Why Facebook Is Suddenly Afraid of the FTC

By Sue Halpern, The New Yorker

25 August 21

The agency is getting a second chance to convince a federal judge that the social-media giant is a monopoly which needs to be broken up.

ast Thursday, the Federal Trade Commission got a second chance to convince James E. Boasberg, a district judge in Washington, D.C., that Facebook is a predatory monopoly. The do-over stems from a suit filed by the agency last December; it argued that the company has been engaged in anticompetitive behavior, buying up potential rivals such as WhatsApp and Instagram, and requiring third-party app developers to agree not to create products that could compete with Facebook. In June, Boasberg dismissed the suit, ruling that the agency had not sufficiently demonstrated that Facebook was, in fact, a monopoly. “Unlike familiar consumer goods like tobacco or office supplies, there is no obvious or universally agreed upon definition of just what a personal social networking service is,” he wrote. “It is almost as if the agency expects the Court to simply nod to the conventional wisdom that Facebook is a monopolist.” Shares of the social network rose more than four per cent after Boasberg’s ruling, sending the company’s market capitalization past a trillion dollars.

The December lawsuit, which was initiated by the Trump Administration, is being carried forward by Biden’s. (Regulating Facebook is a rare point of bipartisan agreement in Washington, though not necessarily for the same reasons.) The new head of the agency, Lina Khan, a former F.T.C. staffer and a professor at Columbia Law School, is—at the age of thirty-two—perhaps the nation’s most prominent advocate for using antitrust law to break up Big Tech. She was counsel to a House subcommittee that issued a four-hundred-page report, in October, 2020, which found that Facebook, Google, Amazon, and Apple “have become the kinds of monopolies we last saw in the era of oil barons and railroad tycoons.” On July 14th, a month after Khan was confirmed by the Senate, Facebook sent a petition to the F.T.C. requesting that she recuse herself from “any decisions concerning whether and how to continue the F.T.C.’s antitrust case against the company.” (Amazon made a similar complaint, two weeks earlier.) In a publicly released letter, the Democratic senators Elizabeth Warren, Richard Blumenthal, and Cory Booker, along with Representative Pramila Jayapal, chastised Facebook’s C.E.O., Mark Zuckerberg, and Amazon’s C.E.O., Andy Jassy, writing, “The real basis of your concerns appears to be that you fear Chair Khan’s expertise and interpretation of federal antitrust law.” They also accused the C.E.O.s of trying to sideline and discredit Khan in order to “evade accountability for any anti-competitive behavior.”

The amended complaint is sharper than the original. It points to the rise of mobile Internet as the impetus for Facebook’s “buy or bury” strategy. “Facebook’s leadership came to the realization—after several expensive failures—that it lacked the business talent required to maintain its dominance amid changing conditions,” the amended complaint alleges. “Unable to maintain its monopoly by fairly competing, the company’s executives addressed the existential threat by buying up new innovators that were succeeding where Facebook failed.” In a statement announcing the new filing, Holly Vedova, the acting director of the F.T.C.’s Bureau of Competition, wrote, “This conduct is no less anticompetitive than if Facebook had bribed emerging app competitors not to compete. The antitrust laws were enacted to prevent precisely this type of illegal activity by monopolists.”

Even if Boasberg is unswayed by the F.T.C.’s amended complaint, Khan’s tenure seems to already have invigorated an agency that had previously investigated only one of more than a hundred Facebook acquisitions. (In 2012, it probed the company’s purchase of Instagram, but did not block it.) Earlier this month, when Facebook tossed researchers from N.Y.U.’s Ad Observatory off its platform, Khan’s F.T.C. pushed back. The researchers, Laura Edelson and Damon McCoy, were using a browser extension that they’d built to examine Facebook’s Ad Library, a searchable database of advertisements running on Facebook products, to understand the social and political effects of those ads. “When Facebook shut down our accounts, we had just begun studies intended to determine whether the platform is contributing to vaccine hesitancy and sowing distrust in elections,” they wrote, in the Times. “We were also trying to figure out what role the platform may have played leading up to the Capitol assault on Jan. 6.”

Shortly before the November election, Edelson and McCoy found that, contrary to its own disclosure rules, Facebook was not labelling all political ads to show who had paid for them. Around the same time, Facebook sent them a cease-and-desist letter, claiming that they were violating user-privacy requirements, imposed by the F.T.C. in 2019, which Facebook had agreed to create after the company was found to be flouting an earlier F.T.C. order. In a pointed letter to Zuckerberg about Facebook’s decision to oust Edelson and McCoy, Samuel Levine, F.T.C.’s acting director of consumer protection, wrote, “Had you honored your commitment to contact us in advance, we would have pointed out that the consent decree does not bar Facebook from creating exceptions for good-faith research in the public interest.” He added, “We hope that the company is not invoking privacy . . . as a pretext to advance other aims.” It was an encouraging indication that Khan’s F.T.C. will not spend the next four years in thrall to Big Tech.

It is easy to forget, scrolling through photographs of puppies and babies, that everything that happens on Facebook and Instagram is used to sell stuff. As the amended complaint points out, “Facebook monetizes its personal social networking monopoly principally by selling surveillance-based advertising.” Some of the stuff being sold on these platforms are consumer goods, and some are ideas. The right-wing commentator Ben Shapiro, who has more followers on Facebook than the Washington Post does, and whose Web site, the Daily Wire, gets more likes and follows than any other publisher’s, has mastered the art of using Facebook’s microtargeting tools to amass an audience. According to a study by the digital investigative newsroom the Markup, Shapiro is using Facebook’s “look-alike audiences” feature to find people who are susceptible to conservative outrage—the way that a craft beer company, for example, might hunt for new customers among people who like artisanal ice cream and small-batch whiskey. The difference is that, by drawing his audience into his sphere of influence, Shapiro is capturing minds, rather than taste buds. As Francesca Tripodi, a professor at the University of North Carolina, told the Markup, the practice “creates this bifurcated or dual internet, and that allows for information to circulate unchecked.” To be clear, there is nothing illegal about this. Indeed, Shapiro and the Daily Wire could be a business-school case study on how to use Facebook to successfully promote one’s brand.

Meanwhile, the Washington Post has reported that Republican candidates and elected officials have been raising money with Facebook advertisements that blame rising COVID-19 cases on undocumented immigrants, a claim that has no basis in truth. According to the Post, these ads “illustrate the platform’s inconsistent approach to defining coronavirus misinformation, especially when elected officials are involved.” (Facebook does not remove political ads that contain misinformation.)

Edelson and McCoy’s findings were likely to provide more evidence that Facebook looked the other way as its platform was being used to plan and incite violence, and that it continues to enable bad actors to use its advertising products to circulate information that compromises public health. But it would be a misreading of the F.T.C.’s current authority to assume that it can sufficiently regulate information and advertising on Facebook. One of its strategic goals is to “protect consumers from unfair and deceptive practices in the marketplace,” but social media presents an unprecedented problem of scale. Whereas the F.T.C. may hold advertising agencies and Web designers liable for individual ads that contain false or deceptive claims, pursuing every deceptive ad would be like playing a game of whack-a-mole.

Congress could change this. It could pass the Social Media DATA Act, which gives researchers like Edelson and McCoy, and also the F.T.C., greater insight into the impact of ad targeting. It could follow the lead of the European Union, which is considering banning targeted political ads altogether; a similar legislation seems highly unlikely here, given that politicians themselves benefit from those ads. Congress could also give the F.T.C., a twentieth-century creation, more money and authority to address the twenty-first-century trade practices that have so far eluded its governance.

But the F.T.C., which was founded as a trust-busting agency, is mandated to address anticompetitive practices as well as to protect consumers. So far, it has taken a hands-off approach to regulating the technology sector, buying into the belief—promoted by those companies—that regulation stymies innovation. Khan’s F.T.C. is poised to use the powers it has to reverse this trend, though the first obstacle is navigating laws that are more applicable to oil, tobacco, and other kinds of companies that spurred the agency’s creation than to companies like Facebook, the products of which are more ephemeral, even if their impact is not. If Boasberg remains unconvinced that Facebook is a monopoly and needs to be broken up, it will be one more indication that, against Big Tech, the law is a weak instrument that may itself need a do-over.