After a 16-month investigation, the House Antitrust Subcommittee has found that Facebook, Google, Apple and Amazon do hold ‘monopoly power’ over their respective markets, and has proposed significant changes to address how they operate.
That could lead to major shifts for each of the tech giants, and potentially, a break-up of their core operations. For Facebook, that could see the company eventually forced divest both Instagram and WhatsApp, and operationally separate its key components as a means to dilute its market dominance.
What that means for consumers is hard to say, but any such change would have major impacts on the systems behind each, and the digital economy as a whole.
The subcommittee has produced a 450-page document outlining its recommendations, which will now need to be considered by congress.
Among the various notes, the report recommends:
- The implementation of structural separation regulations, which would limit the major tech players from acquiring businesses in distinctly different areas from their main operation. This would also include the potential separation of major apps, like YouTube, WhatsApp and Instagram, ensuring that each operates separate from the main business.
- All new acquisition proposals should be considered anticompetitive, with the onus then put on the acquiring business to show why such a merger would be in the public’s benefit, not an expansion of its market power.
- New regulations on data portability, enabling users to more easily shift between apps and tools without penalty.
- New laws which would stop the big tech platforms from preferencing their own products, ensuring equal opportunity for all players in the market
There’s still some way to go in gaining approval for any of these measures, but if they are implemented as outlined, that could see a major structural shift at many of the tech platforms, and could lead to a whole new way of engaging within these apps.
On Facebook, in particular, the report found that Facebook holds monopoly power in the social media sector, which it has used to acquire or quash competing apps over time.
“Facebook has monopoly power in the market for social networking. Internal communications among the company’s Chief Executive Officer, Mark Zuckerberg, and other senior executives indicate that Facebook acquired its competitive threats to maintain and expand its dominance. For example, a senior executive at the company described its acquisition strategy as a “land grab” to “shore up” Facebook’s position, while Facebook’s CEO said that Facebook “can likely always just buy any competitive startups,” and agreed with one of the company’s senior engineers that Instagram was a threat to Facebook”
Facebook’s acquisition of Instagram was a key focus for the investigation – Facebook framed the Instagram acquisition as a mutually beneficial arrangement in order to help Instagram scale, as opposed to Facebook buying up a fast-growing competitor, which has since gone on to become one of the biggest social platforms in the world.
The report found that Facebook has made a habit of detecting and pressuring rising social apps, as a means to maintain its position:
“[Facebook] used its data advantage to create superior market intelligence to identify nascent competitive threats and then acquire, copy, or kill these firms. Once dominant, Facebook selectively enforced its platform policies based on whether it perceived other companies as competitive threats. In doing so, it advantaged its own services while weakening other firms.”
This is in reference to Facebook’s Onavo project, which gathered data on app usage in order to identify rising threats, which it could then acquire or copy in order to blunt their momentum.
And it’s difficult to argue that Facebook hasn’t done this. Facebook has very obviously copied the key functions of Snapchat, TikTok, and various other rising social apps, and used its massive scale to bring similar tools to its users in order to stop people from straying to these new, rising apps. Facebook also tried to acquire Snapchat in its early stages, and succeeded in buying up Instagram and WhatsApp, after identifying their popularity in trend data.
It’s fairly clear that Facebook does use its market power to advantage in this respect. The question then is whether industry would be better off with limitations on such, or whether Facebook enables these tools to expand and grow in a way that benefits consumers over and above the impacts on market competition.
That, as noted, will be up to Congress to determine, but Facebook is also not waiting around to find out the results. The company has been working for months on its messaging integration project, which many believe is a means to avoid a potential break-up of its platform. If Facebook can argue that its back-end systems are all connected, and these are all, essentially, one giant, interconnected entity, then breaking them up will be harder to do. This is also why Facebook has added Facebook branding to all of its apps, despite concerns that doing so could impact trust in Instagram and WhatsApp.
Facebook has also shared its opposition to the report:
“We compete with a wide variety of services with millions, even billions, of people using them. Acquisitions are part of every industry, and just one way we innovate new technologies to deliver more value to people. Instagram and WhatsApp have reached new heights of success because Facebook has invested billions in those businesses. A strongly competitive landscape existed at the time of both acquisitions and exists today. Regulators thoroughly reviewed each deal and rightly did not see any reason to stop them at the time.”
And Facebook does have a point, but at the same time, the company’s actions have made it increasingly difficult for competitors in the sector, especially given Facebook’s aggressive approach to stunt their growth. Snapchat CEO Evan Spiegel described Facebook’s efforts to ‘crush’ his app after he rejected Zuckerberg’s takeover offer.
Now, Congress will need to decide on the next steps, which, as noted, could take some time. But eventually, it could lead to a major shake-up for the tech sector – or, maybe more likely, a protracted legal battle to avoid such.
However it goes, you can expect to see a lot more on this front over time.