Facebook’s court win could end up leading to trouble for tech giants

A court ruling in the US last week might appear to be a blow to anti-trust reformers’ desire to rein in and break up the power of Big Tech. Instead it might presage a far graver threat to the likes of Facebook, Google, Amazon and Apple.

While the federal court judgment dismissed the lawsuits brought against Facebook by the Federal Trade Commission and more than 40 states, in the process it provided ammunition to the Big Tech critics who argue that current anti-trust laws aren’t capable of containing a sector they never envisaged.

There is a global push to rein in the power of tech giants. Credit: Paul Rovere

The case against Facebook failed when US District Judge James Boasberg said the FTC had failed to show that Facebook was a monopoly; had failed to establish the market in which Facebook operates; had failed to provide a definition of “personal social networking services”; had failed to establish what Facebook’s actual market share of those services was and had therefore failed to establish that Facebook held market power.

Apart from shortcomings in the way the FTC presented its case (which it could remedy if it appeals) the judgement tends to highlight how laws framed to essentially protect consumers from the abuse of monopolies and which tend to measure harm through the lens of prices can’t readily be applied to the digital economy, where the medium of exchange isn’t dollars but personal data and where consumers might benefit but competitors and prospective competitors suffer detriment.

The court ruling was instantly seized on by those advocating new laws, including break-up powers, to deal with abuses of the dominant positions of the giant tech companies to argue the need for legislative reform.

Coincidentally, six new anti-trust bills narrowly emerged from the House Judiciary Committee last week.

While some of those bills could be regarded as simple housekeeping (like an increase in the fees charged to file notices with the FTC and other regulatory agencies) others are far more threatening.

The “Platform Competition and Opportunity Act”, for instance, would prohibit any platform with more than 50,000 active monthly users in the US from holding more than 25 per cent of a competitor’s shares or profits.

The “Ending Platform Monopolies Act” would make it illegal for a dominant platform (Amazon or Apple are the most obvious) from creating their own products or services to compete with competitors using their platforms. Amazon, for instance, has private-label products that compete with third parties within Amazon Marketplace.

Another proposed bill would give consumers more control over the use and transportability of their data.

The fate of the bills is uncertain. While both Democrats and Republicans are committed to crackdowns on Big Tech, it’s for very different reasons.

China’s crackdown on its large tech companies appears partly driven by a desire to heading off the threat of their rapidly increasing power and influence to the Communist Party stranglehold on everything of significance that happens within China but also by concerns about their impact on financial stability and data privacy. Credit: AP

The Democrats see Big Tech’s dominance in conventional competition policy terms – the companies are too big and use their market power to engage in anti-competitive conduct – while the Republicans want to punish the big social media companies for their alleged censorship of conservative speech.

Nevertheless, while the eventual action might fall short of the Democrats’ ambitions, there is a bipartisan will in the US to do something about the dominance of the platform businesses despite the tech companies, and Californian lawmakers, arguing that breaking them up would harm consumers and small businesses by driving up prices and reducing access to the platforms’ scale and reach.

There’s equally a similar, indeed more aggressive, push in Europe and even China to hobble the tech companies and respond to the potential for harm to local competitors.

Last month Google paid about $US270 million ($360 million) in fines and agreed to change some business practices after French competition regulators charged that it had abused its market dominance to damage news publishers and other sellers of advertisements online.

The actions of lawmakers around the world suggest that they believe Big Tech companies, if left unchecked, will produce net harm to consumers and economies

That settlement highlighted one of the central issues raised by the coexistence on platforms like Google and Amazon of their proprietary services with those of competitors.

Amazon has been accused of using the data it gains from its marketplace to launch competing products that undercut successful merchants and either drive them out of business or enable Amazon to buy them cheaply. Google has been accused of using its data, algorithms and platform to give its own services preferential treatment.

Germany last month started investigating Apple for anti-competitive practices after earlier opening similar investigations into Amazon, Facebook and Google. The Apple probe centres on whether the Apple ecosystem – its “walled garden” – adversely impacts third parties.

Similar investigations into all the Big Techs have been launched by the European Union and Britain, with the EU particularly aggressive in proposing tougher and more intrusive rules to discipline the behaviours of the companies.

China’s crackdown on its large tech companies appears partly driven by a desire to head off the threat of their rapidly increasing power and influence to the Communist Party’s stranglehold on everything of significance that happens within China but also by concerns about their impact on financial stability and data privacy.

Its latest intervention, for instance – a cybersecurity review of domestic rideshare giant Didi Global – was, according to the Cyberspace Administration of China, to prevent data security risks, safeguard national security and protect the public interest.

Whether it is the US, Europe or China, however, the common concern is the sheer power of the big tech companies, their relationship with consumers and treatment of consumers’ data, their impacts on competitors and business models that elevate growth over profits and therefore confer major competitive advantages over traditional competitors.

Facebook’s court win could actually lead to trouble for tech giants.Credit: AP

Those models, the ostensibly free ride for consumers, the network effects that dominance confers and their purchases of emerging threats to their dominance before those prospective competitors are large enough to result in a “substantial lessening of competition” and trigger anti-trust law breaches (Google’s acquisition of YouTube and Facebook’s of Instagram and WhatsApp are good examples) represent a difficult and highly complex set of challenges for lawmakers without the unconstrained ability to act that the Chinese authorities have.

Beyond limitations on their ability to act, however, are the larger questions about whether they should intervene.

Does the consumer benefit outweigh the harm to competitors and potential competitors?

Does Big Tech dominance increase or thwart innovation?

Would regulating Big Tech, breaking the companies up and preventing them from making acquisitions, lead to higher prices for consumers and reduced access to consumers for competitors, particularly small businesses?

Would it slow the pace of the positive, if disruptive, change needed to maximise the potential of 21st-century technologies and economies?

None of the questions are straightforward or have easy answers but the actions of lawmakers around the world suggest that they, at least, believe that the big tech companies, if left unchecked, will produce net harm to consumers and economies and are therefore moving inexorably towards imposing some restrictions and some new rules on them.

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