Facebook's reversal of D.C. fortune
Yesterday's landmark lawsuits against Facebook cap four years in which tech companies' national standing has turned upside-down even as their fortunes have boomed.
When Vice President Joe Biden left office in Jan. 2017, Facebook, Google and other tech giants had the proud luster of American success stories. When President Biden takes office next month, his government will be charging Facebook and Google both as harmful monopolists — and pushing to break Facebook up.
Driving the news: The Federal Trade Commission on Wednesday filed a lawsuit against Facebook, asking a federal court to claw WhatsApp and Instagram away from the social media giant because, the agency charges, Facebook used its acquisitions of those companies to firm up its dominance and choke off competition.
The intrigue: Facebook, along with Twitter and Google, has been a favorite punching bag for President Trump, who claims Big Tech is biased against him and other conservatives. But the case is apolitical and won backing from the agency's two Democratic commissioners.
- Notably, two GOP commissioners opposed the suit — but Chairman Joe Simons, also a Republican, crossed party lines to join the Democrats in voting it forward.
It's joined by a parallel suit from 48 state and territorial attorneys general, who make the same broad-strokes arguments that Facebook operates an illegal monopoly but focus on a slightly different set of perceived harms.
- The FTC contends Facebook unfairly blocked rival tech firms from knitting their services with its platforms, while the AGs say a more competitive social media landscape would have resulted in greater privacy protections for consumers.
New York Attorney General Letitia James, a Democrat, is leading the states' case, which is strongly bipartisan. The only states sitting it out are Georgia, South Carolina, South Dakota and Alabama.
- Both suits got warm receptions from Democrats, with Rep. David Cicilline (R.I.), who chairs the House Judiciary antitrust panel, saying in a statement, "Facebook has broken the law. It must be broken up. I applaud the FTC and state attorneys general who are leading this effort today."
Meanwhile: The Justice Department sued Google in October, alleging the company was running its own illegal monopoly in online search, chiefly by locking up exclusive agreements to be the search default on browsers and mobile devices.
- That case, too, was cheered by Democrats, who have led the Washington charge in recent years in calling for more aggressive antitrust enforcement against Big Tech.
Between the lines: The cases are in some sense a rebuke of the Obama administration's regulatory policy, which broadly looked on tech combinations as part of Silicon Valley's virtuous cycle of growth and innovation.
- Biden is seeking a return to Obama-era normalcy in many respects, but is unlikely to do so here. Taking on Big Tech is now mainstream Democratic orthodoxy.
The catch: The FTC and states have to prove that rejecting Facebook's acquisitions would have made life better for consumers and increased industry competition — a tough case to make, legal experts told Axios.
The court will be looking at whether the acquisition of WhatsApp, for instance, was lawful when it occurred in 2012, not whether it would be lawful now, said Kristen Limarzi, a partner at Gibson, Dunn and Crutcher and former chief of the appellate section of the DOJ antitrust division.
- One hurdle for the FTC is "that they reviewed the transaction and cleared it," she said. "Their suit depends on admitting they made a mistake in 2012, and that’s a tough spot for any litigant to be in."
- It’s not common for the FTC to try to undo previous acquisitions, but it has happened, said Jeffrey Jacobovitz, a partner at Arnall Golden Gregory LLP and former antitrust attorney at the FTC. He called the FTC’s suit "super aggressive."