FTC’s new attempt to define Facebook’s market of “personal social networking services”
Personal social networking services are a unique and distinct type of online service.
Three key elements distinguish personal social networking services from other forms of online services provided to users.
built on a social graph
include features that many users regularly employ to interact with personal connections and share their personal experiences in a shared social space
include features that allow users to find and connect with other users, to make it easier for each user to build and expand their set of personal connections
There are two major problems with this argument:
the FTC’s own definitions, reasonably understood, don’t reflect reality,
the definitions themselves have no relation to the actual market for online services.
WhatsApp is a mobile messaging service. So how is Facebook acquiring it illegal?
completely ignores what the product actually does.
any definition that says that Instagram is like Facebook but is not like TikTok is ridiculous.
Both let you connect with people you know,
but both are primarily focused on broadcast-follow dynamics, not interpersonal communication
everything listed above is a non-rivalrous digital service with zero marginal costs and zero transactional costs;
users can and do use all of them at the same time.
Indeed, the fact that all of these services can and do exist for the same users at the same time
makes the case that Facebook’s market is in fact phenomenally competitive.
the only rivalrous good in digital services is consumer time and attention
It is almost as if the agency expects the Court to simply nod to the conventional wisdom that Facebook is a monopolist.
whatever it may mean to the public, “monopoly power” is a term of art under federal law with a precise economic meaning:
the power to profitably raise prices or exclude competition in a properly defined market.
Digital advertising inventory on large platforms like Facebook is sold through an auction:
advertisers bid for impressions, the highest bidder wins, and,
depending on the auction design used, either the second-highest (in some flavor of a second-price auction, such as the Vickrey-Clarke-Groves auction design that Facebook employs) or the highest (in a first-price auction) bid sets the price for the placement.
Most modern, sophisticated ad platforms allow advertisers to bid against conversions — purchases, registrations, etc. —
versus simply bidding for an impression, and
the ad platforms use campaign performance
to throttle delivery based on calculated click and conversion probabilities for any given user
the last two years have been an eye-opening experience about capacity and capability.
If the powers that be decide that the company needs new kinds of regulation,
the answer should be new laws,
not redefining antitrust to be about the specific implementation of a non-rivalrous digital service
The appropriate response to this challenge is to reject a top-down approach conducted via regulators
with less capacity and greater encumbrances
you can no longer plausibly argue that Facebook has any sort of monopoly power;
look no further than recent tech earnings,
where the prevailing story was how company after advertising-supported company was absolutely crushing it,
in stark contrast to six years ago when Facebook really did look unstoppable.
The market worked.