A Whirlwind Week in Big Tech

Felix Beilin 

The news out of Silicon Valley in the last seven days has been incessant. First, on December 9, the Federal Trade Commission announced that it was filing a lawsuit against Facebook for anticompetitive conduct. Then, on December 16, 10 state Republican attorneys general announced a lawsuit against Google for allegedly monopolizing its control in the realm of digital advertising. Late in the news cycle on December 16, Facebook announced that it was purchasing more ad space for tomorrow to criticize Apple for ostensibly anti-small business policies implemented into its App Store. Finally, Google was the target of yet another lawsuit on December 17, as state prosecutors alleged monopolistic behavior with regard to Google’s search engine dominance. All this litigation and inter-media giant hostility occurs against the backdrop of increased discussion about government moderation of content displayed on platforms run by several Silicon Valley media giants. Here, we’ll take a look at where the politics lie in all these battles, and what practical effect they might have on Washington and the media environment as a whole.

The FTC’s lawsuit against Facebook is the product of a nearly-two-year-long investigation into the digital giant’s acquisitions of potential rivals in the social media sector. Facebook acquired Instagram in 2012 for $1 billion and WhatsApp in 2014 for $19 billion, granting it umbrella control over two of the three most popular social media platforms in the world, and the two largest instant messaging applications. The lawsuit claims that these acquisitions kneecapped the social media sector, precluding the possibility that Facebook would encounter serious competition throughout the rest of the decade. A separate lawsuit, filed by 48 state attorneys general and led by New York AG Letitia James, made similar allegations.

Importantly, both lawsuits, filed in the U.S. District Court for the District of Columbia, go further than asking the judicial system to bind Facebook’s hands and prevent future acquisitions, or to impose financial penalties for its behavior. Instead, the lawsuits ask for WhatsApp and Instagram to be spun off from Facebook’s corporate conglomerate, an aggressive function within the 19th-century Sherman Antitrust Act that has not yet been wielded against Big Tech. 

Facebook’s position is that government regulators were given the opportunity to review and block both acquisitions in 2012 and 2014 respectively, and failed to do so. “The government now wants a do-over, sending a chilling warning to American business that no sale is ever final," said Jennifer Newstead, VP and General Counsel for Facebook. Prosecutors are convinced, however, that the government has the right to change its mind about the fairness (and therefore legality) of acquisitions as new evidence comes to light in the years after the fact.

The lawsuit will see little drama in its next phase. Facebook is expected to draw out the lawsuit for years, especially if unfavorable verdicts in lower courts give way to appeals. 

Facebook isn’t the only one in antitrust trouble, though. Google was slapped with a second lawsuit in three months on Wednesday, as ten states, led by Texas AG Ken Paxton, alleged that Google had built an empire of digital advertising sales by crowding out competitors. Part of Google’s methodology, the lawsuit alleges, is Google’s ability to extract a “tax” on websites which depend on ad sales, administered by Google, for their own revenue. Investigators also alleged that Google had colluded with Facebook, its main competitor and peer in the realm of digital advertising, “to manipulate advertising auctions.” Facebook is said to have received privileged information that would have disrupted the fairness of Google’s Open Bidding program--and the pact between the two companies, according to the lawsuit, used names from Star Wars like “Jedi Blue” to represent the noncompetitive behavior.

Google is already facing a lawsuit over its integration of Google search into its Android mobile operating system, filed in October by federal regulators. But that’s not all: just as your humble blog post author was about ready to submit this post, a third lawsuit, this one with a bipartisan spate of 38 regulators, was filed in DC District Court. This lawsuit focuses on the ways in which Google has used its search engine--which carries a behemoth 90% market share--to drive traffic and revenue through its other products. The lawsuit also takes issue with much of Google’s advertising and data-sale practices: “Google sells advertisements to some specialized vertical providers, but, depending on the commercial segment involved, unnecessarily limits their utility,” the lawsuit says. “And by virtue of its monopoly power, Google extracts from some specialized vertical providers massive amounts of proprietary customer data that Google can them use to compete against them.”

The states, led by Colorado’s Democratic and Nebraska’s Republican Attorneys General, seek stiff penalties for Google’s behavior. To counter advantages that Google has allegedly created for itself, the states suggest possible divestiture of Google’s existing assets.

The most recent spate of antitrust lawsuits against technology firms on a similar scale came in 1998, when regulators alleged noncompetitive conduct against Microsoft, and eventually settled in what was seen as an aggregate win for the software manufacturer. 

But the Big Tech situation is not limited to government vs. private sector conflict. Facebook took out full page advertisements in the Washington Post, Wall Street Journal, and New York Times on December 17, titled “Apple vs. the free internet.” Apple made significant changes to its privacy policy in the latest update to its iOS mobile operating system, which will force applications to ask permission to collect data and track user behavior. Facebook argues that this policy will prevent the creation of personalized advertisements, forcing application developers to switch to subscription and fee-based revenue models. It is not the first time in recent months that Apple and Facebook have ended up on opposite sides of Apple’s choices in iOS 14. 

Finally, intragovernmental tensions over how to regulate Big Tech have spilled over from the legal realm into the political one. Recent clashes over “misinformation labels” and suspension of prominent accounts on social media platforms have led to conversations over Section 230 of the Communications Decency Act, a 1996 law that initially intended to regulate pornography in the early days of the internet. Section 230 provides legal immunity to social media platforms and their users for illegal content posted online. Supporters of the law argue that without it, the internet could not have grown to be the vibrant marketplace of ideas and services that it is today; "[It's] part of the architecture of the modern internet," David Greene, senior staff attorney and Civil Liberties Director for the Electronic Frontier Foundation, told CBS News. "Everything you do online depends on it." [A defense of the law can be found here]. Critics contend that the law inadvertently permits social media companies to deplatform perspectives at will, leading to additional constraints placed on the speech of conservatives on websites like Twitter and Facebook. [An account of a debate between Senators Cruz (R-TX) and Whitehouse (D-RI) about the merits of the law can be found here]. President Trump has been vocally in favor of repealing Section 230, suggesting that the fate of the recently-passed military spending bill may be tied to Congress’s position on the communications law.