The Federal Trade Commission announced yesterday that it will launch a task force to monitor the tech industry for anticompetitive activity.
Part of that responsibility includes reviewing industry mergers -- both those slated to take place, as well as those that have already been completed.
But as a task force forms that's designed to get answers -- especially those pertaining to the practices and potential monopolistic activity -- many are left with even more questions.
Here's a look at some of them.
It's Called "Big Tech" for a Reason
"Big Tech" is a term coined for the biggest global tech companies, which typically includes Google, Amazon, Facebook, and Apple.
The name is meant to embody the net worth, multinational reach, and general power of each company -- which often includes the number of companies it has acquired, or the degree to which they can influence day-to-day life.
Arguments have been made, however, that the "big" nature of these Tech Giants -- another term commonly used to refer to them -- teeters on the edge of monopolistic practices, and that they perhaps exercise too much control. As Scott Galloway, an NYU Stern professor once put it, "These companies avoid taxes, invade privacy and destroy jobs to increase profits because ... they can."
The behavior and practices of these companies have been particularly salient over the past year, especially since it was revealed last spring that vote profiling firm Cambridge Analytica had improperly obtained and abused personally identifiable user data.
The event resulted in multiple hearings, including those where Facebook CEO Mark Zuckerberg testified before two U.S. congressional committees, as well as one before members of European Parliament -- where he was questioned about the company's potential monopoly over social media.
Facebook CEO Zuckerberg listens to opening remarks from House Energy and Commerce Committee Chairman on April 11, 2018. | Amanda Zantal-Wiener
At one point during that last round of questioning, People's Party chair and MEP Manfred Weber asked if Facebook's portfolio of companies -- including WhatsApp, Instagram, and Messenger -- should be broken up into separate entities. At the time, a six-figure digital ad campaign called "Freedom from Facebook" launched in the U.S. in an efforts to convince the FTC to do just that.
Now, as this new FTC task force forms and many of these outstanding questions arise once again, all eyes seem to be on the Tech Giants, and on Facebook, in particular.
And while Zuckerberg has repeatedly insisted that Facebook does, in fact, have competition -- citing a statistic that the average online user has eight core apps to communicate with personal networks -- the math doesn't exactly add up, and many of these alleged competitors, like Instagram and WhatsApp, are actually owned by Facebook.
He also gave the same stat he gave Congress, that the average person has 8 apps they use to communicate with friends and family. Neglects to mention how many of them are owned by Facebook. (Also not sure where that stat is from)
This phenomenon provides only a sliver of a look into what the FTC task force is responsible for investigating -- and the dilemmas it could be assigned with resolving.
Will There Be Regulation?
Although many view the formation of the FTC task force as a crucial first step -- one that some say should have been taken long before now -- it's unclear exactly what, if any, executive action the members of the task force can take.
This is an important step toward restoring competition online and keeping the Internet open and innovative. Companies like @Facebook will not regulate themselves. Government has to do more to protect consumers! https://t.co/n5TKIxUK74
For instance, as others who cover the tech industry has noted, the term "task force" doesn't exactly imply regulatory action, and more often suggests a team of experts assigned to exploration and investigation. And while the official announcement of the group's formation has said that the task force will "tak[e] enforcement actions when warranted," it doesn't specify what those action items might be.
Zuckerberg, for his part, has previously stated that he's "not opposed to regulation," other statements made in the past have suggested he's not eager for it to become a reality -- telling one elected official during last year's congressional hearings that "things that need to be thought through very carefully [before] we think about what [policies] to put in place."
The Impact on (Other) Businesses
If, hypothetically, Facebook and its acquired companies in owns are broken up into separate entities -- how could it impact the other businesses that use them for growth, promotion, and advertising?
At April's congressional hearings, some U.S. lawmakers voiced concerns that regulation of the tech industry could hurt smaller companies within the market -- and that, as Senator Dan Sullivan phrased it, regulation might "stifle ... the next Facebook."
To that, Zuckerberg responded, "That's the problem with regulation": that as a big company, Facebook has the resources to manage it, while more fledgling companies might not. But some argue that breaking up Facebook's portfolio of brands could actually benefit smaller businesses, in that it would promote greater competition among those who have to decide where to allocate marketing budgets.
For example, let's have a look at the top three online advertising platforms: Amazon, Facebook, and Google. The latter two have such a large digital ad spend market share that it's often been called a "duopoly," though Amazon is showing significant growth.
In its current form, the Facebook Ads Manager allows marketers to manage campaigns and promotions for Facebook and Instagram on a central dashboard, as opposed to using multiple tools and platforms.
As HubSpot Principal Product Marketing Manager Marcus Andrews notes, having to shift to this model of "running multiple campaigns would be annoying" -- perhaps at worst.
But at the same time, forcing Facebook and Instagram to become independent entities would also benefit advertisers in some ways -- such as forcing the two newly individual companies to compete for ad budgets, perhaps adding incentives to do so.
"Businesses -- especially growth companies -- have to decide where to spend their ad budgets," Andrews explains. "Right now, those options are largely limited to Google or Facebook. That's not much competition to create a fair market."
Part of the FTC's task force, then, is to examine scenarios such as these, and to determine if such "consummated technology mergers" as the one between Instagram and Facebook have resulted in "anticompetitive conduct."
The Task Force will coordinate and consult w/ staff throughout the FTC on tech-related matters, including prospective merger reviews in the #techsector and reviews of consummated tech mergers
Many have responded to the formation of the new FTC task force with a degree of skepticism, with some questioning why it didn't take action on potential Big Tech monopolies sooner -- even if they had the resources to do so.
that's my question, really — like this sort of thing would basically be saying "sorry we were asleep at the wheel for seven years, so now we're gonna come in and blow stuff up"
i genuinely do not know if that's realistic or posturing
Throughout 2018, the question of, "Are tech companies too powerful?" reverberated throughout industry and consumer vernacular. And it wasn't just limited to Facebook, either. As noted above, Google shares the digital ad spend "duopoly" dominance with Facebook, and has also partaken in its fair share of mergers acquisitions -- as has its parent company, Alphabet.
Apple, too, has been accused of having a monopoly on mobile apps, which prompted a class-action lawsuit by iPhone customers -- who sought a suit claiming that this dominance on the app market leads to prices that are more "inflated" than they would be if apps were available for purchase from other outlets. (For contact, while developers determine a price point for a given app, Apple charges them 30% commission for every purchase.)
Finally, let's not forget Amazon -- one of the newer leaders in the digital ad spend market -- whose acquisition of organic grocery store chain Whole Foods serves as what some say should have been one of the biggest catalysts for an investigation of potential anticompetitive activity within the tech industry.
this is totally the case in vertical deals. the ftc should look every damn year at the market post amazon-whole foods. that merger skated through. the agency and public deserves some more constant oversight/econ analysis
In any case, the outcome of the task force's creation remains to be seen. While its monitoring and investigative activity could reach a conclusion that, yes, many Tech Giants have been engaging in anticompetitive behavior -- whether or not it results in the aforementioned "enforcement actions" is ambiguous.
We, too, will be monitoring the situation.
Originally published Feb 27, 2019 9:33:15 AM, updated December 11 2019