> The FTC has failed to plead enough facts to plausibly establish a necessary element of all of its Section 2 claims — namely, that Facebook has monopoly power in the market for Personal Social Networking (PSN) Services. The Complaint contains nothing on that score save the naked allegation that the company has had and still has a “dominant share of th[at] market (in excess of 60%).” Redacted Compl., ¶ 64. Such an unsupported assertion might (barely) suffice in a Section 2 case involving a more traditional goods market, in which the Court could reasonably infer that market share was measured by revenue, units sold, or some other typical metric. But this case involves no ordinary or intuitive market. Rather, PSN services are free to use, and the exact metes and bounds of what even constitutes a PSN service — i.e., which features of a company’s mobile app or website are included in that definition and which are excluded — are hardly crystal clear. In this unusual context, the FTC’s inability to offer any indication of the metric(s) or method(s) it used to calculate Facebook’s market share renders its vague “60%-plus” assertion too speculative and conclusory to go forward. Because this defect could conceivably be overcome by re-pleading, however, the Court will dismiss only the Complaint, not the case, and will do so without prejudice to allow Plaintiff to file an amended Complaint.
Not sure what the FTC's game plan was going into an antitrust fight without a market share pitch.
The judge notes two problems (at least!):
(1.) the FTC approved the purchase of Instagram and WhatsApp. Why does it want to change its mind?
(2.) they don’t even attempt a serious market definition. If Facebook is a monopoly, what is it monopolizing? Who else is in the market? This is an absolutely central question in any monopolization or horizontal merger case. Indeed, getting the judge to accept your theory of the market is a big part of the job.
The economics staff at the FTC is not incompetent (I know several people there), but they have a tough job in this case. If it has been up to me I would not have allowed the Instagram and WhatsApp purchases, but the FTC itself approved them!
Perhaps they did know the case wouldn't have a chance. Perhaps there isn't a plan to follow up with the actual complaint. It's not like the federal government has seriously pursued anti-trust activity in recent decades.
I agree that if they brought the case they should have had an argument, but it's less clear that they should have brought the case, or that size was an issue.
Maybe their plan was to lose to destabilize any later lawsuit which would have had a reasonable chance of winning?
Never attribute to malice that which can be adequately explained by stupidity.
Regardless, this still wouldn’t break Hanlon’s Razor because when you have enough information to adequately explain corruption so devious that it has been intentionally dressed as stupidity, it is rarely explained adequately with mere stupidity.
A lot of maybes, but I do wonder if the wheels of government are still recovering and whether the consequences of this are sometimes indirect and not so obvious. Bad management can leave waves.
TBH if I worked in public services over the last few year I'd probably feel pretty under-appreciated and it would be hard to motivate myself.
Misunderstandings and lethargy perhaps produce more wrong in the world than deceit and malice do. At least the latter two are certainly rarer.
through I also think we might need to better differentiate between content platforms with social aspect (YouTube, TickTock), Social Networks (Facebook, Instagram?) and Messengers (WhatsApp, Signal, etc.).
Negative way of looking at it: Virtue signaling/needing to appear to do something/campaign donation solicitation
Facebook the business (selling ads) is a large business but the largest advertiser is Google, so they aren't even the leader.
When it comes to FAANGs, in what world does Apple or Netflix have 85%+ market share? It's a ridiculous argument. But if you create a privacy law with draconian penalties, it's easy to show that most of these companies share data.
In my mind, new privacy laws are the way to go. Strong privacy laws would stop most of these companies in their tracks. How many times do activists need to be laughed out of anti-trust courtrooms before we get the message that it's a route that probably won't work?
The bar isn't 85%+, it's significant market power, which may be 60%, and could be less depending on the specific conduct and facts. Apple has something in that range in mobile phones in the US (but not in many other countries), so there is probably a real question of law on what the market is precisely, and what % is needed to show significant market power (as well as what Apple conduct, if any, is prohibites) as well as a question of fact regarding the specific market share controlled by Apple. I dunno, maybe they have a high market share in smartwatches too.
I don't think Netflix currently has significant market power, and the streaming market doesn't seem to have significant barriers to entry; everybody and their dog in the media business has launched WhateverPlus in the last few years to some success. That would be a hard case to make.
Apple has around 49-51% of market share, with the rest being Android. This is no where near monopoly power.
https://www.statista.com/statistics/266572/market-share-held...
>I dunno, maybe they have a high market share in smartwatches too.
Nope, around 35% globally, similar US.
https://www.counterpointresearch.com/global-smartwatch-shipm...
Neither of these is large enough to likely bring a monopoly argument. I've looked over the years at cases and what is generally needed, and none have ever went anywhere with such small numbers.
Amazon, Facebook, and Google (especially Amazon and Google) have demonstrated all sorts of anti-competitive behavior. That’s different than privacy invasions, although there’s some overlap with advertising it’s not a complete overlap.
1. the legislative bodies aren't designed to represent equally the population being governed
2. the vast majority of political spending comes from the wealthiest people & corporations
3. there is no correlation between the views of the average American and what gets passed as policy.
There are really only 2 major players for smartphone apps, and that's incredible power.
It may not be so much an issue of monopoly but simple regulatory concerns over value chains.
No, it's not. Mainly because most of these companies do not share data directly. Even GDPR doesn't really do anything much to curb the power of these giants.
Now everything is extremely differentiated so it's hard to find any products that are clearly competing apples to apples. The markets of these things overlap funnily such I almost wonder if the graph of "quasi-competing" products is fully connected.
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The institutional power of these firms isn't just in the things they sell. It is also in people's dependence on the non-fungible free services, etc.
We do need new laws so issues with the courts in some sense are good to force the issue.
This is not correct. Market shares are perfectly well defined and understood in the differentiated products case.
Indeed, it is precisely the fact that products are differentiated that makes market definition an important part of nearly every antitrust proceeding: where should the market start and stop? What market is being monopolized?
The FTC failed to come up with a good market definition here, among other problems.
Yes, we do know more about https://en.wikipedia.org/wiki/Monopolistic_competition, but clearly many industries are extremely consolidated. Are you saying existing anti-trust law is good enough and we simply need to start enforcing it?
> Indeed, it is precisely the fact that products are differentiated that makes market definition an important part of nearly every antitrust proceeding: where should the market start and stop? What market is being monopolized?
Well with my second part, I was trying to get towards the relationship Facebook and Google have with their users, which does not involve money by being exchange by and large, probably couldn't be characterized in a way that would please the court. Indeed, perhaps it would be hard to characterize it as a market in the traditional sense at all.
> The FTC failed to come up with a good market definition here, among other problems.
Indeed the FTC's move does look bad based on what the court is saying, but I am skeptical that they would be able to do sufficiently better to win something big --- which is breaking up big companies. (Fines will never cut it.)
That some of the recently drafted laws are seeming written to hit tech and not other large firms is also disappointing.
If a company is in the sights of Facebook, and could be acquired .. they should stand to benefit from any legislation put in place.
Keep in mind many startups don't want to do the work of becoming an actual sustainable company, and rather have the higher values of the acquisition market.
Also keep in mind that a more fragmented digital ads market without the total surveillance from monopolies might not be very profitable at all.
I don't think a disaggregated private sector is capable an entirely filling big tech's vacuum. I also don't think that is a reason not to break up big tech.
The fact is software wants to be free, and free software wants to be funded by something other than profits. But I don't think our courts or legislatures are willing to grapple with this truth. And so we will waffle and keep the monopolies intact.
Many startups aim to become acquired, because there is no alternative. It's the only viable route to success. Continue 'feeding the beast'.
This isn't a desirable scenario though .. we all know that there are political, social and economic consequences to allowing monopolistic behaviour to carry on unchecked.
The best reason for introducing legislation is to improve life for a huge amount of people.
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> Also keep in mind that a more fragmented digital ads market without the total surveillance from monopolies might not be very profitable at all.
Then we should fully do away with those markets.
Regulation sets a bar. It stops the worst problems associated with unregulated capitalism from taking root and prospering.
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> I don't think a disaggregated private sector is capable an entirely filling big tech's vacuum. I also don't think that is a reason not to break up big tech.
I agree, it's not a reason to _not_ break it up.
I also agree it won't be business as usual; nor should it be.
There's a pragmatism to open standards and free software that works well with capitalism.
We will need to embrace open standards to provide interoperability between products once they're split.
To some founders, maybe? But the fact is fewer acquisitions will mean more outright failures, if also more a few massive successes. Investors might not like that.
It will take time also for the number of starts to break through and chip away at monopolization, until that happens, we have a "worst of both worlds" where monopolies still crush you but you also can't sell out. That will definitely not be popular.
> Then we should fully do away with those markets.
I fully agree, but so many popular things are dependent on advertising, I worry the politicians have no guts here. If people just loose all their free entertainment heads will roll.
I think the best way to fund art / entertainment is UBI and crowdfunding, but that's a massive shift that, again, takes a lot of guts.
> I also agree it won't be business as usual; nor should it be.
:)
> There's a pragmatism to open standards and free software that works well with capitalism.
Actually I think those have a very awkward relationship with Capitalism. On one hand, sharing ideas is clearly more efficient, on the other hand, they undermine the competition that makes capitalism work.
There was a lot more systems innovation in non-micro-computers before Unix, by virtue AT&T limited in how they were allowed to capture the value, predominated. Then Linux also wiped out all the proprietary Unixes to a large extent.
The biggest thing attacking the stagnation of OSe might be the the increasingly bespoke cloud platforms. So basically FOSS gets in a "no profit to be found here" rut in a sub-sector, until a bunch of proprietary things the exist mainly but to increase switching costs get us back to "proprietary diversity", and the process repeats.
A stupid take mean anti-trust means banning FOSS too, kind of like how the sherman anti-trust act was used against unions. A better take might be we need something other than competition for profits to push FOSS forward.
Facebook's niche is in one-to-many communication with people you directly know. It's also arguably one of the stickiest forms of social network because of the strength of its network effects. There is very little real competition in that niche.
Pepsi doesn't copy Coca-Cola's marketing about being a sexy/mainstream drink, they create their own niche of being for younger independent personalities.
When people choose to get their viral news from Reddit rather than Facebook, or their viral videos from YouTube rather than Facebook, that's competition period.
Companies differentiate products to avoid competition. It’s marketing 101.
You don't think ballpoint pens and gel pens compete with each other?
Just because the consumer gets more choice doesn't mean they're not competing.
The product differences between, say, Facebook and YouTube are night and day. You wouldn't add an acquaintance on YouTube and start messaging them through that platform. I'm not sure you can even message people like that on it anymore. But you can on Facebook. They're fundamentally different products, they only align because they both have some sort of social aspect to them. Kind of.
For "viral videos", Facebook and YouTube (and Reddit) absolutely directly compete in the same market.
For "educational videos", YouTube competes with other platforms.
While for "tracking social acquaintances" Facebook competes with the Contacts apps by Apple and Google, as well as other messaging apps.
Really there's no such product category as a "Facebook" or a "YouTube". And Facebook's original product category -- to keep track of social contacts and post public and private social messages -- is now only a tiny part of Facebook.
I don't think this is a valid argument.
You could state the generalized product they sold and their total control was evident.
Draw it narrowly (I.e., convince the judge to accept a narrow market definition) and making the case against a merger or in favor of monopolization becomes easy. Convince the judge to draw it broadly and it becomes much harder to stop a merger or to make a monopolization claim.
Facebook is not mainly a "consumer platform" (if at all).
There are billions of online person to person interactions that happen outside of Facebook. There are hundreds of thousands of websites and communities that allow communication, discussion and sharing of user generated content. There are hundreds of thousands of online spaces that provide an outlet to augment a message.
So if anything, regulators should start by redefining what's a monopoly because the current definition clearly doesn't fit the classic narrative around monopolies.
You have to demonstrate somehow that the dominance exists in a rigorous way.
In what way can consumers substitute normal use like sharing photos with family members on Facebook with YouTube?
But if I understand correctly, determining whether two companies are competitors is more about their markets, rather than their feature sets.
From the ruling text:
> Although the precise definition of a “Personal Social Networking Service” is disputed (as that is the market in which Facebook has its alleged monopoly), it can be summarized here as one that enables users to virtually connect with others in their network and to digitally share their views and experiences by posting about them in a shared, virtual social space.
YouTube would fit that definition.
Then it’s a bad definition. Who organises family gatherings on YouTube?
The challenge here is there isn't a single market definition that would fit. It's up to the plaintiff (FTC) to allege a coherent definition, and it sounds like in this case they just neglected to do so.
Still if in your opinion YouTube was a “Personal Social Networking Service” then why do you think Google have made G+?
Competing on features != competing in a different market. Feature sets and markets are two very different things.
What definition would you use to define Facebook's market?
Spray paint manufacturers aren’t in pen market even if you can “recorded text and images in a durable fashion with them.” Lighting a couch on fire sure produces a lot of lights but couch manufactures are not part of the home lighting market.
EDIT: But let’s ignore that. Sure, YouTube has roughly the share of social networking market as the number of people posting vacation photos on it. That might just add up to 0.0001% market share.
I can’t think of any definition that would only apply to Facebook that isn’t so narrow as to be unprecedented as a definition of an entire market.
Bell was “telephone service”. Standard oil was “oil”. What’s a comparable definition for the market that Facebook is in?
Arguably Instagram in April, 2012 was a reasonable pens vs pencil division where the courts could have included or excluded them quite reasonably. Though allowing Facebook to buy them suggest a vary narrow definition at the time.
What really needs to happen is to amend monopoly definitions in cases where a captive market is present.
The issue with Facebook isn't that they own 100% of the ad market, but that they control 100% of the Facebook ad market, which is itself large enough to constitute monopoly concerns. (As with Apple and Google app stores)
Advertising is trickier than apps in terms of separation, but my gut says things would be better if companies with large captive market share were required to wholesale ad space and targeting via standardized mechanisms.
And were specifically prohibited from developing any kind of value add ad products on top of their platforms.
Just too much conflict of interest.
You need to define these terms in a way that doesn't make everything a monopoly. Because by this logic, my corner flower vendor has a monopoly on her corner and also on the flowers she is holding in her hand right now.
Regulation helps capitalism work for more people, and keeps our society healthier. It's a good thing.
We’ve looped back to that term. What is an “economic market?” Precisely? In a way that makes the law grounded, predictable and extensible.
I’ve struggled with this, too, by the way. The courts have as well.
However, I do think there is a lot of money depending on making the situation as complicated as possible — especially in the US.
The fact the EU is managing to progress this type of matter, proves it's possible.
Is it? The European Commission has no theory of a market, just an enemies list. It has never once in court sustained a succinct pitch on how to define a market for antitrust purposes in a way that snares big tech. Once in a while it settles for a fine and everybody moved on.
Catching out these corporations in order to lay a 'charge' shouldn't be necessary, when it's quite clear to most people that their behaviour is stifling competition.
We simply need to implement the necessary legislation to enable a playing field which is able to serve a greater range of players.
“We simply need to implement the necessary legislation” could be said about literally any problem. The EU has this figured out about as much as the U.S. does.
> the EU doesn't rely on litigation to define the economic landscape in the same way that the USA does
The courts have been snubbing the European Commission’s expansive views of antitrust. In part due to a lack of any consistent definition of a market.
I find it maddening to see the corporations run rings around elected governments!
“We simply need to implement the necessary legislation” could be said about literally any problem. The EU has this figured out about as much as the U.S. does.
This moves the problem of defining a market to defining a submarket.
Please don't interpret this as my being facetious. In the days of good and services being sold to consumers, we had metrics to measure this. The government measured and the courts incorporated said metrics into antitrust law. Those measures don't work well in the digital era. These cases are about proposing new measures and getting them to stick.
Mind bogglingly, the FTC didn't propose such a metric. That's why its complaint was dismissed. I'm curious to see what they propose, if anything.
In that case, the core product (to other businesses) is shelf space.
So is there a monopoly on shelf space control?
Walmart is huge. But Target's pretty big too (~10% their size by revenue). And they've got bigger competitors in grocery.
But in the Facebook case, where else are you going to buy eyeball time? The closest thing to the scale of Facebook ad space would be if Google put ads on the launcher of Android.
- that is not the case the FTC tried to bring before the judge, so it’s not the issue here.
- if the FTC had tried to bring that case, Facebook would have (correctly, IMO) pointed out that the advertising market encompasses print, television, radio, direct mail, and online. Even in online it faces competition from (at least) Google and Amazon, among others. I think the FTC would definitely lose a “monopolizing online advertising” case handily.
Advertising to Facebook users is.
Because Facebook has ~2.5B daily active users using at least one of its core products.
At some point, you're big enough that you create your own markets. And should be looked at as such.
This is downright absurd -- you're a monopoly because your company has customers?
So either you can not control access to as many customers by splitting your customer base. A la Ma Bell.
Or you can keep your privileged position and accept regulation. A la utilities.
The FTC had nearly a decade to bring something up and it didn't. This ultimately is problematic because Facebook would look at this and clearly see the FTC had no problems with its actions. So to look at Facebook's conduct in the time that has passed is ultimately unfair to Facebook. Since its actions since would have been seen as being compliant.
> The FTC is apparently unwilling to allege that Facebook has ever (pre- or post-Instagram acquisition) had something like 85% or even 75% market share; instead it hedges by offering only that the number is somewhere north of 60%. The question naturally arises: which firms make up the remaining 30–40%? Although Plaintiff is correct that it is not required to identify every alleged competitor in its pleadings, its choice to identify essentially none is striking.
> The Court’s decision here does not rest on some pleading technicality or arcane feature of antitrust law. Rather, the existence of market power is at the heart of any monopolization claim. As the Supreme Court explained in Twombly, itself an antitrust case, “[A]district court must retain the power to insist upon some specificity in pleading before allowing a potentially massive factual controversy to proceed.” Here, this Court must exercise that power. 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.