It's hard to get anyone in Washington to agree on anything, but one thing they all seem to accept and condemn is the monopoly power of Facebook (FB) . Yesterday the Federal Trade Commission filed suit against Facebook to break up the company, a suit that's similar to 46 state attacks against the social media giant.
They both have a common theme: suppressing competition through its monopolistic power. The FTC excoriates Mark Zuckerberg for buying up companies that present competitive threats, focusing on Instagram and WhatsApp. Both, the FTC alleges, amount to playing defense through competitive means. They claim they have the smoking gun, a 2008 email from Zuckerberg saying "it is better to buy than compete."
Instagram's been a huge success for Facebook and the commission again plays gotcha with a quote, again from Zuckerberg: "In the time it has taken for us to get our act together, Instagram has become a large and viable competitor to us on mobile photos, which will increasingly be the future of photos." So, the commission alleges it fell back on its nefarious "it is better to buy than compete"
Same deal with WhatsApp, which the FTC says "presented a powerful threat to Facebook's personal social networking monopoly which Facebook targeted for acquisition rather than competition."
The crime here? The FTC says it "suppresses, deters, hinders and eliminates personal social networking competition" and deprives advertisers "of the benefits of competition such as lower advertising prices and increased choice, quality and innovation related to advertising." These practices and acquisitions have put a protective moat around the personal networking site, the agency says, which is unacceptable.
The FTC wants these kinds of practices to stop and is willing to force the break-up of the company to get the job done.
Put aside the fact about what a disgrace it is that this measure seems to be the only thing that causes the two parties to get together, especially when 3000 people in this country are dying from Covid every day and millions are out of work because of the disease, this one really has me steamed.
First, the FTC blessed these two acquisitions when they occurred. When I read through the suit I didn't see anything that warrants a do-over. Facebook bought these two fair and made them into what they became. Maybe no one else had that same vision. But anyone else could have bought them.
Two, the concept that Facebook has some how created an insidious protective moat is bordering on the hysterical. Warren Buffett, the oracle of Omaha, has always contended that he wants to buy companies with protective moats, should we break up all of his companies?
Third, there is no sign whatsoever that advertisers are being screwed by Facebook. In fact it's the opposite. Gary Vaynerchuk, the acknowledged guru on all advertising, especially social, has said that Facebook and Instagram represent the biggest advertising bargains in the entire firmament, including, television, radio and print. He's done extensive work on pricing for clients and marvels about how cheap Facebook is especially given its reach.
Fourth, you don't have to go to Facebook for social. Snap (SNAP) , Twitter (TWTR) , TikTok, they are all valued competitors as you can tell from their valuations and prospects. Facebook hasn't hurt them that I can tell when I analyze the companies.
Finally, what's the deal here? Facebook has always been open about what it's good at and what it isn't. If you simply listen to their conference calls you could tell what they needed to do to become better. They pretty much played with an open hand. Any competitor, including some deep-pocketed FAANG companies could have read the tea leaves and front run these guys.
Put it altogether and I can't see who they hurt, what harm they have done and why the original decisions by the FTC should be overturned. If the FTC wins this case I can't think of any potential acquirer who would be safe buying anything and there are hundreds of companies that have made buys that should be re-examined. The chaos would be catastrophic for dozens of industries and sectors.
So, memo to the FTC and the attorneys general who want to break up Facebook, give me a break, don't you have anything else to do? Go after those who want to monopolize something that could hurt people instead of creating something and then buying something that makes it more competitive and offer more to its users. I am embarrassed for these regulators. It is they, not Facebook, that deserves our opprobrium.
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