While not throttling innovation, regulators must keep the spirit of competition alive
The lawsuits against Facebook by the Federal Trade Commission and the attorneys general of 46 U.S. States, the District of Columbia and the territory of Guam are a significant challenge to the dominant Internet empire that Mark Zuckerberg has built in such a short time. The plaintiffs, working in close coordination, sued Facebook on Wednesday for its anti-competitive conduct, which they said harms users, advertisers, competition, and innovation. The basic charge is that Facebook, in fear of competition, plays by an anti-competitive strategy playbook. It either buys potential competition or, if it cannot, cuts them off from accessing its large platform. Money is no bar in buying off potential competition, as the $19-billion purchase price of WhatsApp in 2014 shows. The lawsuits highlight Facebook’s acquisition of Instagram and WhatsApp, which happened when Mr. Zuckerberg saw them as real threats to Facebook’s continuing success. Whatever Facebook cannot acquire faces, as a lawsuit puts it, the “wrath of Mark”. It may be years before the lawsuits are decided one way or the other. But not even the noisy fallout of the Cambridge Analytica scandal was as much of an existential threat for Facebook as this issue could turn out to be. For, while highlighting its lack of concern for privacy, a taint that Facebook has struggled to shrug off since, the Cambridge Analytica scandal did nothing to stop the social network’s roaring growth. Facebook, which last year made a revenue of over $70 billion, right now has a market capitalisation that is just a shade under $800 billion. These lawsuits could potentially endanger this business success.
The action against Facebook, however, is not to be seen in isolation, and is linked to the growing backlash against what is called ‘Big Tech’ globally. Europe and the U.S., especially, have moved against these technology companies not just on anti-trust charges but also on cases involving violation of privacy. There seems to be a growing realisation about the disproportionate clout that these technology platforms have in the global scheme of things, which they exploit to further their domination in the industry. And that it is futile for regulators and policymakers to continue with a light-touch approach in the technology industry. In fact, calls for the break-up of technology firms have been put forward by politicians in the U.S. With its immense scale, Facebook has on more than one occasion managed to startle regulators and administrators, not to mention civil society and activists, by its grandiose plans which seemed to threaten the existing world order. The offer for a free limited version of the Internet and plans for a new digital currency are a few examples. Internet monopolies are not a feature of just the developed world. They are everywhere. And it would be useful for governments and regulators to draw the right lessons from this if they want to keep the spirit of competition alive.