With its groundbreaking antitrust lawsuit against Facebook, the Federal Trade Commission faces more than just a fight against a multi-billion-dollar technology giant – it’s fighting to regain its credibility that could shape its future.
The FTC was roundly criticized by lawmakers on both sides of the aisle following privacy settlements that saw tech hawks as toothless. In July 2019, the agency settled a privacy investigation into Facebook following the Cambridge Analytica scandal for $ 5 billion, representing about 9% of the company’s 2018 revenues. Shortly after, it settled for $ 170 million alleged violations of privacy. children on YouTube, owned by Google.
“The FTC is foolish and reckless to rely solely on money to punish decades of past privacy violations and continued profiteering,” Senator Richard Blumenthal, D-Conn., tweeted at the time of the Facebook settlement.
Long before that, the agency closed an investigation into Google’s competitive practices without filing staff-recommended charges. Nearly a decade later, the DOJ has filed charges against the search giant.
The alleged failure of the committee to hold tech giants to account in the eyes of some lawmakers has threatened the very existence of the FTC. Senator Josh Hawley, R-Mo., Last year proposed downgrading the entire agency to a division of the Justice Department and consolidating all of its competition enforcement powers under the DOJ Antitrust Division.
That gives the FTC’s actions against Big Tech companies additional meaning. The FTC differs from the DOJ in that it is independent from other branches of the government. FTC Chairman Joe Simons testified last year that the structure actually makes the agency so valuable, although he agreed with DOJ antitrust chief Makan Delrahim that dividing enforcement powers between two agencies causes inefficiency.
That was the background in which Simons made the decision to break with his Republican colleagues in order to be the casting vote in bringing an antitrust case against Facebook in federal court. About a week later, he and most of his colleagues voted to conduct a wide-ranging survey of the privacy practices of nine technology companies.
Simons made it a priority during his time at the helm of the committee to expand and focus his expertise in the tech sector, said a person familiar with the thinking of the FTC and only authorized to run in the background. to speak. That meant creating a Technology Task Force within the committee, now known as the Technology Enforcement Division.
It was in this context that the FTC decided to open an antitrust investigation into Facebook. Facebook first disclosed the investigation last year, just after the agency’s $ 5 billion fine. According to the source, the FTC opens a behavioral investigation after one of three things has happened: 1) someone complains about a company’s conduct to the committee, 2) states or the Department of Justice refers a matter to the agency, or 3) new information comes in to light through public reporting.
For Facebook, it was the third option that prompted the investigation, the source said, declining to specify the new information that triggered it.
The FTC’s decision to press charges in the Facebook case has been welcomed by its recent critics. The lawsuit is a sweeping indictment of Facebook’s activities and acquisition strategy, which the commission says demonstrates its attempts to illegally maintain its monopoly position in personal social networks. The case primarily focuses on Facebook’s acquisitions of Instagram and WhatsApp – two mergers the FTC had to review before closing.
Facebook’s chief advisor called the lawsuit an attempt for the government to “get a reconsideration by sending a chilling warning to corporate America that no sale is ever final.”
While by law the FTC’s decisions not to block the mergers from the outset do not imply any presumption of legality, Facebook is likely to continue on this point in court, according to antitrust experts.
“Some of these warning signs were certainly there,” Delrahim, the DOJ antitrust chief, said in an interview with CNBC this week. “ If you go back to Microsoft, the Federal Trade Commission has looked into that too and didn’t bring a case until the Department of Justice in the Clinton administration took it under Joel Klein and brought the case up. That’s not an FTC versus DOJ statement. , but it is a comment that sometimes when you don’t have a decision making process with a supervisor, decision making becomes much more difficult and may not be optimal. “
Delrahim favors a structure in which responsibility is concentrated on one person, as with the Antitrust Division, where he has the final say in bringing enforcement action. In contrast, the FTC requires five commissioners to vote on whether or not to bring a claim, with no more than three commissioners at a time from the same political party.
“I have no doubt that it is right to combine the two agencies, but that is not a decision I have to make,” said Delrahim.
The source familiar with the FTC’s thinking defended the committee’s structure, saying that the agency’s dual tradition means that cases go through rigorous debate and scrutiny before ever reaching public attention, growing stronger along the way. They pointed to the FTC’s procedural law, refuting the notion that the deliberative model has slowed its efforts. The agency has brought significant, albeit less widely followed, anticorrosion cases into the tech sector in recent years, such as against chipmaker Qualcomm and the e-prescribing platform Surescripts, they added.
When it comes to the Facebook case itself, Delrahim described many parts of it as “ noise, ” particularly the aspect relating to the alleged use of Facebook’s Application Programming Interfaces (APIs) to cut competitors off from its platform. He also defended the legitimacy of privacy as part of the potential harm to consumers.
“The issue of privacy as a quality element of competition is a very legitimate one,” said Delrahim. “A lot of people in this debate have confused the antitrust standards just by looking at price effects, and that’s just not true.”
Just filing such a sweeping lawsuit is an important step for the FTC. But it comes with high stakes. If the government fails to prove its case in court, it risks creating more case law unfavorable to future monopoly challenges, potentially further deterring enforcement in the area.
But if it wins, it could usher in a new era of antitrust enforcement.
“If you never get a Section 2 [Sherman Antitrust Act] as the government, you’re starting to encourage monopolists, “said Sam Weinstein, a former DOJ anti-trust attorney who now teaches at Cardozo Law.”
Weinstein said the things themselves are “terrible PR” for the companies and shows that “the government has the will to do this. It’s no longer theoretical; it’s happening.”
Subscribe to CNBC on YouTube.
WATCH: This is why some experts are calling for Big Tech to break up after the House antitrust report