With its groundbreaking antitrust lawsuit against Facebook, the Federal Trade Commission is not only facing a battle against a billion-dollar tech giant – it is fighting to regain the credibility that could determine its future.
The FTC was harshly criticized by lawmakers on both sides of the aisle after tech hawks, classified as toothless, settled their privacy. In July 2019, following the Cambridge Analytica scandal, the agency closed a privacy investigation into Facebook that turned out to be $ 5 billion, equivalent to about 9% of the company’s 2018 revenue. Shortly thereafter, suspected child privacy violations on YouTube were settled by Google for $ 170 million.
“The FTC is foolish and foolhardy to rely on money alone to punish decades of past data breaches and continuing profiteers,” said Senator Richard Blumenthal, D-Conn. tweeted at the time of the Facebook agreement.
Long before that, the agency completed an investigation into Google’s competitive practices without charging the fees recommended by its employees. Almost a decade later, the DOJ picked up competition charges against the search giant.
The Commission’s supposed failure to hold tech giants accountable in the eyes of some lawmakers has threatened the FTC’s very existence. Senator Josh Hawley, R-Mo., Proposed last year that the entire agency be transformed into a division of the Department of Justice and that all of its powers to enforce competition be consolidated under the DOJ’s Antitrust Division.
This adds extra meaning to the FTC’s actions against big tech companies. The FTC differs from the DOJ in that it is independent from other branches of government. FTC chairman Joe Simons testified last year that the structure actually makes the agency so valuable, despite agreeing with DOJ antitrust chief Makan Delrahim that the division of antitrust enforcement powers between two agencies creates inefficiencies.
With this in mind, Simons made the decision to break away from his Republican colleagues in order to be the decisive voice in bringing lawsuits against Facebook in federal court. Less than a week later, he and most of his colleagues voted for a comprehensive study of the privacy practices of nine technology companies.
Simons made it a priority during his time at the helm of the commission to expand and focus her expertise in the technology field, said one person familiar with the thinking of the FTC and only empowered to speak on the background. This meant the establishment of a technology task force within the Commission now known as the Technology Enforcement Division.
In this context, the FTC decided to launch an antitrust investigation against Facebook. Facebook first announced the investigation last year, shortly after the agency fined $ 5 billion. The FTC usually investigates after one of three events, the source says: 1) someone complains to the commission about a company’s behavior, 2) states or the Department of Justice refer a case to the agency, or 3) new ones arrive Illuminate information through public reporting.
For Facebook, it was the third option that sparked the investigation, the source said, declining to disclose the new information they had started.
The FTC’s decision to prosecute Facebook has been welcomed by its recent critics. The lawsuit is a sweeping indictment of Facebook’s operations and acquisitions strategy, which the Commission believes is demonstrating its attempts to illegally maintain monopoly power over personal social networks. The case is largely centered around Facebook’s acquisitions of Instagram and WhatsApp – two mergers the FTC had to look into before they went through.
Facebook’s chief attorney described the lawsuit as an attempt for the government to get a “do-over” that sends a terrifying warning to the American company that no sale will ever be final.
While the FTC’s decisions not to block the mergers at the outset don’t create a presumption of legality for legal reasons, antitrust experts say Facebook is likely to keep going to court.
“Certainly some of these warning signs were there,” said Delrahim, the DOJ’s antitrust chief, in an interview with CNBC this week. “If you go back to Microsoft, the Federal Trade Commission has looked into it too and has not brought a case until the Clinton Administration Department of Justice picked it up and brought it up under Joel Klein. This is not a comment from the FTC against the DOJ, but it is Comment that sometimes when you don’t have decision making in an executive, decision making becomes much more difficult and may not be optimal. “
Delrahim advocates a one-person structure where responsibility is centered, such as in the Antitrust Department, where he has the final say in bringing an enforcement action. In contrast, the FTC has five commissioners to vote on whether to bring a lawsuit, with no more than three commissioners from the same political party at any one time.
“I have no question that the right thing to do is combine the two agencies, but that’s not a decision I have to make,” said Delrahim.
The source, familiar with the thinking of the FTC, defended the structure of the commission, saying that the agency’s bipartisan tradition means that cases undergo rigorous debate and scrutiny before they ever go public, thereby keeping them on the way Get stronger. They pointed to the FTC’s process record and disproved the idea that the advisory model slowed its efforts. The agency has launched important, albeit less widespread, cases of anti-rust technology in recent years, against chipmaker Qualcomm and e-prescribing platform Surescripts, for example.
With regard to the Facebook case itself, Delrahim described many parts of it as “sound”, particularly the aspect that Facebook allegedly uses its APIs (application programming interfaces) to cut off competitors from its platform. He also defended the legitimacy of privacy as an element of potential consumer harm.
“Privacy as a quality element of competition is a very legitimate issue,” said Delrahim. “A lot of people in this debate have confused antitrust standards with looking at price effects, and that’s just not true.”
Filing such a comprehensive lawsuit is already a significant step for the FTC. But it comes with high stakes. If the government fails to prove their case in court, there is a risk that more jurisdiction will be created that is unfavorable to future monopoly challenges and may further scare enforcement in the region.
But if it wins, it could usher in a new era of antitrust enforcement.
“If you never bring a section 2 with you [Sherman Antitrust Act] As a government, you are beginning to encourage monopolists, “said Sam Weinstein, a former DOJ antitrust attorney who now teaches at Cardozo Law.” You start to think, “We can somehow do what we want here, the government is afraid of litigation. ‘”
Weinstein said the cases themselves were “terrible PR” for companies, showing their peers “the government has a will to do this. It’s no longer theoretical; it happens.”
Subscribe to CNBC on YouTube.
WATCH: That is why some experts are calling for Big Tech to be liquidated after the company’s antitrust report