Issue 119

Facebook is not a monopolist

Delivered on 05 July 2021 by Justin Pyvis. About a 3 min read.

Before we get into the latest example of overlawyering in the US, some housekeeping: this will be the last ever EconByte newsletter. I'm going to archive a static version of the website but there will be no new content or emails from now on.

The main reason for the retirement is that I'm now publishing on a separate platform 5 days a week: Brekky Wrap. It has more of an Australian focus but there's also plenty on global markets and technology that should interest even those who couldn't care less about what's happening down under. It's digestible in just a few minutes and is also free, so if you haven't already done so feel free to sign up.

Another reason for closing this down is that I want to experiment with other mediums and spend more time working on a book (tbc). For now, I've set up a WriteFreely instance on the fediverse – called Detrended – which will have more of an ad hoc publishing schedule and no emails. You can keep up with posts there using any RSS/Atom reader or by following it on the fediverse.

Anyway, on to the final issue.

Last week, a judge unsanctimoniously dismissed the US Federal Trade Commission's (FTC) antitrust lawsuit against Facebook:

The FTC's Complaint says almost nothing concrete on the key question of how much power Facebook actually had, and still has, in a properly defined antitrust product market. It is almost as if the agency expects the Court to simply nod to the conventional wisdom that Facebook is a monopolist.

The judge also dismissed a separate case attempting to divest Facebook of WhatsApp and Instagram, signed by nearly every state attorney general, "holding that a specific civil law doctrine prevented the coalition from challenging acquisitions settled so many years in the past".

You would think that criticism as scathing as that might be enough to deter even the most fervorous antitrust zealots. But that's unlikely given that President Biden recently appointed Lina Khan to chair the FTC, a 32-year old law professor specialising in antitrust "who made her reputation as a critic of tech giants". The judge also made it clear that the FTC can revive its case by 29 July, if it's able to "plead enough facts to plausibly establish" that Facebook is violating antitrust laws, "namely, that Facebook has monopoly power in the market for Personal Social Networking Services".

That said, I'm not sure if the FTC will bother trying to fight this antitrust case, mostly because I don't think it can. Facebook just doesn't have a monopoly, as it has historically been defined. It doesn't charge consumers (where's the consumer harm?), doesn't collect monopoly rents (even in advertising), doesn't restrict supply and can't increase prices for users or advertisers without fear of competition.

Do "network effects" make it more difficult to leave Facebook? Absolutely. But that doesn't make Facebook a monopoly any more than it made MySpace a monopoly. If a better rat trap comes along, you can be sure people will switch to it. Facebook is dominant because people like it, not because it's the only social network in town.

Now that doesn't mean the FTC will give up. No, you can be sure that the FTC will have tunnel vision for Big Tech until the end of Khan's term. Amazon is so concerned that last week it asked a judge that she be recused from all Amazon-related antitrust cases before the agency, as she apparently:

...has on numerous occasions argued that Amazon is guilty of antitrust violations and should be broken up. These statements convey to any reasonable observer the clear impression that she has already made up her mind about many material facts relevant to Amazon's antitrust culpability as well as about the ultimate issue of culpability itself.

While any sensible judge will throw out Big Tech antitrust claims as the law is currently written, there's a good chance that the Biden administration will try to change the law. Early in June US House Democrats unveiled five separate bills aimed at Big Tech, and Biden has signalled his intentions not just with the appointment of Khan but also Tim Wu, "a critic of anticompetitive conduct by Big Tech companies, as his special advisor for technology and competition policy".

How this plays out will be incredibly important. Productivity is essential for growth, and you only get that through increased savings or innovation. While there's no doubt regulation could help improve things on many margins, there's also a gigantic risk that any new laws are ill-conceived, poorly written or outright captured by Big Tech, unleashing unintended consequences that could suffocate the most vibrant sector in the United States.

Issue 119: Facebook is not a monopolist was compiled by Justin Pyvis and delivered on 05 July 2021.