Technology She Argued Facebook Is a Monopoly. To Her Surprise, People Listened.

04:30  11 december  2019
04:30  11 december  2019 Source:   online.wsj.com

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Facebook could be considered a monopoly that has too much power for three simple reasons: its dominant user base, its pricing power, and its lack That 's certainly true, but none of those companies is Facebook 's direct competitor. Google repeatedly tried to gain a foothold in the social media market

In a monopoly situation, antitrust means disaggregating supply to bring relief to consumers. Ditto people looking to read the news of the day ( Facebook ) or buy an offbeat and unique travel experience (Airbnb). The media version is Facebook , which is a monopsonist of human attention.

a man standing in front of a book shelf© Ian Bates for The Wall Street Journal

When Dina Srinivasan quit her job as a digital advertising executive two years ago, she wasn’t looking to retool antitrust law for the social-media age. She just wanted to spend some time reading in coffee shops.

Then 36 years old, with a Yale law degree she had never put to use, Ms. Srinivasan spent a few months in cafes around her Connecticut home reading economic history, and mulling over her own misgivings about the evolution of the digital advertising market. One mystery nagged at her, she said: How could a company with Facebook Inc.’s checkered privacy record have obtained so much of its users’ personal data?

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David Mitchell: Facebook has thrived where Bebo and MySpace failed, and while it provides its services for free, it can do what it wants.

Many people have been arguing that Facebook is a monopoly due its its undue “market share” of attention or consumer data, as if this is what makes for a monopoly . However, the customers of Facebook are advertisers, not consumers. You would have to show that an advertiser has no other

Her conclusion was that rather than raising prices like an old-school monopolist, Facebook harmed consumers by charging them ever-increasing amounts of personal data to use its platform. Eventually she emailed an unsolicited article to the Berkeley Business Law Journal, which published it this year under the title, “The Antitrust Case Against Facebook.”

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Her argument has had unexpected resonance. In the past year Ms. Srinivasan has presented at the American Antitrust Institute’s annual conference and appeared at a private gathering of state attorneys general investigating Facebook. Now based in northern California, she is presenting her work at an international antitrust conference in Brussels this week.

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Facebook is a social network that operates on multiple operating systems. It has multiple apps, like Messenger and Instagram that feed into it. It’s clear from today’s testimony that even Zuckerberg agrees Facebook messed up. But the missteps are not the product of a monopoly gone wrong.

This means Facebook doesn’t meet the textbook definition of a monopoly , in which company secures a dominant share in its market through improper conduct She noted the key distinction for platforms like Amazon and Facebook will be if they are seen as subject to competition, or insulated from rivals.

U.S. Attorney General William Barr, whose department is currently probing big tech, said Tuesday he is “open to that argument” that consumer harm can exist through the use of personal data, even if a service is free. “I am inclined to think there is no free lunch” he said at the WSJ CEO Council meeting in Washington, D.C. “Something that is free is actually getting paid for one way or the other.”

The attention to Ms. Srinivasan’s article took her by surprise, given that when she wrote it, she had neither any institutional affiliation or a law license. “Why would I think anybody was going to read my paper?” she asked.

Yet Ms. Srinivasan believes it is important to study how we got to this moment “so that we can catch these things earlier in the future,” she said. “We can correct this one now.”

A person who has worked on Facebook’s privacy policies disputed Ms. Srinivasan’s premise that the company tracks its users in an aggressive or unique fashion, saying it was behind other big tech companies in adopting such tactics. Nor does Facebook believe its recent history demonstrates the disregard for user privacy that Ms. Srinivasan alleges.

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As one of Facebook 's most senior executives, she was about to be grilled by the House Judiciary Committee on fake news and content filtering. Freedom from Facebook is a coalition of privacy and anti- monopoly advocacy groups, essentially born out of the Open Markets Institute in May.

The entire idea that Facebook and Google need to be regulated, perhaps as utilities, is based upon an ignorance of the very subject under discussion. Google may very well be market dominant but that again is not the same thing as a monopoly . So the basic definition being used is wrong.

“The trend runs directly counter to what Dina is arguing,” the person said, citing the company’s recent release of a feature allowing users to review and block advertising based on their off-Facebook activity. “We haven’t degraded privacy protection, we’ve increased it.”

The rise of Ms. Srinivasan’s privacy-as-antitrust idea owes a great deal to an escalating argument over whether antitrust law had grown too narrow. Though founded on statutes that gave enforcers sweeping powers to protect competition, antitrust law has for the past 40 years marched toward a singular focus on consumer welfare in keeping with the Chicago School’s free-market thinking. That can be summarized as: If the end user of a product is better off as a result of a dominant company’s behavior, there isn’t a viable antitrust case to be made.

Big tech has complicated the picture. Companies such as Facebook, Alphabet Inc.’s Google and Amazon.com Inc. built empires based on free or near-free products and services, remaking the economy in sometimes controversial ways without ever raising prices, and in some cases lowering them.

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Why Facebook Is A Monopoly . In fact, nearly all the major consumer technology targets for antitrust litigation, from IBM to Microsoft to Intel to the More people choose Google Search, for example, over the many alternatives because they believe attributes of that service created by Google are superior.

rejected the idea that Facebook was a monopoly , despite being the largest social media platform essentially trying to argue that the company’s users don’t have other comparable choices when it “It certainly doesn’t feel like that to me,” Zuckerberg said. Several people in the Senate chamber audibly

A new breed of antitrust experts believes new approaches are needed. Derided as “hipster antitrust” by critics, the movement seeks to broadly wield antitrust law against concentrated corporate power.

Ms. Srinivasan has sometimes been lumped in with the hipster crowd but her argument has won credibility with mainstream antitrust scholars precisely because it sticks to the consumer welfare standard—substituting consumers’ payment to Facebook with personal data for payment with money.

When it comes to Facebook, she says, “the Chicago paradigm is dagger enough.”

“You don’t have to be radical or change the Chicago School,” said Luigi Zingales, a University of Chicago economist. “Her paper shows the protection of privacy at Facebook goes down as Facebook faces less competition. I think the world is moving in this direction.”

Ms. Srinivasan’s timing is significant in another regard: she published her paper just months before the Federal Trade Commission and a coalition of state attorneys general announced that they were weighing potential antitrust cases against Facebook, creating an opening to new approaches.

Ms. Srinivasan consults on the digital advertising market, and is currently working with The Wall Street Journal’s parent company, News Corp. The Journal separately has a commercial agreement to supply news through Facebook.

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The notion that Facebook might be a monopoly , unlawfully using its market power, isn’t shocking. As Dina Srinivasan, author of a 2019 Berkeley Business Law Journal article about the antitrust case against Facebook , puts it, “Colloquially, and in the press, Facebook is a monopoly .

We need a new standard for monopolies , they argue , one that focuses on the skewed incentives produced by a Even better, anti- monopoly activists would have a bunch of different ways to block those That means Uber can’t be a monopoly in the Standard Oil sense, but it could be a part of a

While Ms. Srinivasan’s argument has been well received on the legal-conference circuit, some believe it would face a chillier reception in court. “You’re facing a case in which there is no precedent, you have no pricing, and you can’t look at the normal factors,” Utah senior district court judge Clark Waddoups, a former antitrust litigator himself, said at an October antitrust conference at which Ms. Srinivasan presented. He said he found the paper to be “a great piece of work” but that “there’s going to be a whole other side, saying this is just off the wall.”

Ms. Srinivasan has taken a roundabout path to the front lines of the tech antitrust debate. Born in Seattle but raised mostly in Lebanon, she moved back to the U.S. alone at the age of 16 to finish high school. She founded an early text messaging interoperability startup in college, then went to law school. By the time Ms. Srinivasan graduated from Yale in 2006, however, she was expecting her third child and chose not to sit for the bar.

Instead, Ms. Srinivasan co-founded a digital advertising technology company while raising her four children. She sold its technology to a division of WPP Global, took a job with its then-subsidiary Kantar Media, then quit in 2017.

Her paper draws on her own history: She recalls signing up as a Facebook user while a law student precisely because it seemed like a less rapacious form of social media than competitors such as MySpace.

Later, as a specialist in the structure of the digital ad market, she watched as Facebook increasingly tried to track its users elsewhere on the internet.

Some early efforts were turned back amid user protest, and in 2009 Facebook even promised to put prospective change to Facbook’s terms of service up for a user vote. By Ms. Srinivasan’s thinking, these concessions were driven at least in part by competition.

But as Facebook’s market share grew, and it vanquished competition through acquisitions and shrewd appropriation, the company rescinded users’ prospective veto power. In 2014, Facebook formally announced it would track users via the login and like buttons embedded in millions of news sites, online retailers and games.

The expansion benefited Facebook and advertisers through better targeting and measurement of advertising effectiveness, even though many users had said they objected to being tracked.

Unlike some Facebook critics, Ms. Srinivasan isn’t advocating for a breakup of the social media giant, or to force it to unwind some of its major acquisitions, such as WhatsApp or Instagram. Ms. Srinivasan would prefer that Facebook be forced to change certain business practices, including how it tracks users when they are off the company’s platforms.

“It would be a mistake to go after Facebook and not include the pattern and practice of deceptive conduct which allowed it to track users across the web,” she said.

Write to Jeff Horwitz at Jeff.Horwitz@wsj.com

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