Fb breakup ought to concentrate on restoring competitors, consultants say
- New York attorney general Letitia James said a breakup with Facebook was “on the table”.
- Insider spoke to three experts who explained what a breakup could look like.
- You said restoring competition through regulation should be the ultimate goal.
- You can find more stories on the Business Insider homepage.
Last week, New York attorney general Letitia James, who leads 48 other attorneys general in the lawsuit against Facebook for illegally suppressing competition, told Bloomberg Businessweek that she was considering disbanding the tech giant because “Facebook’s monopoly is hurting consumers, it hurts the market “hurts advertisers. “One method, she said, would be to end the Instagram and WhatsApp acquisitions that Facebook acquired in 2012 and 2014, respectively.
Continue reading: Wall Street pours cold water on Facebook’s breakup party: “The courts won’t buy this.”
The Federal Trade Commission, which helped make both acquisitions of Facebook possible, filed a similar lawsuit last year in hopes of breaking open the company over its “illegal monopoly”. The FTC said it is challenging both the acquisitions and the company’s behavior.
Here’s what three antitrust experts had to say about Facebook’s breakup.
What it would take to dismantle the fortress, Facebook built
Separating from Facebook would create more competition in the social media market, which according to Harry First, a law professor at New York University, would be good for users.
“The main beneficiary of competition should be consumers. We should get more of the things we want and prefer,” said First, who previously served as chief antitrust officer for the New York attorney general’s office.
First, he said that “the remedy must be tailored to the wrong” in cases where the company is accused of taking certain measures to maintain a monopoly. If the company is wrong, a court can fix the problem by asking Facebook to stop these behaviors.
On the other hand, “If it’s the acquisitions that built the moat around Facebook, then you have a plausible claim that you should take the fortress down,” First said.
Dismantling could take various forms. For example, a judge could instruct Facebook to process its Instagram and WhatsApp acquisitions. This could be tricky considering the company has been working to integrate the two platforms heavily into its business, First said. Another idea could be to split the company in half and have two competing operations.
In a scenario where a judge instructs Facebook to wind down its WhatsApp and Instagram acquisitions, the details of how it went would be important to prevent the anti-competitive behavior, said Charlotte Slaiman, director of competition policy and senior antitrust expert at Public Knowledge.
Overlapping aspects of the social media websites like advertising business and coding are shared by the platforms. “The question of what parts of that backend would be split is going to really matter how effective the agent is in fixing the anti-competitive behavior,” said Slaiman.
According to First, “the guiding star is that you do enough of what you must to restore competition in the market and this is informed by what the plaintiffs show in court that harms competition.”
The competition could make Facebook a better company.
Another antitrust expert, R. Mark McCareins, co-director of the JD / MBA program at Northwestern University’s JL Kellogg Graduate School of Management, said, “We’re far from talking about what a breakup would be like.”
Regarding James’ statement that a breakup is “on the table,” McCareins said, “Are we talking about your table? You need two to tango.” He added that he saw little evidence that Facebook would come to the table and say “mea culpa,” a Latin phrase that suggests that it is admitting to be at fault.
The creation of a monopoly is not illegal, said McCareins. Rather, monopoly power is used exclusively in order to hurt the remaining competition. According to the law, he said, “If you succeed through superior skill or business acumen, and your business gets bigger and better and stronger because you built the better mousetrap, it’s not illegal.”
He said that when monopolies work to stifle competition, they will often use killer acquisitions where they overpay to acquire a competing company and then kill the product. Facebook did not do this with Instagram and WhatsApp, but instead spent money improving the products and integrating them into its business.
McCareins said he found it “somewhat offensive” that Facebook’s acquisitions were being questioned years after their federal government scrutiny prior to approval.
“It’s very worrying that you can get an M&A deal and then the government blesses you and you do too good a job integrating the assets and you get too powerful. Years later someone says, ‘We wouldn’t have this should allow. ‘ “”
Slaiman of Public Knowledge, on the other hand, said a separation might not even be enough to restore competition in the market. Increased regulation of digital marketplaces by the federal government is also necessary.
Separation coupled with regulation would encourage real competition in social media and help address ongoing user issues in space such as privacy, harassment and misinformation.
“If this space is more open to new ideas to be successful and companies are figuring out what consumers want and actually do, it would make a huge difference in our lives,” she said, adding, “It is possible that the competition is pushing Facebook to be a better company. “