Facebook co-founder Chris Hughes penned a much-discussed op-ed last week calling to break up the tech giant. Anti-competitive acquisitions by Facebook, he argued, should be banned and unwound under existing antitrust law and the social-networking business should be split apart due to its overwhelming market dominance. A new governmental regulatory structure, Hughes added, is required to control the baleful effects the tech industry is having on not just markets but also civil society.
Hughes’s admonition comes as Senator Elizabeth Warren has made antitrust concerns about Facebook—and other major tech platforms like Amazon and Google—a primetime political issue. Other 2020 Democratic presidential hopefuls, like Pete Buttigieg and Kamala Harris, have now indicated a willingness to explore the same policy.
As a formerly-avid Facebook user who dropped the social media platform cold-turkey a year ago, I share Hughes’ confessed “anger” at the company, though not his confessed “responsibility.” But while some of his prescriptions are on-point, others are misguided, unnecessary, and, in the case of his proposed government authority to regulate online speech and content, downright dangerous.
Competition laws arose originally in response to consolidation by John D. Rockefeller, who came to control 90% of the oil industry by buying up competitors and controlling the pipelines and railroads that moved oil, thereby allowing him to price remaining competitors out of the market. As Hughes points out, antitrust enforcement lamentably went out of fashion with the Reagan administration and the rise of laissez-faire economics. We’re now experiencing another Age of Concentration that stifles innovation and produces widening inequality, declining social mobility, and growing threats to individuals’ freedom and autonomy.
The proclivity of all would-be monopolists—like Rockefeller, Bill Gates, and Mark Zuckerberg—to buy out potential competitors is well-recognized as a danger to a free economy, but the dominance of a small number of Internet platforms today is breathtaking: Facebook and Google account for so much of the digital advertising market that Forbes flat-out calls them a duopoly. Amazon, meanwhile, accounts for half of all e-commerce. As Hughes points out, potential innovators cannot attract needed investment to get off the ground because investors know that a behemoth like Facebook will ensure that, one way or another, they die in the cradle. This kind of horizontal consolidation—the snuffing out of rivals on the same playing field—should be limited to protect competition.
So, too, should “vertical” integration, which has historically involved a manufacturer acquiring control over its supply chain—or, for a virtual market-maker like Amazon, controlling consumer access by producers of competing products—thereby hurting competing suppliers and sometimes putting them out of business completely. The monopoly producer then becomes a monopolist purchaser, squeezing higher profit margins from customers and suppliers alike by shutting down competition on both sides of the market.
Hughes’ proposal, like Warren’s, would roll back some acquisitions made by tech platforms with revenues above $25 billion (the FANGs—Facebook, Amazon, Netflix, and Google), and force these companies to choose between selling products and operating the marketplaces where these products are sold. That’s badly needed. But while splitting off Facebook’s horizontal consolidation with Instagram and WhatsApp is similarly justified, Facebook’s vertical consolidation threat is much subtler, and requires a subtler solution. Facebook doesn’t need to be broken up: It needs to be broken into.
In his op-ed, Hughes dismissed the notion that Facebook is a “natural monopoly,” but that conflates Facebook the service with Facebook the underlying utility. It doesn’t make sense to lay a different phone line or sewer pipe from a different provider to each separate home in a neighborhood—there should be just one. In this sense, natural monopolies reflect the physical constraints of the world in which we live. But there’s another cause of natural monopoly relevant in our increasingly-virtual world: so-called “network effects.” A network, by definition, is more valuable to each user the more members there are. A successful network thus tends to crowd out other, smaller competitors until it’s the only one left. Zuckerberg’s crushing of the independent Baylor University social network in Facebook’s early, college-centric days is a classic example.
This, however, actually points to what should be done with Facebook now that it has achieved Zuckerberg’s long-time goal of total global domination. As Zuckerberg has understood from the beginning, there probably needs to be one underlying social-network architecture to which everyone connects. But there doesn’t need to be only one social-networking provider.
I deleted Facebook for all of the reasons for which Facebook has been in the headlines the last two years. But there’s much I miss about it, specifically the ability to keep in touch on a regular basis with lots of people I otherwise wouldn’t—and now don’t. Unfortunately, as Hughes writes, when you leave Facebook, where else can you go? Well, there are would-be competitors to Facebook, such as Hashtiv, Diaspora, and Vero. They offer greater data privacy, ownership of your own data, the ability to control your own newsfeed, and what ads you see, if any. But so far as I know, none of my friends even know these exist, let alone use them. So, while I like all those features far more than Facebook’s, I can’t go there to socially network with anyone else I know.
But there’s a way that I—and all of us—could: by doing with social networking what we did with telephone networks. The answer is to require interoperability between Facebook’s platform and any other social-networking companies. If I choose to use, say, Hashtiv as my social-networking provider, I should still be able to connect to and access posts by my friends on Facebook, and vice versa, just as I can use my Android phone on Verizon’s phone system to talk with my friends who use Apple phones on the T-Mobile network. Which is why we don’t need to break up Facebook’s social-networking service into three or four smaller Facebooks—we need, rather, to break open its platform to equal use by anyone else.
That would lead to the growth of numerous other social-networking options—not through government mandate, but through freedom of innovation and choice. The underlying network may be a natural monopoly, and should be treated and regulated as such. Facebook’s service model, however, certainly is not. It should be forced to compete.
The most problematic part of Hughes’s prescription is his call for a government agency to regulate social media content in response to growing concern over the hate, division, and falsehood being fostered online today. But social media doesn’t need less freedom—it needs more.
To be sure, all the dominant social media platforms today promote emotion over analysis, virality over lasting value, controversy over consensus, anger over amity. They are deliberately addictive, anxiety-inducing, and depression-producing because that has been found to increase “engagement,” allowing platforms to pry out every quantum of their users’ private information and psychological insight possible to manipulate them and channel their choices.
These ill effects that are antithetical to democracy and civic culture stem wholly from the dominant business model these industry titans have so far devised. These are features of these platforms and the business models of these companies—not of the underlying technologies themselves. Social media, as a technology, is not inherently dystopian. Rather, companies like Facebook have intentionally engineered social media to be the way that it is. This is the world that tech companies have chosen for us. But we don’t need to settle for it. We need to give people the ability to choose different tech companies.
Other companies could develop other business models and other products based off the same technologies. A number are already doing so; you’ve probably just never heard of them. What’s holding them up is the FANGs’ imperviousness to market pressures, and their ability to thwart competition.
Where we really need to start, then, is not with breaking up the FANGs so much as giving other business models a chance to overtake them by opening up their underlying networks. That way, people can exercise their autonomy in a flourishing market free of deception, manipulation, and disinformation. Who could be against that … except, perhaps, Mark Zuckerberg?