FTC Re-Files Facebook Antitrust Complaint

See also a CEI news release with statements from Jessica Melugin and me.

The Federal Trade Commission (FTC) submitted a revised antitrust complaint against Facebook today. In June, a judge threw out the initial complaint for not providing evidence that Facebook had a monopoly in anything. The FTC had until today to give it another try. The text of the amended complaint is here.

The new complaint has the same problem, and relies heavily on wordplay. The FTC argues that Facebook dominates the market for “personal social networking services,” which it defines in a way that excludes TikTok, Twitter, Clubhouse, Discord, YouTube, and others. By the FTC’s boutique market definition, Facebook’s biggest competitor is Snapchat.

Any market is a monopoly if you define it narrowly enough, and that is the only thing the FTC’s complaint successfully proves.

Real-world monopolies, as opposed to semantic monopolies, are characterized by rising prices, restricted supply, and slowed innovation. Facebook and its competitors show none of these characteristics. They are largely free to consumers. Advertisers pay to show their ads on Facebook and competing networks, but the prices they pay have fallen by half over the last decade—akin to a permanent 50 percent off sale compared to before Facebook got big.

Facebook is not able to restrict the supply of social networking services. New social networks are constantly rising, falling, and evolving, and Facebook cannot stop people from using them. Signing up for a competing service takes a minute or two and maybe a few dozen keystrokes. Many people also have multiple accounts on multiple social networks—how many people do you know who use both Facebook and Twitter, for example?

As for innovation, Facebook spent $21 billion on research and development over the past year. It is constantly experimenting with new features on its site in an ongoing trial-and-error process—because its competitors are, too. This is not monopoly behavior.

Nobody but lawyers are benefiting from the FTC’s ideologically charged word games. For example, a 2019 Inspector General report found that the FTC routinely pays outside experts as much as $750 per hour. In years-long antitrust cases, that can add up to millions of dollars, without creating any consumer value.

Another concern is regulatory capture. An antitrust settlement against Facebook would likely include expensive new policies involving privacy, content moderation, and more. Facebook can absorb these compliance costs; smaller startups cannot.

Facebook, with its aging user base, and seeing people under 25 moving to TikTok and other competitors, would likely be happy to negotiate such a settlement down the road. In the world of regulation, intentions and results are often very different things. Antitrust policy is no exception. The FTC’s ideological campaign is harming both consumers and the competitive process. At the very least, it should drop the Facebook case, if a judge doesn’t drop it first again.

Longer term, it is time to reconsider antitrust regulation altogether.

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