5 Nov 2019

The anti-trust case against Facebook

From Nine To Noon, 9:17 am on 5 November 2019

Facebook was once the social network of choice because it promised consumers privacy. After gaining a dominate market position, it changed tack. Now it could face a large anti-trust case.

Dina Srinivasan has been a leading light in building the anti-competition case against Facebook, with her research having been cited by Congress among others.

Earlier this year she published a journal article explaining the link between Facebook's tightened grip on the ad marketplace and surveillance capitalism.

The logo of Facebook is seen on a smartphone.

Photo: AFP / Alexander Pohl/NurPhoto

Late last month she attended a closed-door meeting between attorney generals from 47 states, and federal officials, to explore the possible legal avenues to build an anti-trust case against Facebook.

Dina was previously an executive with WPP, the world's largest advertising holding company, which acquired the advertising technology of a company she founded and ran.

The crucial question is if Facebook has endangered consumer data, reduced the quality of consumers’ choices, and increased the price of advertising. If it has, it falls short of legally accepted practices.

In its own backyard of Silicon Valley, many believe its aggressive competitive strategy is stifling innovation.

Srinivasan says that under US law, it’s not illegal to be a monopoly, it’s only illegal if a company has become a monopoly by engaging in bad conduct or maintained a monopoly by engaging in bad conduct.

“There’s a range of conduct regulators might look at. The first bucket of conduct is what I might call a pattern and practice of deceptive conduct. This is something that perhaps consumers are most familiar with when we think about Facebook - whether it’s the Cambridge Analytica story or whether it’s a long history of making representations about consumers’ privacy and then violating those representations.

The other bucket involves Facebook’s role as a communication network.

“Communications networks can become monopolies if they’re closed. And in this area, Facebook has had a history of interoperability.”

As an example, she says consumers used to be able to send messages from Facebook Messenger to AOL’s ICQ messaging app. Facebook revoked this functionality after it gained sufficient market power.

Another example is how people could compose messages on Twitter and then cross-post them Facebook.

“Facebook used to be interoperable and it revoked this interoperability along with statements that look like they were doing it to try keep competitors out. That’s another area of conduct that might be subject to any investigation.”

The third major element is Facebook’s mergers with other companies which could be challenged in retrospect, the biggest one’s being Instagram and WhatsApp.

“If we look at the world today, we see Facebook’s power, we see - in the US at least - 99 percent adults that use any form of social media use Facebook. The curious thing to me is that by using it, Facebook is recording and really creating a database profile on you, not only based on your interactions on Facebook, but across more than 8 million sites and mobile apps. If you read an article about XYZ on a news site, it’s basically cataloguing that fact about you.

“I thought, that’s really interesting. Sometimes we think these things reflect positive consumer welfare because they’re free, but would we be intrigued by our telephone network if it recorded our conversations – is that something consumers would be happy about?”

Srinivasan says she went all the way back in the market’s history to figure out how we reached this point.

“What you learn is that, in 2004, the market was very competitive. It was dominated by other social networks like MySpace – which was having all sorts of privacy problems – and Facebook entered the market and competed on privacy.”

Many consumers, she says, chose to use Facebook over other social networks because of its emphasis on privacy protection.

“This included the very specific promise that it would not use cookies to track consumers online off of Facebook. This was a positive, forward looking representation. In 2007, Facebook tried to change the value proposition with consumers in order to do just that, and consumers went crazy. They didn’t want anything to do with a social network that recorded their behaviour on other sites.

She says Facebook initially retreated and said it was a mistake with CEO Mark Zuckerberg making a public apology. The change of tack didn’t last long.

“In 2010, Facebook did something which seemed, at the time, unrelated. They started launching these ‘like’ buttons and Facebook ‘like’ buttons started appearing everywhere on the web, and consumers were concerned. There was a very visible, public conversation about these ‘like’ buttons where consumers asked, are you going to use these to track communications on the internet, and Facebook made continuous representations for a number of years saying they were not going to do so.

Facebook changed its mind when its only remaining large competitor, Google, pulled out of the social media market in 2014. Yet from 2010 to 2014, she says, Facebook made many statements that, in retrospect, look deceptive.

“They were stating on the one hand they were not going to use ‘like’ buttons to track consumer communications, yet simultaneously had filed a patent to do just that. Taking all of that together, it looks like you have a good enough picture where it does look like a pattern of false and misleading statements meant to get consumers to choose Facebook over other rivals, but once rivals exited the market, Facebook flipped the switch.”

The switch not only impacted consumers, it hit news organisations hard. Because it has the ability to track users’ data outside the website, Facebook can actually go to advertisers and undercut the news websites that the user reads.

Srinivasan says a properly functioning market would have more choices.

“I think you’d have more fluidity in consumers moving from one product to another. I myself wanted to get off Facebook after Cambridge Analytica and what I realised is that I can’t actually close my personal account on Facebook, because I need to have a personal account open to have a business account. These types of things make it very difficult to leave.

“Even if that wasn’t happening and I wanted to leave Facebook, what are the options? Where do you go? How hard is it to leave?”

She says, in an ideal market, people would be able to port their data from one network to another without being cut off from friends and family – in the same way we can now keep the same phone number when we change networks.

Srinivasan says that by breaking up Facebook and giving consumers the choice to opt out of digital tracking, news organisations might find a return in revenue.

“I think the entire digital advertising industry is operating on a false assumption that consumers are OK with being tracked persistently online across millions of sites. If you give consumers the right to opt out, I am sure that they will. And if you do, we swing the pendulum of power back to independent media organisations to monetise their own audiences.

“I think that is the quickest and surest way to fix the problem news organisations.”

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