Antitrust: US pulls out the big gun in the fight against Facebook and Google
Facebook chairman Mark Zuckerberg testifies before Congress on online platforms and market power in July. Picture: Getty Images
Opinion piece for The Canberra Times by Dr Belinda Barnet, Senior Lecturer, Media and Communications, Swinburne University of Technology
The US government wants to break Facebook up and haul Google over the coals for its global monopoly on search. Along with 40 state attorneys-general, the Federal Trade Council (FTC) filed an antitrust case against Facebook on Wednesday, shortly after the Department of Justice filed another one against Google in October. Where has this come from - and what is US antitrust law anyway? Has it ever managed to change things?
Two decades ago, Facebook didn't exist yet and nobody cared who Mark Zuckerberg was. Google was a dinky little student project run out of Stanford University called BackRub. Nobody imagined these two would one day become global giants, let alone the targets of landmark antitrust suits.
Back then Microsoft was the behemoth that controlled our digital lives. No other company could touch it. Unfortunately, it started behaving exactly as you'd expect a global monopoly to behave: it made business decisions to hinder real or potential rivals, and it ate up smaller competitors like plates full of whitebait. Sounds familiar, doesn't it?
The US government had to pull out the biggest gun it has for controlling monopolistic companies: antitrust. Antitrust laws are designed from the ground up to limit the market power of aggressive corporations - often by forcing them to break apart or relinquish acquisitions. The pointy end of this law is used sparingly. Data privacy, licensing or copyright issues are much easier guns to draw, but these actions can only go so far; ultimately companies receive a slap on the wrist and a fine by regulators like the ACCC or FTC.
In our era we've seen an endless conga line of lawsuits and legislation by government regulators aimed at Facebook and Google. Our own ACCC has just successfully argued that Facebook and Google must negotiate payment for news content with media outlets here; the legislation was passed last week. Both platforms resisted this code but ultimately it won't dent their duco, despite their very public threats and tantrums. Facebook and Google are often fined or made to pay a price for smaller issues - but they change their global behaviour exactly zero per cent. Only US antitrust law can literally cleave an American company in two.
In 1998 the attorneys-general of 20 different states, along with the Department of Justice, filed charges against Microsoft alleging anti-competitive behaviour, and Microsoft was ordered to break its company up. The case eventually settled, and Microsoft arguably got off lightly, but it was deeply scarred. By the time it all finished the company had spent half its lifetime fighting to survive - and barely managed to avoid annihilation. It was far more cautious afterwards, less aggressive, almost "afraid".
The suit cleared a space in the digital landscape that would allow upstart young internet companies like Google and Facebook to evolve; they were emboldened to challenge Microsoft's dominance. It changed the digital landscape forever.
Now, two decades down the track, Google and Facebook have grown up and started to exhibit monopolistic behaviour themselves. There's no doubt these global giants will understand antitrust actions to be the existential threat they are. This is not just another data privacy investigation. Everything is at stake.
In the FTC case filed against Facebook on Wednesday, the FTC said it would argue, among other things, for the "divestiture of assets, including Instagram and WhatsApp". Most of Facebook's revenue growth comes from Instagram, and WhatsApp is central to Facebook's plan to become the dominant force in both private messaging and group communication. If successful, it would cripple their future growth and open the space up to competitors who can't elbow in at the moment - which is precisely what antitrust law is designed to do.
In the Google case filed on October 20, the Department of Justice did not specify the remedy it would seek but did say that "Google is the monopoly gatekeeper to the internet for billions of users", which it absolutely is, and that it "illegally" holds a monopoly on search and search advertising. Google's search advertising division brought in $US37 billion in advertising last year - so we don't need to point out that advertising is central to the company's profitability.
Google will fight this tooth and nail, as will Facebook: but unlike Microsoft both companies have the power to deliver counter-information to billions of users around the world. Google did precisely that when the ACCC suggested they'd have to pay a small fee for news content: they launched a global misinformation campaign that involved alarming popups and baseless threats that free search was "at risk" for anyone who went to use Google search or YouTube.
Given that antitrust is far more of an existential threat than the ACCC's news media code could ever hope to be, I think they'll draw on all their resources. We'll see a campaign against the FTC and the Department of Justice that will make the one against the ACCC look like a kindergarten stoush.
In the short term, nothing else will change for you or me or any Australian. Your Instagram feed will still show you pictures of other people living impossibly beautiful lives, and your Google search results will still be astonishingly accurate. The battle over in the US won't even have a discernible impact on the ACCC's attempts to hold Facebook to account on issues arising from the digital platforms inquiry over here (like the news media bargaining code); we are not an existential threat, just a very annoying horsefly on their flank.
In the long term, no matter who wins or loses in these enormous antitrust cases, the landscape will change. They are both once in a generation cases, designed to strike at the heart of Google and Facebook and clear some breathing space for the next generation of startups. It's hard to predict a winner in either case - but there will be an extended fight.
So grab some popcorn and settle into a comfy chair; US antitrust cases are spectator sport for Australians.
This article is republished from The Canberra Times. Read the original article.
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