Live on Bloomberg TV

00:00From a legal basis in your view how would you describe the essence in the case against Facebook. Well the essence is that Facebook did not acquire and grow and maintain its monopoly power by competing based on merit to outperform competitors. Instead it pursued a buy or burry strategy buying competitive threats. And for those companies that couldn't buy it would bury them with anti-competitive conduct. Now a lot of people seem to think this is just the way business is done. Perhaps that's because our antitrust laws have been very weakly enforced particularly in the tech sector. But the Clayton Act does prohibit mergers that may tend to lessen competition or create a monopoly. And the Sherman Act prohibits illegal monopolization. So the state ages sue Facebook for both of those claims and the FTC sues Facebook just for the Sherman Act violation. So Sally I mean the general assumption is that yes this is how a lot of companies act particularly in the tech space and particularly with social media and the networking effect. And there's almost an expectation of it of that for these companies act that way by investors if there is not sort of a mechanism and enforcement mechanism in the government to clamp down on this what really is stopping them because it's not really clear that there is anything there are they can stop them. Oh enforcers could definitely be stopping these illegal mergers. You know FTSE did. Look at the WhatsApp Instagram mergers. It should have taken a closer look at the time but the Clayton Act does not have any kind of a time limit. And often when an enforcer is looking at a merger what they're doing is really making guesses about the future. They may not have the evidence at that time but they have the evidence now. I'm curious though Sally when we talk about the reviews though I mean one Facebook defense that they put out there at least was the idea that these mergers were vetted before. So if the Clinton check if there wasn't anything there for it to be applied at the time why would there be something there to apply in the future. You know I think these mergers were legal at the time and the FTC didn't see the evidence didn't have enough evidence at that time. From his view to block the deals. But the evidence is now abundantly clear that they were illegal. They did tend to create a monopoly. They did substantially lessen competition. But the other important thing to remember is that the Sherman Act prohibits illegal monopolization. And what the states and the FTC are arguing is that there was a pattern of these anti-competitive acquisitions combined with anti-competitive uses of data denying any company that dared compete against Facebook access to the Friends API. That was a legal monopolization over the course of several years. So it's not just looking at the independent mergers but rather a pattern of monopolization. The Shery Ahn reaction has been pretty muted. Many knew this was coming of course but there's a feeling that they just won't be broken up. That's just too difficult to exert. And certainly when you talk to Margaret best year over in Europe she's not saying break up these companies and she's been hounding them for a lot longer than the US has a monopolistic grounds and instead exerting fines. What do you think are the more likely business model changes that could be forced upon them. I actually think a breakup is likely thanks to European enforcement efforts that have largely failed. It's become very clear to the world that these behavioral modifications just don't work. I mean kudos to Vestager for bringing those cases against Google but none of her remedies have worked. Everyone who's been involved says they're a complete failure because they were behavioral remedies. And fortunately these tech companies are too hard to modify and a behavioral way because they have way too many levers to push to distort competition. What's really needed is a structural reform. So I actually do think structural reform is what we're going to ultimately see in these cases. What do you mean by that. Structural reform. Is it like beyond just these sort of agglomeration of different businesses that is problematic or something about how our big tech giants or Facebook in particular in this case does business. Whether Instagram is part of it or not. Right well so most of the tech giants have a problem where they're both controlling the platform and competing on the platform. And so the argument for structural separation is separating out the Congress from the platform itself. With Facebook it's a little hard to understand how it does that but it does do a preferential practice of giving you know as algorithms incentivize and prioritize particular types of content. The content that makes Facebook the most money is the content that makes people click and share. So there is an issue there with picking winners and losers of content. So part of it is always about removing the incentive and ability to favor particular types of businesses or your own self over others. What's Facebook. What we really need is some competitive constraint on Facebook. You know if you look at the camera analytics scandal that angered so many people they deleted Facebook and they chose to use Instagram most night and realizing that Facebook had bought Instagram which was its number one substitute. So what we really need our independent competitors out there so consumers can have choice and we can have better innovations of how to do social networking in a way that's less harmful.

No schedule data available.

Facebook Pursued a ‘Buy or Bury’ Strategy With Its Monopoly Power: Sally Hubbard

The U.S. Federal Trade Commission took a major step toward the possible breakup of Facebook by formally filing an antitrust lawsuit against the technology giant, accusing it of abusing its monopoly powers in social networking to stifle competition. Sally Hubbard, director of enforcement policy at the Open Markets Institute and author of “Monopolies Suck", speaks with Bloomberg's Caroline Hyde, Romaine Bostick and Joe Weisenthal on "What'd You Miss?" about Facebook. (Source: Bloomberg)

More From What'd You Miss?
All episodes and clips