Anamitra Deb
Senior Director, Beneficial Technology
&
Gus Rossi
Principal, Beneficial Technology

How Facebook Gained Immense Power and Harmed Consumers, Competition, and Innovation Along the Way

June 9, 2020

Today, we unveiled the second in a series of policy papers containing detailed evidence and roadmaps for potential antitrust cases against several tech giants. The “Roadmap for an Antitrust Case Against Facebook”, is the result of a collaboration between several antitrust experts who have been working in tandem to study competition issues in the digital marketplace and research the specific harms caused by big tech:

  • Fiona Scott Morton, Theodore Nierenberg Professor of Economics at the Yale University School of Management and former deputy assistant attorney general for economics at the U.S. Department of Justice’s antitrust division co-authored the second paper;
  • Our partners at the DC-based think tank, Public Knowledge; and 
  • David Dinielli, a senior advisor at Omidyar Network and former special counsel at the U.S. Department of Justice’s antitrust division.

Using public information gathered by the U.K.‘s Competition and Markets Authority (CMA), U.K’s House of Commons Report on Disinformation and Fake News, and other sources, the second policy paper describes a clear theory of how Facebook may have potentially violated antitrust laws in the US, assuming that the facts mirror those found in the UK.  The paper details three sources of anticompetitive conduct that Facebook appears to have engaged in. 

  1. Facebook has a pattern of purchasing companies that show a realistic threat of competing against Facebook. Facebook, for example, used data collected by Onavo, a VPN and analytics firm it purchased, to identify how often consumers downloaded and used certain apps. Facebook then used that data to acquire top performing apps that might become competitors in the future, like WhatsApp. 
  2. Facebook cut off competitors’ access to important APIs that facilitate interoperability with its network. For instance, emails obtained by the UK House of Commons show how Facebook disabled video-sharing platform Vine’s access to Facebook’s API after Vine was acquired by Twitter. Once a thriving company, Vine has since been shut down.
  3. It raised costs for its rivals by hiding information about a key competitive feature: privacy. The opacity of Facebook’s data practices make it hard for consumers to understand the trade off they make when they use Facebook over potential competitors. In combination with its data advantage, Facebook’s opacity severely limits potential competitors’ ability to differentiate themselves.

“We now find ourselves world in which social media is dominated by a single firm—Facebook—that appears to be able to take almost any action, whether about price, politics, or psychology, without losing its position,” the authors conclude.  

In the process, consumers, publishers, and advertisers have been harmed by Facebook’s anticompetitive practices. Consumers and publishers have been left with lower quality products while advertisers face higher costs, according to the paper. 

Because Facebook has been able to either acquire rivals or exclude and disable them, they have not needed to compete and innovate. This track record of anticompetitive conduct has in turn generated a marketplace bereft of potential alternatives, as challengers who might have competed on features that would improve social media, such as better privacy and more data control, more transparent information curation and fewer dark patterns, better protection of social connections, and healthier political discourse, are left with no viable pathways to scale.  Indeed, having a marketplace where a single company essentially gets to determine the dimensions of competition is antithetical to the concept of choice and freedom. 

Omidyar Network supports the development and enforcement of competition policy because we believe platform accountability requires competitive markets. If done well, competition policy can result in more innovation, more responsible technology, and better outcomes for users. As this paper shows, this is not yet a reality in today’s social media market. 

We call on the relevant US federal and state agencies, who are hard at work determining when and where anticompetitive practices and harms have occurred, to adopt this comprehensive view of Facebook's conduct and help establish a fair and responsible tech ecosystem. 

To learn more, please read the first policy paper in the series: "Roadmap for a Digital Advertising Monopolization Case Against Google”. 

 

 

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