Zuckerberg's new enemy: European lawmakers
Mark Zuckerberg this year reportedly told Facebook officials that the company is at war. He's right. Facebook is facing a new kind of existential threat, not from competitors, but rather from an adversary who can neither be acquired nor competed against: governments, particularly in Europe.
Driving the news: The decision by Damian Collins, a British lawmaker, to publish highly sensitive, unredacted internal Facebook emails is aggressive, uncompromising, and further intensifies the European battleground — an arena where Facebook has little to no political support.
- Facebook has faced such threats domestically, and has responded by hiring attack dogs in D.C. It also has on its side Facebook-friendly senators like New York's Chuck Schumer. Europe has few if any equivalents.
- The emails published by Collins could not be published in the U.S., where they are under a court-ordered seal. But Collins is not subject to U.S. jurisdiction, and happily sent the UK's Serjeant-at-Arms to demand the material. The gambit was legally dubious, but it worked.
- The lesson, for Zuckerberg: Foreign adversaries do not play by U.S. rules.
Facebook was already facing a formidable threat in the form of Margrethe Vestager, the EU's competition commissioner. After all, Facebook already comprises half of a duopoly controlling 75% of the digital advertising market, and it's growing fast. Calls to break it up are being taken increasingly seriously.
Internally, Facebook considers itself to be a business, acting as businesses do. Mark Zuckerberg's defense, in large part, boils down to "Running a development platform is expensive," in a world where Facebook needs to make money. (Facebook had $43.7 billion of gross profit in its last four quarters, and $24.4 billion in operating income.)
But the company is grappling with a growing trust deficit with its users — the people who elect politicians like Damian Collins. Facebook's sheer size and influence over global communication has made governments want to check its power.
For example: On January 24, 2013, Twitter launched Vine, a short-form video service it acquired pre-launch. Later that same day, Mark Zuckerberg personally signed off on a scheme to make it impossible for Vine users to find their friends via Facebook. Zuckerberg's explanation for his action is that he "didn't allow developers to use our platform to grow their services virally in a way that creates little value for people on Facebook."
- In the U.S., such behavior can be defended as healthy, red-in-tooth-and-claw capitalist competition.
- To European eyes, however, it looks more like an anti-competitive attempt to strangle Vine — a potential competitor — at birth.
Don't forget: There's a fundamental difference in how regulators view monopolies (and duopolies) on either side of Atlantic.
- U.S. antitrust law evaluates monopolies in terms of potential direct harm to consumers, such as rising prices as a result of a firm's dominance. Simply being a monopoly is not illegal.
- In Europe, regulators act to preserve competition, whether or not there is evidence of direct consumer harm.
The bottom line: Mark Zuckerberg signaled his contempt of Europe's governance structures when he refused to appear in front of Collins's committee last month. That snub will not soon be forgotten. Zuckerberg has made an enemy of European lawmakers, which might not be wise. Those lawmakers have a fearsome arsenal.
Go deeper: What we learned from the Facebook papers