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Antitrust

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

Jericho Casper

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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.”

Antitrust

Former and Current FTC Commissioners Laud Efforts At Greater Resources For Antitrust Cases

Samuel Triginelli

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Screenshot of FTC Commissioner Noah Philips on C-SPAN in November 2018

March 17, 2021 – A new antitrust bill by Sen. Amy Klobuchar, D-Minn, is receiving high praise from current and former commissioners of the Federal Trade Commission for its focus on enhancing resources required to tackle competition issues.

“I think we could use more money still,” Noah Phillips, commissioner on the FTC, said at the Information Technology and Innovation Foundation conference on Tuesday. “The agencies could do more with more resources, and that goes without saying. There are hard decisions that we have to make with the limited resources that we have.”

William Kovacic, former FTC chairman, reacted to the bill by noting that the debate has effectively shifted from what agency should do the work to how they do it.

“The neglected questions of implementation are starting to receive the attention they deserve, and one of them is resources,” Kovacic said. “When I look at competition authorities around the world, there is an epidemic failure to match commitments with the means necessary to carry out the task in question.”

The FTC in the last year has brought more cases than it ever has since 2001, Phillips said.

“This is a bit of delusion that all of our countries engage in,” Kovacic said. “We have the highest aspirations, the boldest goals, but when it comes to paying for it, we don’t want to do that; we want to drive and take off the lot.”

He related antitrust enforcement’s strength to the net amount of resources that have to be increased to perform existing functions capably. “It is not simply competition,” Kovacic added. “If you benchmark the FTC resources devoted to data protection privacy, we have a decidedly inadequate allocation,” and that is not the FTC’s doing but those are legislative choices, he said.

Screenshot from ITIF event on Tuesday

For the FTC to be a genuinely full-fledged national data protection regulator for privacy, it would have to be double-to-three times the agency’s resources right now, he said.

More resources will enable the agency to carry out its mandate in a more capable way, he said. The essence of success in so many matters is maintaining continuity of staff at a high-level with high-quality.

Phillips, for his part, said part of the funding will go to hiring economists, experts and increasing salaries.

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Antitrust

House Committee Hears of Big Tech’s Alleged Anticompetitive Behavior in New Hearing

Samuel Triginelli

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Photo of House Antitrust Subcommittee Chairman David Cicilline at the Thursday hearing

WASHINGTON, March 2, 2021 – A House committee on Thursday heard of the need for strengthened antitrust measures to stem the influence of big technology companies, which are alleged to have increased its stranglehold on data on the internet.

The committee heard of Google’s and Facebook’s overwhelming control of the digital ad market; Amazon’s alleged anticompetitive practice of demanding small businesses that sell on its platform provide its proprietary information so it can make its own products; and Apple using its position as one of two app store platforms to extract taxes from competitors like Spotify and other news apps.

This is the first in a series of hearings held by the House Judiciary Antitrust Subcommittee to consider legislative proposals to address the rise and abuse of market power online and to modernize the antitrust laws.

On Thursday, the committee played host to antitrust experts and affected businesses for the hearing titled “Reviving Competition,” which was intended to address market power and big tech’s role as gatekeeper online.

The committee also heard about recent actions by the tech giants to silence speech online. Since early October 2020, according to the testimony, Google’s YouTube platform has been deleting numerous conservative channels; Facebook and Twitter have been shutting down pages, including former President Donald Trump’s; and Amazon kicked the controversial social media app Parler off its web hosting service.

Google and Apple blocked the app from their app stores.

Witnesses recommended the government strengthen enforcement agencies so they have more teeth and reform how merger cases are viewed.

Antitrust gatekeepers work to promote competition between powerful and smaller digital companies, and innovative connectivity competitors should be able to compete at the same level with big tech, said Charlotte Slaiman, competition policy director at Public Knowledge.

That would involve creating a level playing field where larger players cannot leverage their own platform to one-up competitors, said Hal Singer, managing director of Econ One.

Sharing those concerns, Eric Gunderson, chief executive officer of Mapbox, said that American competitiveness and innovation are at risk with these giants controlling the sector. Antitrust reform needs to be focused on allowing other companies to be able to compete in a level playing field.

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Media Ownership

Pandemic Isn’t Death Knell Of Theaters, Says Lionsgate Vice Chairman

Derek Shumway

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Screenshot from the webinar

February 24, 2021 – Lionsgate Vice Chairman Michael Burns said Tuesday he thinks theaters will be packed again once the pandemic ends, speaking at a New America event on the future of entertainment.

Suggesting the pandemic will not impair traditional theaters amid the rise in streaming adoption at home, Burns said the growing portfolio of films to feature in theaters under his studio will ensure traditional movie viewing doesn’t go away.

He noted that Lionsgate is associated with about 20 Tyler Perry movies, which will attract people to theaters. He also said a new program based on the The New York Times’ telling of America’s history with slavery, called 1619, will also draw viewers back.

Burns expressed optimism in a returning moviegoing population and cited that in the past, African Americans made up 5 percent of the movie going population. African Americans also make up 13 percent of the U.S. population. But over the last few years and before the pandemic began, they have made up about 20 percent of the movie going population, he said. This trend is in line with Hispanics, he said, and it gives hope to the entire industry that not even the pandemic can unseat the traditional movie theater.

He said he also hopes the older generation is ready to head back to the theaters, especially as people, young and old, develop pandemic fatigue and especially as vaccines continue rolling out.

Burns turned away doubt about his prediction by pointing to China’s recent New Year’s holiday box office performance the previous weekend, which enjoyed record-breaking box office revenues of $1.206 billion, demonstrating that the country’s film market has recovered from the COVID-19 pandemic.

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