It’s about time, even if it’s been a very long 22 years.
It was 1998 when Microsoft finally landed in the cross hairs of the federal government, when the Justice Department and 20 state attorneys general alleged in an antitrust lawsuit that the software giant had abused its market power to crush competition. It was the last time the government took meaningful action against the unfettered rise of a tech behemoth.
The Big Tech companies that have sprouted up since the Microsoft case have been treated by government as if they were the most delicate of flowers, in need of more nurturing than the most finicky of ferns. There have been laughable fines, while one merger after another was allowed to sail on by.
Those charged with regulation have given companies like Google, Facebook and Amazon a very wide berth to grow into some of the most valuable entities in the history of the planet. Their founders are among the richest people ever.
It all came to a halt with the announcement in October that the Justice Department was finally taking aim at Google in an antitrust lawsuit focused on search and advertising. And on Wednesday, in the most potent government action since the Microsoft case, the Federal Trade Commission and 46 states, as well as the District of Columbia and Guam, filed a lawsuit in the U.S. District Court for the District of Columbia alleging that Facebook has employed anticompetitive tactics that allowed it to bully and bury rivals. The filing, after an 18-month investigation, recommends breaking up the company.
“For nearly a decade, Facebook has used its dominance and monopoly power to crush smaller rivals and snuff out competition,” said the New York attorney general, Letitia James, who led the state group, at a news conference. “By using its vast troves of data and money, Facebook has squashed or hindered what the company perceived to be potential threats.”
The F.T.C., which is charged with protecting consumers from corporate dominance, has ducked its responsibilities many times over the years when it comes to tech companies. It has finally decided in the waning days of the Trump administration to go for broke.
Facebook will bring its enormous power to bear against the agency, which has only some 1,100 employees and a paltry budget of $330 million. In contrast, Facebook’s revenue rose sharply to $21.5 billion in its most recent quarter, giving it ample resources to add to its already ample resources.
“It will be the lawyer employment act of 2020,” one regulator joked to me about the prospect of Facebook sucking up every hired legal gun in Washington to battle the F.T.C. and the states.
But it’s no joke. And Facebook would be wise to mount the strongest possible defense since the stars are finally aligned for serious antitrust action. In this case, the stars include the feds, the states — and also a bipartisan group of legislators.
For those of us who have been paying attention, the need for this legal action has been obvious for a long time. The unchecked growth of some tech companies has been a challenge to new entrants and ultimately a dampener of innovation. And with unfettered power, Big Tech companies have become bullies, armed with fists full of data, acquired through outsize market share, to keep them at the top of the heap.
Which is why it is amusing that Facebook’s first response to the lawsuit has been to act like a victim. It’s a feint that those of us covering Silicon Valley have had to listen to for years, where those with most weaponry cry most plaintively about being under siege.
The poor-little-me act is tiresome enough, but Facebook is doubling down on the whine by claiming that the F.T.C. cannot re-evaluate deals from years past.
“The most important fact in this case, which the commission does not mention in its 53-page complaint, is that it cleared these acquisitions years ago,” Jennifer Newstead, Facebook’s canny general counsel, said in a statement. “The government now wants a do-over, sending a chilling warning to American business that no sale is ever final.”
That’s laughable and disingenuous. The agency never actually approved the deals in question, specifically Facebook’s purchase of the Instagram social photo service in 2012 for $1 billion and the WhatsApp messaging service acquisition in 2014 for $19 billion. Rather, the government simply did not step in to stop the acquisitions.
Think of it more like regrets that are now being resolved, using proof — and an unearthed spate of mine-mine-mine emails from the Facebook founder and chief executive Mark Zuckerberg. His missives make it clearer than it was possible back then that Facebook sucked up possible competitors in order to eliminate challenges to its hegemony. And so, in hindsight, it’s time to rewind to unwind.
Here’s a test for you to better understand what that means: What was the last significant and big social network to gain traction?
That would be Snapchat, started in 2011. It’s a creative company that Facebook tried its best to buy. And when Facebook was rebuffed, it simply copied Snap’s products, over and over, in order to suck dry Snap’s innovation and kill it.
This has long been a Facebook go-to move, which is why I am looking forward to the discovery process in the new lawsuit to see how far Facebook pushed the Trump administration to take aim at its most recent rival, TikTok.
This “buy or bury” strategy is reminiscent of the allegations aimed at Bill Gates of Microsoft decades ago. These charges still have heft when lobbed at Mr. Zuckerberg today.
Which is why Facebook’s Ms. Newstead is trying hard to paint the case as “revisionist history,” claiming that the government could have acted to stop the acquisitions of Instagram and What’sApp if it were so concerned.
It’s a savvy effort to claim that we can’t turn back time — even if we did not know then what we know now. And what we know now is that Facebook has become a menace in ways that require limiting its size and power.
The thing is that you can turn back time. And even though it may take years to do so, we will wait as long as it takes.
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