of the trickle-down antitrust dept
Last week’s dismissal of the FTC’s antitrust case against Meta — combined with the previous limited remedies in Google’s search case — shows something that should be clear by now: antitrust is a pathetically weak tool for increasing competition in digital markets.
This is not an argument against competition. Competition in digital markets is crucial. But antitrust enforcement is slow, cumbersome, and virtually blind to the speed at which these markets are actually developing. It takes years to litigate, there are limited effective legal remedies, and by the time the court rules, the competitive threats have often changed entirely. The whole device works fine for slower industries (which have real competitive issues!) but consistently fails when applied to more dynamic markets where the landscape changes every few years.
Over the past decade, figures like Lina Khan and Tim Wu have advanced a more aggressive vision of antitrust—sometimes called “hipster antitrust” or “neo-Brandeisian antitrust”—that promises to ignore these limitations and wield antitrust as a more punitive tool against big companies. The theory goes that punishing big companies will magically result in more competition, a kind of antitrust trickle-down economics. The results of the Meta and Google cases suggest that if we want more competition in the digital space, there are far better policy tools than antitrust.
Both cases — originally filed by Trump’s AG Bill Barr as part of a 2020 campaign stunt to show Trump was “taking on” the hated “Big Tech” — were subsequently pursued by the Biden FTC, with amended complaints that attempted to address the original weaknesses. But both cases ultimately revealed the same fundamental problem. The one from last week rejection of the Meta case was particularly educational.
As Judge Boasberg noted in his long and thorough opinion, the FTC’s bizarre attempt to define the market in which Meta was supposedly a monopolist failed the laugh test. Notably, the FTC emphasized that Meta’s market was only for “personal social networking” among friends and family, in an effort to prevent the continued growing success of TikTok and YouTube as competitors. For example, the FTC said that the competition for Facebook and Instagram was only the much smaller Snapchat and the barely existing MeWe.
As Boasberg noted, the FTC had to show that Meta still has a monopoly on the market to win the case, and the only way the FTC could win that argument was if TikTok and YouTube were excluded from the market definition. But that’s laughable:
The FTC states that Facebook, Instagram and Snapchat constitute a separate market that can be identified by the unique features of those apps. While these apps certainly have some distinct characteristics, they are particularly similar to two other social media apps that the FTC emphasizes should be excluded: TikTok and YouTube. Their dominant characteristics are identical: people typically use all four to view disconnected content that they can send in direct messages, industry participants agree that the apps belong to the same competitive market, they use similar resources and technologies, and they charge the same price to the same customers.
Even when considering only qualitative evidence, the court finds that Meta’s apps are reasonably interchangeable with TikTok and YouTube…. Taking all the evidence together, it appears that personal social networking is not a separate product market. Instead, Meta competes in the social media market, and that market includes – at the very least – TikTok and YouTube.
The advice repeatedly shows that Meta was terrified of the growing success of TikTok (and to a lesser extent YouTube) and continued to adapt its products (hello “Reels”) to be more like those other apps.
The court also rejected the FTC’s claim that Meta harmed consumers by making its products worse. On the contrary, according to the actual evidence:
So the FTC instead claims that Meta has degraded the quality of these apps. By offering a worse product for the same price, the agency argues, Meta has imposed the equivalent of a price increase.
However, the record shows the opposite: Meta’s apps have been continuously improved. The company has added a host of new features to Facebook and Instagram, from Stories to Reels to Marketplace…. The Court simply does not find it credible that users prefer the Facebook and Instagram apps of ten years ago to the versions that are available today
The court points to numerous natural experiments (bans, downtime, etc.) which show that many users consider Instagram/Facebook Reels to be effectively interchangeable with TikTok and YouTube Shorts.
The broader problem here is that by the time the case went to trial, the competitive landscape had already changed dramatically. Meta’s supposed monopoly was actively challenged by TikTok’s explosive growth, forcing Meta to completely overhaul its products. The FTC’s case was based on freezing the market in a timely manner and pretending that this competition did not exist.
And really, this all shows how terrible of an antitrust tool it is to deal with these markets.
The Google case—which the DOJ technically won—suffered from a similar dynamic. Judge Amit Mehta acknowledged that the market had changed significantly on its own, with Google’s search dominance challenged by AI tools such as ChatGPT. The solutions he imposed fell far short of what the government requested, precisely because the competitive threats were already emerging without judicial intervention.
This is not to say that antitrust never makes sense or that we don’t need more competitive markets. But the fact that the FTC has been converted under both administrations to focus more on punishing companies, rather than actually enacting policies that increase competition, is a problem.
Tim Wu wrote an angry response to Boasberg’s decision in the NY Times, thereby inadvertently exposing the core problem of the neo-Brandeisian approach. When you strip away the legal arguments, it all comes down to the atmosphere:
Does anyone seriously doubt that Meta is the kind of company that antitrust laws should rein in?
That gives the game away. If your antitrust case is based on “doesn’t this company feel bad?” you’re going to take shortcuts, ignore inconvenient facts like the existence of TikTok, and then fail in court.
Wu’s piece is instructive because it shows how the FTC arrived at its ludicrous market definition. He claims that Boasberg dismissed the case “in the face of strong evidence to the contrary, not to mention common sense,” but the “common sense” he appeals to is merely the intuition that Meta appears large and powerful. The actual evidence (the stuff Boasberg analyzed for pages) showed that there was robust competition that forced Meta to completely overhaul its products.
Wu even complains that recognizing TikTok and YouTube as competitors represents “strained legal thinking” because they are “adjacent markets.” But the whole point of antitrust law is to prevent companies from abusing monopoly power to prevent competition. Demonstrating that competition exists and forces the alleged monopolist to adapt its products is not a technical fact; it is proof that the market works.
There are ways to bring good antitrust cases, but you have to show that a monopoly actually exists under the law, that this monopoly is being abused by the monopolist to limit further competition and/or make products worse for consumers.
When you start from “Meta feels like a monopoly” and work backwards, you ultimately fail to make the case that the law actually requires, and that doesn’t really help enable a more competitive market. The FTC was so focused on the atmosphere and how Meta looked bad that it failed to make the factual case it needed to.
If we want real competition in the marketplace, perhaps we should stop focusing so much on antitrust laws and look at the problems that continue to hold back real competition: cleaning up broken copyright and patent laws that limit competition, fixing the CFAA that has been repeatedly used by big tech companies to stifle competition, and stop trying to pass laws that would make it impossible for smaller startups to exist because of the costs of compliance.
These would in fact allow for much greater competition, but no one wants to do the hard work to ensure that actual competition exists.
Filed Under: antitrust, competition, ftc, hipster antitrust, James Boasberg, lina khan, market definition, monopoly, social media, tim wu
Companies: google, meta, mewe, snapchat, tiktok
#antitrust #case #depends #pretending #TikTok #doesnt #exist #fail