Cicilline to FTC – Time to Investigate Facebook

Mar 19, 2019

WASHINGTON – House Antitrust Subcommittee Chairman David N. Cicilline (RI-01) today wrote to the Federal Trade Commission (FTC) asking that they finally open an investigation into whether Facebook has broken antitrust laws. Cicilline laid out the case for an investigation into Facebook in an op-ed that the New York Times published this morning.

 

“The FTC has a credibility crisis,” Cicilline said. “American antitrust agencies have not pursued a significant monopoly case in more than two decades, even as corporate concentration and monopoly power have reached historic levels. Given all that we’ve learned recently about Facebook’s predatory behavior, it’s clear that serious enforcement is long overdue.”

 

The full text of Cicilline’s letter is embedded below. A PDF copy can be downloaded by clicking here.

 

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March 19, 2019

 

Dear Chairman Simons, Commissioner Chopra, Commissioner Phillips, Commissioner Slaughter, and Commissioner Wilson:

 

I write to urge the Commission to open an immediate investigation into whether Facebook has violated the antitrust laws.

 

It has been a year since news broke that Facebook exposed user data to Cambridge Analytica, a political consulting firm that sought to manipulate voter behavior.  Since then, a torrent of reports has revealed that the Cambridge Analytica scandal was part of a much broader pattern of misconduct by Facebook.  This includes mounting evidence of anticompetitive behavior.  Facebook’s predatory acquisition strategy, foreclosure of rivals from its platform, and declining product quality strongly suggest that it has abused its position as a monopoly to undermine competition and the competitive process.

 

An antitrust investigation responding to these revelations should focus on at least three aspects of Facebook’s conduct.

 

First, the Commission should examine whether any of Facebook’s acquisitions substantially lessened competition in violation of Section 7 of the Clayton Act.  Since its founding, Facebook has acquired over 75 companies.  Two of the most significant purchases were Instagram, which Facebook bought in 2012 for $1 billion, and WhatsApp, which Facebook purchased in 2014 for $19 billion. Through these acquisitions, Facebook now owns three of the top four, and four of the top eight, social media apps.

 

When Facebook acquired Instagram, the photo-based app posed a competitive threat.  It was growing faster than even Facebook had at its peak and proved especially attractive to teenagers and young adults, a demographic Facebook was losing. Moreover, buying up Instagram enabled Facebook to make the switch to mobile, a market where Facebook was struggling to adapt. In hindsight, it is clear that by approving this purchase, the Commission enabled Facebook to swallow up its most significant rival in the social network market.

 

WhatsApp, meanwhile, threatened to outdo Facebook Messenger. As documents released by the UK Parliament reveal, Facebook had been using its surveillance tool Onavo to obsessively track WhatsApp.  By doing so it learned that WhatsApp’s market reach was expanding steadily, outdoing then-popular apps like Foursquare and Tumblr while also beating out Facebook Messenger in certain markets.   In other words, WhatsApp “was quickly demonstrating that it could compete with Facebook on its most important battleground.”  Instead of protecting this competition—as the antitrust laws require—the Commission permitted Facebook to neuter it. And while Facebook promised at the time of the acquisition that “nothing” will change for WhatsApp users’ privacy,  it has since gone on to use WhatsApp users’ data for marketing purposes—a breach of its commitment.  

 

Since the Commission generally does not share with the public its analysis justifying inaction, we do not know what led the agency to approve these acquisitions. But it is clear that allowing Facebook to purchase Instagram and WhatsApp has deprived users of critical competition. As Facebook’s serial disregard for users’ privacy has prompted some users to delete their Facebook accounts, they find themselves unable to escape Facebook’s ecosystem.  Given that Facebook used spyware to systematically track and target actual, potential, and nascent rivals, it is vital to examine whether any of Facebook’s acquisitions—including of smaller social networks—unlawfully lessened competition. 

 

Second, the agency should investigate whether Facebook has engaged in exclusionary conduct in violation of Section 5 of the Federal Trade Commission Act.  Documents reveal that Facebook has responded to competitive threats by cutting them from its network. For example, when Vine, a social application through which users can make short videos, attempted to let users find friends through Facebook’s platform, Facebook quickly shut down the feature.  The Commission should examine whether Facebook has weaponized application programming interfaces (APIs) to undermine competition.

 

Finally, the Commission should consider whether Facebook has abused its monopoly power in violation of Section 5 of the Federal Trade Commission Act.  Experts have noted that while Facebook faced competition, it was not able to condition use of its network on constant surveillance; in fact, users expressly rejected this bargain.  It was only after Facebook achieved a dominant position that it could successfully backtrack on privacy commitments and initiate widespread commercial surveillance of users.  This dramatic decrease in privacy has amounted to quality degradation of Facebook’s service. The Commission should investigate whether Facebook is using its monopoly power to degrade quality below what a competitive marketplace would allow.

 

Thank you for your attention to this important matter. It is critical that the Commission robustly enforce the antitrust laws to prevent anticompetitive acquisitions and anticompetitive conduct.

 

Sincerely,

David N. Cicilline

Chairman

Subcommittee on Antitrust,

Commercial and Administrative Law

Committee on the Judiciary

 

cc:  The Honorable Jerrold Nadler, Chairman, Committee on the Judiciary

The Honorable Doug Collins, Ranking Member, Committee on the Judiciary

The Honorable F. James Sensenbrenner, Ranking Member, Subcommittee on Antitrust, Commercial and Administrative Law

The Honorable Makan Delrahim, Assistant Attorney General, Department of Justice