Aurelien Portuese is director of antitrust and innovation policy at the Information Technology and Innovation Foundation (ITIF). He focuses his research on the interactions between competition policy and innovation objectives. He is also an adjunct professor of law at the Global Antitrust Institute of George Mason University, and at the Catholic University of Paris.
Today’s populist antitrust climate leads to troubling claims made by rivals writing to disparage their competitors by claiming they are monopolies. Case in point: Mark Weinstein, founder of MeWe an ad-free social network competing with Facebook, who recently wrote “Facebook is a monopoly.” This rent-seeking through media attention illustrates a perplexing moment in antitrust: Companies that are victims of their rivals’ superior innovations trying to have regulators stop the rapid pace of innovation that superstar firms generate.
Indeed, the first and main argument of Mr. Weinstein’s article is that no rival can ever compete with Facebook’s newest innovation and disruptive strategy which is to become a “Metaverse company” where virtual-reality innovation would be embedded into the social platform. Because rivals such as MeWe cannot compete with these innovations and technologies, Facebook should be considered a monopoly and be broken up and micromanaged by regulators, the argument goes.
This argument is tantamount to destroying the barometer to ignore that competition is heating up: Innovation is and should remain the regulators’ barometer. When rivals attempt to weaponize antitrust rules to destroy the innovation barometer, the dynamism of markets and the merits of competition tumble down.
Consider Mr. Weinstein’s second argument against Facebook: The platform remunerates too well its content creators. Facebook plans to provide its content creators with $1 billion per year. Rival TikTok to Facebook’s “monopoly” (sic!) only spends $200 million. Content creators and influencers would of course be delighted with Mr. Weinstein’s proposal to give them less money for the sake of giving a leg up to MeWe. It’s not a race to the top for social benefits. It’s a race to the bottom for unfair egalitarian reasons benefitting the few (rivals such as MeWe) and harming the many.
The third argument of Mr. Weinstein is no better: Facebook remunerates news outlets around the world based on a share of the revenues generated by Facebook News. These payment agreements should be banned, according to Mr. Weinstein, since MeWe neither has the reach nor the financial ability to contract with “hundreds of major news outlets worldwide.” Foregone the consumer benefits of accessing digital journalism, foregone the benefits of news outlets to adapt to digital technologies and remain viable: The world MeWe advocates is a world where a company cannot start a service with some partners (Facebook News) while ensuring that these partners have a fair share of the gains. It’s not a win-win situation MeWe advocates for; it’s a lose-lose situation.
It is especially ironic that Mr. Weinstein cries monopoly, while citing competitors such as TikTok, Twitter, Snapchat, and others. Indeed, in the amended complaint against Facebook filed on August 19, 2021, the Federal Trade Commission (FTC) had to define the market for Facebook so narrowly that it hardly corresponds to market realities. The FTC defined the market “personal social networking services” (PSNS), where the FTC awkwardly ignores TikTok, Twitter, and YouTube as rivals of Facebook. This is to reach the contestable conclusion that Facebook enjoys 60 percent of the market share of PSNS. In reality, Facebook inevitably competes with those companies, but also LinkedIn, iMessage, WeChat, etc…so that the market share of Facebook plausibly falls below 50 percent. This hardly makes Facebook a “monopolist.”
One can argue that the real market Facebook operates into is not so much the market of social media platforms but rather the advertising market from where it derives its revenues and from where the ad-free MeWe refuses to derive revenues. Then, the assessment of Facebook’s market share in the digital advertising market alone proves to make an even weaker case for the Facebook-as-monopoly allegory. Facebook’s digital ad market share represents 25.2 percent in 2020, thereby hardly making the company a dominant company for antitrust purposes. Antitrust does not find monopoly power whenever a firm enjoys 25 percent of the market share.
Complaints by rivals that antitrust needs to be transformed only because their competitors are excessively innovative and engage in fierce competition would lead antitrust not to protect competition but to protect (inefficient) competitors at the expense of American consumers. As the Department of Justice once wrote, “mere harm to competitors—without harm to the competitive process—does not violate Section 2” of the Sherman Act—the foundations of antitrust laws.
More fundamentally, neo-Brandeisians who disdain large companies and inefficient rivals have a common objective: To protect business, rather than consumers and the overall economic welfare.