An Ugly Truth: Inside Facebook's Battle for Domination [calibre 4.99.5]

In December 2017, Acton quit in protest over Zuckerberg and Sandberg’s plans to introduce targeted advertising to users. He became a billionaire from the deal; later, he conceded that he’d been naïve and regretted trusting Zuckerberg. Business came first, and they were good businesspeople. “At the end of the day, I sold my company,” Acton said in an interview with Forbes. “I sold my users’ privacy to a larger benefit. I made a choice and a compromise. And I live with that every day.”

Tim Wu and Scott Hemphill, law professors at Columbia and New York University, respectively, viewed the integration of the apps as a ploy to ward off antitrust action. Zuckerberg could argue that the process of breaking them up would be too complicated and harmful to the company—you couldn’t actually unscramble the eggs in an omelet. Facebook would have good reason to pursue such a strategy: regulators were reluctant to review past mergers, especially deals that hadn’t been blocked. Unwinding mergers was a messy task that could cause more harm than good.

But the law professors had been studying Facebook’s history of acquisitions. They saw Zuckerberg’s announcement as a defensive measure to protect his empire. Wu had an insider’s understanding of government. He had worked at the FTC, in the Obama White House, and for the New York attorney general. He was best known for coining the term net neutrality, the principle that telecommunications providers should keep their high-speed internet networks open for all content. Google and Facebook cheered his anti-telecom theories and joined his push for regulations on broadband service providers. In recent years, however, he had flipped sides and begun to rail against the power of those tech partners.

Facebook’s acquisitions of Instagram and WhatsApp were part of a pattern to create a social media monopoly and then to maintain that monopoly by buying or killing off competition, the professors argued. They saw a historical parallel in Standard Oil, which became a monopoly during the industrial age through acquisitions, eventually overseeing more than forty companies. The oil trust, established in 1882 by John D. Rockefeller, then maintained its monopoly by colluding with partners and squashing competition, ultimately putting itself in a position to own or influence every part of the supply chain. At its peak, the company controlled almost all oil production, processing, marketing, and transportation in the United States.

By 2019, Facebook had acquired nearly seventy companies, the vast majority of the deals valued at less than $100 million and not subject to regulatory review. When the Instagram deal was reviewed by the FTC in 2012, Facebook argued that the photo-sharing app wasn’t a direct competitor. The company made a similar argument in defense of the WhatsApp acquisition in 2014: the app didn’t compete with Facebook’s core business as a social network. The regulators didn’t block the deals because there wasn’t enough evidence that Facebook was eliminating competitors. Instagram and WhatsApp didn’t have advertising businesses at the time; the FTC didn’t consider how, in the process of absorbing the apps, Facebook would feed more data into its ad business and cement its dominance in social media. “The lessons from history were all there, and yet we were going down the same path of the Gilded Age,” Wu said. “That era taught us that extreme economic concentration yields gross inequality and material suffering, feeding an appetite for nationalistic and extremist leadership.”