Antitrust investigations aren’t the biggest threat to Facebook’s future

I.

A week from now, Facebook’s Mark Zuckerberg will be among the CEOs appearing before the House of Representatives’ antitrust committee. Today let’s check in on how the Federal Trade Commission’s antitrust case is developing.

The first thing to say is that the case is developing slower than expected. Once on track to wrap up before the US presidential election, it now appears that the case will arrive afterward — if at all, Cecelia Kang reports in the New York Times:

The investigation into whether the tech giant has broken antitrust laws continues to move along, said the people, who spoke on the condition of anonymity because the investigation was private. A round of document production from the company and its rivals was done in the spring, and staff members appear to be preparing depositions of Facebook’s top leadership, including its chief executive, Mark Zuckerberg, according to the people. The agency also began looking into concerns by rivals about Facebook’s recent acquisition of Giphy, a search database for short video clips.

But investigations often require multiple rounds of document requests, and the interviews will take time to complete, indicating that the agency is far from finishing its review and deciding whether to pursue a lawsuit, the people said.

What’s behind the delay? One explanation is that the federal government has chosen to focus instead on Google for the moment. But it’s also taking the FTC longer than expected to develop a theory of the case about Facebook, Margaret Harding McGill and Ashley Gold report at Axios. One part of the agency, the Office of Policy Planning, wants to evaluate Facebook’s market dominance through the question of whether it has raised prices for consumers. Another part of the agency, the Bureau of Competition, wants to investigate Facebook through the lens of competition, examining how the company’s practice of making its services free to use has reduced the number of players in the space. Axios writes:

One antitrust lawyer familiar with the workings of the FTC said the Office of Policy Planning “would not want to move the needle much” with antitrust guidelines, and is generally reluctant to consider new definitions for anticompetitive behavior.

“The policy people live in a world where there is a one-size-fits all formula,” a person familiar with the back-and-forth said. “They want it to be less messy, but the enforcers recognize that antitrust is inherently messy because it’s fact-based.”

Also still up for debate: whether to depose Zuckerberg and Facebook’s chief operating officer, Sheryl Sandberg. Last year, when the FTC fined Facebook $5 billion, the terms were all but dictated by Facebook, Tony Romm reported in the Washington Post. The FTC later said it got a bigger settlement out of Facebook than it would have otherwise in part by excusing Zuckerberg and Sandberg from depositions.

It seems strange to me that an inquiry into Facebook’s market power would not involve sworn depositions from its top two executives. But then nothing about this investigation has so far proceeded in the way I thought it would.

II.

What is the best case that Facebook unfairly dominates the advertising market, uses its power to reduce competition, and has harmed consumers by doing so?

The legal answer to that question, should it eventually be made by the FTC, will surely run dozens of pages, and be supported by mountains of supporting briefs and other documents. But if you want to look at the basic shape of it — what the FTC might say, and what Facebook might say back — you could start with this conversation last year between Wired editor in chief Nick Thompson and antitrust crusader Tim Wu. Thompson presents Facebook’s case for itself as traditionally made by Zuckerberg, and Wu does his best to dismantle it.

The Facebook case for itself goes something like: we have tons of competition, from consumer products to advertising products; our free services are a public good that, among other things, support the growth of millions of small businesses; and breaking us up would make all the problems that really worry you much worse. If you want a company to invest heavily in protecting the platform from bad actors, the argument goes, you want that company to be a giant. Finally, if you break us up, a giant technology company from China will likely emerge as the world’s dominant social network, creating a beachhead for the expansion of Chinese soft power — and, along with it, censorship and authoritarianism. Perhaps you’ve heard of ByteDance?

The Wu case goes something like: Facebook acquired Instagram to reduce competition. Facebook acquired WhatsApp to reduce competition. Facebook (with Google) now has an effective duopoly on digital advertising, and continues to acquire smaller social products that could threaten its dominance. This has harmed consumers by reducing the amount of innovation in the technology industry. It also turned Facebook into something like a single point of failure for the distribution of foreign propaganda, with famously dire results in 2016. Break up Facebook and force the new Baby Books to compete on innovation, including in the trust and safety services that Facebook now says only a company of its size can provide. As for China? Better to have a vibrant consumer technology industry than select a lightly regulated, monopolistic national champion to fight on America’s behalf, as if in a Westerosi trial by combat.

You’ll note that these arguments don’t have much to do with the price — in dollars — that consumers pay as a result of Facebook’s outsized success. They can’t: the services are free. The question looming over the Facebook antitrust case — and the one being debated by officials within the FTC — is whether the agency is willing to take other costs into account.

If that agency won’t, perhaps the nation’s attorney generals or the Department of Justice, which are conducting their own antitrust investigations into Facebook, will.

III.

One reason some people are skeptical of antitrust cases is that tech companies often just fall apart by themselves. The US government sued Microsoft for bundling its Internet Explorer browser with Windows out of fears that doing so would permanently entrench its monopoly in personal computers. And then Google made Chrome, and Microsoft just kept making Internet Explorer, and Microsoft made a series of really bad mobile phones, and Apple made a good one, and within a few years Microsoft was an enterprise software company with a video game console division and it was hard to remember what the whole fuss had been about in the first place.

Until recently, it has been hard to envision how something similar might happen to Facebook, since there has been so little growth in other social networks. Snapchat and Twitter tick up a bit each quarter, but their user bases remain a fraction of Facebook’s. And even if a competitor did emerge, we know Facebook would either clone it, attempt to acquire it, or both.

Then TikTok came along and challenged that view. Yes, it had to spend $1 billion on advertising to hit escape velocity. But it did, and now it has. Children now spend an average of 80 minutes a day on TikTok. If you’re Facebook, that’s the very definition of a competitive threat.

For that reason, you might expect that Facebook executives reacted warmly to the news that the app has been banned in India. Facebook raced to bring its TikTok clone, Reels, to market in India, and has promised to roll it out in dozens more countries by next month. It looks like classic Facebook: working ruthlessly to disrupt a competitor in a moment of weakness.

But Zuckerberg has told employees that he finds the move worrisome, I’m told. If India can ban one app used by 200 million people, citing rather vague national security concerns, it can ban others. Facebook already faces fights around the world from governments on both the left and the right related to issues that fit under the broad umbrella of national security: election interference, influence campaigns, hate speech, and even just plain-old democratic speech. Zuckerberg knows that the leap from banning TikTok on national security grounds to banning Facebook on national security grounds is more of a short hop.

The so-called “Splinternet” is a long time in coming. When I wrote about it here last year, it was in the context of a new European internet emerging alongside the American and Sino-Russian authoritarian ones. When India banned TikTok, it added a new fault line to the global internet. And as those cracks continue to spread, they risk shrinking the size of Facebook more than even the FTC ever could.

THE TWITTER HACK
Last week Twitter suffered a catastrophic security breach, with attackers managing to wrangle temporary control of the accounts of President Barack Obama, Joe Biden, Jeff Bezos, Elon Musk, and others. Since then, some new details have come to light.

One unanswered question from last week was: could attackers access victims’ direct messages? In eight cases, the answer appears to have been yes, according to a blog post Twitter put up Friday. But none of the accounts whose DMs may have been breached were verified accounts, Twitter said, throwing cold water on theories from last week that the Bitcoin scam perpetrated by the accounts was meant to be a distraction from some larger blackmail campaign or other scheme. All in all, attackers targeted 130 accounts for takeover and managed to crack 45, Twitter said.

Meanwhile, the New York Times talked to some individuals who say they were involved in the attack. Key takeaway: the hackers’ original interest had been in taking over short usernames — @6, @y, that sort of thing — and only belatedly realized they might be able to make more money taking over famous people’s accounts. To the extent that gives you comfort that the attack was just about making money and not destabilizing the nature of our reality and / or starting nuclear war, there you go.

Twitter says it’s embarrassed. A former FTC official says the company’s data security lapses, which are many, are “egregious.” Everyone who thinks about the prospect of something similar happening in the run up to Election Day shudders with fear.

As for remaining questions, here are two. One, will the FTC or another branch of government take action against Twitter for this lapse? And two, Twitter hasn’t said anything more about how its own employees may have been involved in the breach. Did the attackers have an inside man, or did they simply trick an employee into doing their bidding? Here’s hoping we get an answer to that one, and soon.