The Big Tech trinity of Google, Facebook, and Amazon are popular bipartisan punching bags, but it seems clear that Facebook is currently the most politically expedient one in the crosshairs. Its poor custodianship of user data seems to always be receiving some form of focus, but now its bold ambitions surrounding payments and impending antitrust day of reckoning are making headlines. Facebook’s numerous instances of dereliction of duty towards its users warrants the regulatory whip, but monopoly it is not.
Its newest endeavor, Libra, is pitched as a paradigm-changing financial product that will disproportionately help the unbanked and poor; however, all it has been thus far is a pious talking point for political theater. Allowing Facebook to be the guardian of people’s payments after being such a demonstrably terrible one for people’s data is of course, fair; which is precisely why Libra will be uniquely handled. Facebook insists they will not control the network, currency, or reserve backing it and will be only one of several hundred members of the Libra Association with no special privileges. The project will be headquartered in Geneva, and subject to Swiss government regulation and oversight.
If we’re being pragmatic about this and disentangle the actual merits of the product from our Facebook disdain, it seems Mark Zuckerberg and his colleagues have created this with acute self-awareness they haven’t earned the trust and right to manage it alone. I have far more confidence in Facebook’s network of partners and Swiss financial authorities to oversee this innovative product than the likes of a Maxine Waters-led circus of career politicians, possessing the same degree of financial engineering expertise as someone who thinks the “blockchain” is a tool used on a construction site.
Antitrust is a much bigger topic, and if we look at Facebook’s market share and ability to inflict consumer harm, I’m not seeing a monopoly. The Justice Department and a coalition of attorneys general are coming. We have no real precedent for antitrust litigation proving that consumer harm is occurring by way of companies that sell free products. This will test the ingenuity of regulators in the era of tech, and I think the argument is tenuous.
Facebook and its subsidiaries combined 59% share of the U.S. social media market doesn’t leap out as a particularly hegemonic sum that suggests outright domination like Microsoft’s in its late 1990s antitrust clash, especially in light of Facebook’s diminishing popularity among younger users.The U.S. digital advertising market is led by two companies: Facebook has the second-largest share at 19% to Google’s 36%, percentages for both that are on the decline thanks to Amazon’s continued growth in the space. However, this isn’t some domineering presence where pricing abuses are happening. Being big and appealing to advertisers isn’t exactly illegal.
Is Facebook using these market-leading positions to manipulate? Its anti-conservative bias is both well-documented and readily apparent to anyone who spends time on the site and doesn’t have their head in the sand. However, it is trying to atone. Zuckerberg’s recent dialogue with prominent conservatives, the decision to not be the arbiter on the content of political ads, and including the likes of Breitbart in its new News Tab show that it is at least nominally trying to act like a platform and not a publisher.
This is a critical development for Facebook. If it decides to censor content based on political agenda and affiliation it deserves to lose its designation as a platform and the legal protections that accompany it. It’s encouraging to see Zuckerberg taking this seriously and stand his ground against shrieking liberal pressure that can’t fathom the notion of a Trump ad on their platform.
The most legitimate monopolistic claim against Facebook is centered around its privacy abuses. Regulators will likely accuse it of a deceitful client-facing policy that allowed it to expand more than it otherwise would have had it behaved honestly. Facebook operated on user trust that it would protect their data and privacy, allowing the business to grow into the mammoth it is today. However, it has repeatedly violated this trust by selling access to third parties, like the infamous Cambridge Analytica scandal. By surveilling and monetizing the data of its users unbeknownst to them, it can be interpreted that this is equivalent to extracting monopoly rents, and could legally be argued to fall within the purview of anticompetitive behavior.
I hope regulators stretch before making this reach, otherwise, they may pull a muscle.
What this amounts to is abhorrent corporate governance that requires regulatory oversight vis a vis data storage, monitoring, and access. An anti-monopoly government intrusion and dismantlement is not needed to rein in Facebook. We don’t have a consumer harm issue via monopoly, we have it by way of lax oversight of the new commodity of the 21st century: data.
Jason Orestes is a former Wall Street analyst who focuses on contemporary political developments affecting economics, markets, and culture. His financial commentary can be found on Jim Cramer’s TheStreet, where he is a regular contributor, as well as Seeking Alpha.
