.

“Lina’s experience working both in Congress and at the Federal Trade Commission and as an advocate for competitive markets will be vital as we advance efforts to strengthen enforcement and protect consumers.”

#biden-administration, #big-tech, #ftc, #government, #lina-khan, #tc, #the-battle-over-big-tech

White House reportedly plans to name Amazon foe Lina Khan to FTC

A young woman poses for a photo in a spartan apartment.

Enlarge / Lina Khan, as photographed for a 2017 profile in The Washington Post. (credit: An Rong Xu | The Washington Post | Getty Images)

US President Joe Biden is reportedly planning to nominate antitrust scholar Lina Khan to the Federal Trade Commission, a move that would indicate his administration is open to aggressive antitrust regulation not only generally but specifically against Amazon and other Big Tech firms.

The Washington rumor mill has been floating Khan’s name as a possible candidate for the commission ever since Biden won the election, and Politico reported today that the White House is indeed planning to tap her for the role, which requires Senate confirmation. At present, Khan is an associate law professor at Columbia Law School.

Khan vaulted directly to antitrust superstardom in 2017 while she was still a law student, when she published her blockbuster paper “Amazon’s Antitrust Paradox” in the Yale Law Journal.

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#antitrust, #federal-trade-commission, #ftc, #lina-khan, #policy