The theory of antitrust law is simple: Without competition, monopolies would charge whatever they wanted for their goods or services, and consumers would have to pay up or do without.
But what happens when the company’s product is something that it gives away?
That’s the question raised by the antitrust lawsuits filed against social media giant Facebook by the Federal Trade Commission and 48 states, including Maine, and U.S. territories. The suits correctly charge that the $800 billion company has grown so big that it can use monopoly-like powers to eliminate competitors and hurt consumers, even if they don’t get a bill.
The complaints describe how Facebook has a strategy to acquire or destroy competitors, making it the only option for advertisers that want to reach its two billion users worldwide. But the fact that Facebook doesn’t charge users who want to go online to share family photos or participate in group discussions doesn’t mean that consumers have no stake in this fight.
The lawsuits allege that Facebook users “pay” for the free service by allowing the company to collect data about their online lives, which it uses to target advertising. Just as with a classic monopoly, consumers have to pay up or do without, and that’s not easy when the product has become so dominant in the marketplace.
Facebook is where people get their news, catch up with friends, promote their work and shop. It’s like a newspaper, post office, chamber of commerce mixer and mall, all rolled into one. With an estimated 275 million U.S. users – including 674,000 in Maine – this platform dominates the communication and commerce on the national and local levels. No one outlet can match its reach.
The lawsuits allege that in its effort to remain dominant, Facebook has kept careful track of potential competitors. If Facebook can’t replicate what the newcomer is doing, it tries to buy it, as it did with Instagram, which Facebook acquired in 2012 for $1 billion. At that point the mobile photo sharing app hadn’t yet reported any revenue and valued itself at $500 million. Facebook also first tried to beat the What’s App messaging service and then bought it for $100 million in 2014.
It might have been a happy ending for the owners of those companies, but it’s not so great for consumers. Even more of them were locked in to the Facebook products even if they weren’t Facebook users, and documents uncovered during the federal investigation suggest that the company ratchets up its control of user data as it takes more control of the market.
An article by Gilad Edelman in the tech news magazine Wired details how Facebook entered the social media market, distinguishing itself from MySpace, then the industry leader, by claiming that it would not use cookies or collect private information. But now, when MySpace is no longer a threat, Facebook tracks its users all around the internet.
A series of emails from 2011 quoted in the complaint show company executives discussing a plan to take away a user’s ability to “untag” or disassociate their names from photos published by others. At the time Facebook was in competition with a new social media platform being promoted by Google, a company rich enough to resist buyout offers. The executives agreed they should postpone a controversial move like taking away a user’s ability to protect their privacy “until the direct competitive comparisons begin to die down.”
According to Edelman, “This is close to a smoking gun … Facebook preserves user privacy when it fears competition and degrades privacy when it doesn’t.”
This shows that consumers have a lot at stake even if Facebook is not charging them to use their product. High prices aren’t the only way that monopolies can harm their customers.
The lawsuits against Facebook are an important first step toward breaking up a business that has gotten too big.
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