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Antitrust

FTC and Almost All States Launch Antitrust Suit Against Facebook, Seek Divestment of Instagram and WhatsApp

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Screenshot of New York Attorney General Letitia James on Wednesday

December 9, 2020 — Facebook has used illegal monopoly power and an “unlawful scheme” to stifle competition, degrade personal privacy, and crush rivals, according to two separate antitrust lawsuits filed Wednesday by 46 state attorneys general and the Federal Trade Commission.

In particular, the FTC is seeking a permanent injunction in federal court that could, among other things, require the company to divest assets, including Instagram and WhatsApp, effectively breaking up Facebook as we know it.

It is “critically important that we have the power and jurisdiction including and not limited to divestiture,” said New York Attorney General Letitia James at a press conference announcing the action on Wednesday.

“The two most glaring examples of Facebook’s unlawful scheme are Instagram and WhatsApp,” said James. “For nearly a decade, Facebook has used its dominance and monopoly power to crush smaller rivals and snuff out competition, all at the expense of everyday users.”

The states’ lawsuit against Facebook involves the District of Columbia and every U.S. state except Alabama, Georgia, South Carolina and South Dakota. Alabama has not supported the multistate coalitions focused on antitrust concerns against other tech giants, including search engine company Google. Both Georgia and South Carolina signed on the Justice Department’s separate lawsuit against Google.

Almost every state in this nation has joined this bipartisan lawsuit because Facebook’s efforts to dominate the market were as illegal as they were harmful, James said: “Today’s suit should send a clear message to Facebook and every other company that any efforts to stifle competition, reduce innovation, or cut privacy protections will be met with the full force of our offices.”

Although it is quite rare for a court to actually unwind an acquisition, particularly one that occurred this long ago, James said she is confident she will succeed.  “Look at previous actions that have been taken by the Department of Justice, and our office as well, with respect to Microsoft and AT&T,” said James.

Alleging a systematic strategy to eliminate competition

The FTC said Facebook engaged in a systematic strategy to eliminate its competition, by purchasing smaller up-and-coming rivals, Instagram in 2012 and WhatsApp in 2014. In an effort to maintain its market dominance in social networking, Facebook employs a variety of methods to impede competing services.

“Facebook has employed a buy or bury strategy to impede competing services,” said James. The two most utilized strategies have been to acquire smaller, potential rivals before they could threaten Facebook’s dominance and to suffocate third-party developers that Facebook invited to utilize its platform.

James said these strategies allow Facebook to maintain its monopoly over the social networking market and make billions from advertising.

Since 2004, Facebook has operated as a personal social networking service that facilitates sharing content online without charging users a monetary fee, instead, providing these services in exchange for a user’s time, attention, and personal data.

Facebook then monetizes its business by selling advertising to firms that attach immense value to the user engagement and highly targeted advertising that Facebook can deliver due to the vast trove of data it collects on users, their friends, and their interests.

Some pro-technology groups and organizations were critical of the lawsuit.

“The FTC’s lawsuit reads like a work of creative alternative history. The FTC assumes that these companies would have grown into giants if left alone, but in reality, it has no idea what would have happened,” said Asheesh Agarwal, Deputy General Counsel of TechFreedom.

“By filing this lawsuit, the FTC will discourage companies from investing in start-ups and thereby hinder innovation. Rather than punishing companies for their size and success, antitrust law should focus on actual harm to consumers.”

“CCIA strongly supports antitrust enforcement when consumers are harmed. However, the remedy needs to be tailored to the evidence, and not based on an artificially narrow definition of the market,” said Computer and Communications Industry Association President Matt Schruers. “Unwinding Facebook’s acquisitions of Instagram in 2012 and WhatsApp in 2014 is a drastic remedy that would not only harm consumers but also will have a chilling effect on innovation and the U.S. innovation ecosystem. We look forward to learning more about the facts and regulators’ evidence.”

But others were supportive of the lawsuits.

“These lawsuits mark a huge step towards reining in the power of dominant digital platforms,” said Charlotte Slaiman, director of competition policy at Public Knowledge. “For too long, our country and our world have been unwilling participants in Facebook’s ‘move fast and break things’ experiment. Without competition, users, news organizations, rival apps, and others have been locked into the Facebook network.”

Former Assistant Editor Jericho Casper graduated from the University of Virginia studying media policy. She grew up in Newport News in an area heavily impacted by the digital divide. She has a passion for universal access and a vendetta against anyone who stands in the way of her getting better broadband. She is now Associate Broadband Researcher at the Institute for Local Self Reliance's Community Broadband Network Initiative.

Antitrust

Federal Trade Commission Will Likely Not Be Able to Implement Competition Rules, Panelists Say

Panelists at TechFreedom event said judiciary will prevent the FTC from developing proposed antitrust policies.

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Photo of Peter Wallison from C-SPAN

WASHINGTON, October 22, 2021 –The Federal Trade Commission’s attempts to use rulemaking authority to issue antitrust policy governing technology companies will be struck down in federal courts, said panelists participating in a TechFreedom event on Thursday.

Recently formed conservative majorities on the Supreme Court and other panels have expressed opposition to the idea that the FTC possesses such rulemaking authority, these panelists said.

Hence, unlike past supreme courts, they current bench is likely to strike down FTC-issued binding rules.

Panelists highlighted former President Donald Trump appointees Brett Kavanaugh and Neil Gorsuch as justices who have opposed legal reasoning often used to permit FTC rulemaking.

Indeed, some panelists said early 20th Century legislation governing the FTC makes the case that the agency was created as an investigative body rather than a regulatory one.

Peter Wallison, senior fellow emeritus at the American Enterprise Institute, said that between five and six Supreme Court justices would ultimately vote to weaken precedents that allow for FTC rulemaking.

The Judiciary Committee of the House of Representatives recently advanced six antitrust bills that attempt to regulate the tech industry and foster greater competition, including the Ending Platform Monopolies Act and the Platform Competition and Opportunity Act.

FTC rules have taken on increased importance in terms of economic regulation due to the frequent inability of Congress to pass major legislation due to partisan gridlock. The FTC has proposed new procedures to ensure competition since Lina Khan was appointed as chair.

However, NERA Economic Consulting on Wednesday concluded that legislative proposals to regulate competition would impose costs of around $300 billion while impacting 13 additional American companies in the near term and more than 100 companies in the next decade.

Study author Christian Dippon contends that the legislation would limit American startup growth and international competitiveness while at the same time increasing costs for Americans.

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Antitrust

Public Interest Groups Urge Passage of Six Antitrust Bills Targeting Big Tech

Nearly 60 public interest groups signed a letter to House leaders to call a vote on six antitrust bills.

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WASHINGTON, September 2, 2021 – Nearly 60 public interest groups signed a letter Thursday urging the House party leaders to push for a vote on six antirust bills that cleared the House judiciary committee in June.

The goal of the six bills is to rein in the power of Big Tech through new antirust liability provisions, including new merger and acquisition review, measures to prevent anticompetitive activity, and providing government enforcers more power to break-up or separate big businesses. They include American Choice and Innovation Online Act, H.R. 3816, Platform Competition and Opportunity Act, H.R. 3826, Ending Platform Monopolies Act, H.R. 3825, Augmenting Compatibility and Competition by Enabling Service Switching (ACCESS) Act, H.R. 3849, Merger Filing Fee Modernization Act, H.R. 3843, and State Antitrust Enforcement Venue Act, H.R. 3460.

The letter, which was directed at House Speaker Nancy Pelosi, D-California, and House Minority Leader Kevin McCarthy, R-California, were promoting a package of six bills that were the result of a two-year bipartisan investigation that included 10 hearings, featuring the testimony of the CEOs of the major tech companies, 240 interviews, 1.3 million documents and a 450-page report, the letter notes.

“We believe that these bills will bring urgently needed change and accountability to these companies and an industry that most Americans agree is already doing great harm to our democracy,” the letter said. Public Citizen was the first of the 58 groups on the letter.

America has a monopoly problem. Monopoly power lowers wages, reduces innovation and entrepreneurship, exacerbates income and regional inequality, undermines the free press and access to information, and perpetuates toxic systems of racial, gender, and class dominance,” the letter alleged.

“Big Tech monopolies are at the center of many of these problems,” it continued. “Reining in these companies is an essential first step to reverse the damage of concentrated corporate power throughout our economy. The bills that passed out of the House Judiciary Committee, with bipartisan support, do just that and it is imperative that they move forward in the House.”

List of signatories:

  • Public Citizen
  • Accountable Tech
  • Action Center on Race & the Economy
  • ALIGN: The Alliance for a Greater New York
  • Alliance for Pharmacy Compounding
  • American Booksellers Association
  • American Family Voices
  • American Independent Business Alliance
  • American Specialty Toy Retailing Association
  • Artist Rights Alliance
  • Athena
  • Cambridge Local First
  • Center for American Progress
  • Center for Digital Democracy
  • Center for Popular Democracy
  • Committee to Support the Antitrust Laws
  • Decode Democracy
  • Demos
  • Electronic Frontier Foundation
  • Friends of the Earth
  • Future of Music Coalition
  • Gig Workers Rising
  • Global Exchange
  • Indivisible Georgia Coalition
  • Indivisible Hawaii
  • Indivisible Ulster/NY19
  • Institute for Local Self-Reliance
  • International Brotherhood of Teamsters
  • Jobs With Justice
  • Kairos Action
  • Local First Arizona
  • Louisville Independent Business Alliance
  • Main Street Alliance
  • Mainers for Accountable Leadership
  • Media Alliance
  • Metropolitan Washington Council, AFL-CIO
  • National Employment Law Project
  • New York Communities For Change
  • New York Communities for Change
  • North American Hardware and Paint Association
  • Open Markets Institute
  • Our Revolution
  • PowerSwitch Action
  • Public Knowledge
  • Running Industry Association
  • Secure Elections Network
  • Service Employees International Union
  • Shop Local Raleigh/Greater Raleigh Merchants Association
  • SIMBA (Spokane Independent Metro Business Alliance)
  • Small Business Rising
  • Stand Up Nashville
  • StayLocal, an initiative of Urban Conservancy
  • Strategic Organizing Center
  • SumOfUs
  • The Democratic Coalition
  • UltraViolet
  • Venice Resistance
  • Warehouse workers for justice

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Antitrust

FTC Commissioner Phillips Warns About Shifting Direction of Agency

Noah Phillips voiced concern about the scope and practices of the Biden administration’s FTC.

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FTC Commissioner Noah Phillips

WASHINGTON, September 2, 2021 — Federal Trade Commissioner Noah Phillips said at a Hudson Institute webinar on Monday that he’s concerned about the direction the competition watchdog is moving toward considering recent events.

Phillips said the left-leaning voices in Washington and the appointment of Lina Khan to chair the agency has left him wondering about the legacy of the last 40 years of competition regulation in America – which have been hallmarked by the Hart-Scott-Rodino Antitrust Improvements Act of 1976. That legislation effectively gave the FTC the ability to review mergers and acquisitions before they were finalized, rather than afterward, which governed pre-legislation.

Under Biden-appointee Lina Khan, Phillips described how the FTC has done away with the process of early termination. In the past, this process made it unnecessary for every single company to provide advanced notice and advanced approval for mergers. “Historically, parties have been able to come to the agencies and say, ‘You’re not interested in this, can we just go ahead and finish our deal,’ and the agencies have said ‘yes.’”

He said this is no longer the case, and that every single merger must provide advanced notice and approval. “What we’re introducing is an inefficiency in the market for transactions that we have no interest in pursuing, just for the sake of it. I think that’s a problem,” he continued. “My concern is that it is making merger enforcement less effective, less efficient, and less fair.”

Phillips pointed to left-of-center and leftist voices in Congress, such as Rep. David Cicilline, D-New York, Sen. Elizabeth Warren, D-Massachusetts, and Rep. Alexandria Ocasio-Cortez, D-New York, who, at the outset of the pandemic, wanted to ban all acquisitions and mergers—regardless of their merit. He described this view as falling outside of mainstream perspectives, but noteworthy nonetheless.

“I don’t think that is what most people believe,” Phillips remarked. “I don’t think that is what Hart-Scott-Rodino envisions.”

This webinar took place only a couple of weeks after Phillips spoke at the Technology Policy Institute’s 2021 Aspen Forum, where he voiced similar concerns, stating that he feared that this new direction would make it more difficult for the FTC to hear cases that it should, and defended the commission’s record against critics who said it was lax under the Trump Administration.

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