With its innovative antitrust lawsuit against Facebook, the Federal Trade Commission faces more than just a fight against a billionaire tech giant: a fight to regain the credibility that could determine its future.
Lawmakers on both sides of the aisle harshly criticized the FTC after the technological hawks of privacy settlements considered toothless. In July 2019, the agency liquidated a Facebook privacy investigation following the $ 5 billion Cambridge Analytica scandal, representing approximately 9% of the company’s revenue for 2018. Shortly afterwards, it went to resolve alleged violations of children’s privacy on YouTube owned by Google for $ 170 million.
“The FTC is foolish and foolish to rely solely on money to punish decades of past privacy violations and ongoing profits,” said Sen. Richard Blumenthal, D-Conn., he tweeted at the time of Facebook’s liquidation.
Long before that, the agency closed an investigation into Google’s competitive practices without filing staff-recommended charges. Nearly a decade later, the Justice Department took on competition charges against the search giant.
The commission’s perceived failure to hold tech giants accountable in the eyes of some lawmakers has threatened the FTC’s very existence. Senator Josh Hawley, R-Mo., Last year proposed relegating the entire agency to become a division of the Justice Department and consolidating all of its enforcement power under the DOJ’s antitrust division. .
This gives added importance to the FTC’s actions against Big Tech companies. The FTC is different from the DOJ in that it is independent of other branches of government. Last year, FTC President Joe Simons stated that the structure is what makes the agency so valuable, although he agreed with DOJ antitrust chief Makan Delrahim. , that dividing antitrust power between two agencies causes inefficiencies.
This was the backdrop in which Simons made the decision to break away from his fellow Republicans for being the decisive vote to file an antitrust case against Facebook in federal court. A week later, he joined most of his colleagues in voting for a comprehensive study on the privacy practices of nine technology companies.
Simons made it a priority during his time at the helm of the commission to expand and focus his experience in the technology sector, said one person familiar with the FTC’s thinking who was only allowed to speak in the background. This meant creating a technology working group within the commission, which is now known as the technology control division.
It was in this context that the FTC decided to initiate an antitrust investigation into Facebook. Facebook first revealed the investigation last year, just after the agency’s $ 5 billion fine. Typically, the FTC opens investigations after one of three things happens, according to the source: 1) someone complains about a company’s behavior to the commission, 2) states or the Department of Justice refer a case to the agency or 3) new information comes to light through public reports.
For Facebook, it was the third option that drove the investigation, the source said, declining to specify the new information that launched it.
The FTC’s decision to file charges in the Facebook case was applauded by recent critics. The lawsuit is a thorough indictment of Facebook’s operations and acquisition strategy, which according to the commission demonstrates its attempts to illegally maintain the monopoly power on personal social media. The case focuses primarily on Facebook’s Instagram and WhatsApp acquisitions – two mergers that the FTC reviewed before consummating them.
Facebook’s chief executive described the demand as an attempt by the government to get a “replacement”, which sent a chilling warning to US companies that no sale will ever be final.
While, as a matter of law, the FTC’s decisions not to block the mergers at first do not extend the presumption of legality, Facebook is likely to continue to push the court point, according to antitrust experts.
“Certainly, there were some of these warning signs,” Delrahim, the DOJ’s antitrust chief, said in an interview with CNBC this week. “If you go back to Microsoft, the Federal Trade Commission also examined it and did not file any case until the Clinton administration’s Department of Justice took it under the direction of Joel Klein and filed the case. it’s an FTC comment against the DOJ, but it’s a comment that sometimes, when you don’t have decision-making in an executive, decision-making becomes much more difficult and may not be optimal.
Delrahim favors a structure where responsibility is concentrated on an individual, as in the Antitrust Division, where he has the final say in carrying out enforcement action. In the FTC, on the other hand, five commissioners must vote on whether action should be taken, with a maximum of three commissioners at a time coming from the same political party.
“I have no doubt that what needs to be done is to combine the two agencies, but it is not a decision I have to make,” Delrahim said.
The source familiar with the FTC’s thinking defended the commission’s structure, saying the agency’s bipartisan tradition means cases go through rigorous debate and review before they reach the public’s eyes, which it makes them stronger along the way. They noted the FTC’s record of litigation, refuting the idea that the deliberative model has slowed its efforts. The agency has provided major antitrust cases, albeit less frequently, in the technology sector in recent years, such as chip maker Qualcomm and electronic prescribing platform Surescripts, they added.
When it comes to the case of Facebook, Delrahim described many parts as “solid,” particularly the aspect involved in Facebook’s alleged use of its application programming interfaces (APIs) to cut off competitors from its platform. . He also defended the legitimacy of privacy as an element of potential harm to the consumer.
“The issue of privacy as a quality element of competition is a very legitimate issue,” Delrahim said. “A lot of people in this debate have confused antitrust standards by just looking at the effects of prices and that’s not true.”
Just filing such an extensive lawsuit is already an important step for the FTC. But it comes with high stakes. If the government does not prove its case in court, it runs the risk of creating more jurisprudence that is unfavorable to the future challenges of the monopoly, possibly a cooling of enforcement in the area.
But if he wins, he could start a new era of antitrust compliance.
“If you never carry a section 2 [Sherman Antitrust Act] In case the government starts strengthening the monopolists, “said Sam Weinstein, a former DOJ antitrust lawyer who now teaches classes in the Cardozo Act.” They start thinking, “We can do whatever we want here, the government is afraid to litigate.”
Weinstein said the cases themselves “are terrible public relations” for companies and shows colleagues “the government has the will to do this. It’s no longer theoretical; it’s happening.”
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