In December 2020 the U.S. Federal Trade Commission (FTC) shocked the business and tech worlds by initiating legal actions that, if successful, would require social media giant Facebook to sell both Instagram and WhatsApp. This kind of antitrust action is essentially unheard of in the U.S. in modern times, with the last such major action occurring in 1984 with AT&T, almost forty years ago. Even more notable is that it is the FTC that is pushing the action, an organization viewed by many as overly permissive and hands-off when it comes to major business dealings. Over the past few weeks, state and federal governments have initiated suits against both Facebook and Google for abuse of their positions at the top of their respective industries, finally marking off a line in the sand on antitrust in the world of big tech.
While the details of the Google suit initiated by the Department of Justice are familiar from existing antitrust law and are essentially copy-and-pasted from a similar case against Microsoft in the late nineties, the tack taken against Facebook is an entirely new beast. Instead of pursuing the individual purchases of WhatsApp and Instagram separately, the case that the FTC is attempting to make is that both purchases fall under a larger game plan on Facebook’s part to smother competition and establish a monopoly on social media. Although this makes for an interesting case, some experts think the ambitious nature of the approach could cause issues for the agency. Judges have in the past proven reluctant to go as far as breaking up big companies, and that is precisely what the FTC will have to convince a prospective judge to do.
In an interview with Bloomberg, Joe Simons, Republican chairman of the FTC, said that breaking up what are unquestionably done deals (the Instagram and WhatsApp acquisitions were approved in 2012 and 2014 respectively) is complicated, especially in the case of Facebook which shares a vast amount of infrastructure with its subsidiaries. Despite this statement, Simons moved with the two Democratic commissioners of the FTC and voted to bring the case forward, to the chagrin of the other two Republican commissioners. Simons getting on board is a major shift from his positions in the past and his support is one of the primary factors behind why the action, which is the kind of move the agency’s Democratic commissioners have been trying to initiate for years, has finally been pushed through. Facebook naturally claims to have plenty of competition and that they operate fairly, protesting that digging up business deals this old could stymie future efforts. At least in the opinion of one former FTC chief technologist, Neil Chilson, the organization may have overreached with this particular case. The chosen strategy is untried, making the overall suit risky.
The FTC won’t be going it alone, however. Attorneys general from nearly fifty states and territories, as well as the District of Columbia, are working with the agency to bring the case to bear. This group has further pushed the limits of previous antitrust law and innovated a privacy-based argument to antitrust, an approach with few precedents, to go along with traditional price and output based arguments. The partnership between the FTC and various other state and federal legal authorities isn’t the only coalition important to these cases, either. Per a report in the Wall Street Journal, Google and Facebook have also agreed to pool their considerable resources and give each other a helping hand in the event of an antitrust investigation into their joint online advertising agreement.
In the report, it is claimed that both companies acknowledged that their partnership brought the risk of antitrust action, and strategies for dealing with such an investigation were discussed between the parties. In the suit against Google, it is alleged that executives from the company were concerned about competition from Facebook and other companies utilizing “header bidding,” a programmatic online advertising technology, ahead of the deal being made, and there is a record of Google employees expressing this concern as far back as 2016. It is a longstanding criticism of Google that their influential platforms like Google Search and YouTube have been used to take over advertising across the web, but allegations of misconduct in their partnership with Facebook are potentially a far more powerful avenue for action against the company since such claims can be easier to prove than other antitrust arguments under U.S law. Google is also undersuit in a separate action alleging anti-competitive contracts and general anti-competitive misconduct as part of a monopoly on internet search.
What does this mean for marketers?
Like any major development in the scene there are likely to be both positives and negatives regardless of the outcome. There is no doubt that Facebook and Google are advertising titans. Between YouTube, Instagram, Google Paid Search, and Facebook Ads, there aren’t many marketers operating at any scale that don’t have at least one finger dipped into a Google or Facebook-held pie. If we see substantial antitrust action taken against these companies in the future, it could mean an online marketing world that is less streamlined, but with more opportunities for large gain and pioneering. There are big rewards for starters in any industry and should viable online advertising competitors to Google and Facebook emerge, the marketers who are at the leading edge of effective advertising through these new channels would benefit greatly, at the potential cost of the accessibility and ease which comes with having to deal with only a couple major entities. In contrast, should Google and Facebook emerge victorious we might be faced with an online advertising world with more stability but fewer chances to make big moves or innovate. Whatever the outcome of these two disparate cases, they will shape U.S. antitrust law in a profound way moving forward, and you can bet that the reverberations will be felt across the advertising world.