PAPERS WE’RE READING: The Antitrust Case Against Facebook: A Monopolist’s Journey Towards Pervasive Surveillance in Spite of Consumers’ Preference for Privacy

By Natalie DeCoste

The age of Big Tech is upon us, and with the ease of one-day delivery on Amazon Prime and constant communication with your friends through social media comes anticompetitive behavior from some of the world’s largest tech companies. In particular, Facebook has provided consumers with a way to stay in touch with loved ones while simultaneously subjecting its customers to broad-scale commercial surveillance by maintaining market dominance.

In her paper “The Antitrust Case Against Facebook: A Monopolist’s Journey Towards Pervasive Surveillance in Spite of Consumers’ Preference for Privacy,” Dina Srinivasan explains Facebook’s market power, lays out the relationship between privacy and antitrust economics, and explains how lawmakers could utilize the existing antitrust laws against Facebook.

In her paper, Srinivasan explores how the market developed to where Facebook effectively has a monopoly. The author explores the dynamic that, while Facebook is often referred to as a monopoly in the press and media, from an academic standpoint, the intellectual and legal case of monopoly has not yet been made. Srinivasan suggests that a legal case of monopoly has likely yet to be made because Facebook’s product is free to consumers. However, she believes the price, or lack thereof, for the service is a diversion.

Srinivasan begins her paper by explaining how Facebook became the company it is today. She highlights that Facebook was created when consumer’s privacy was paramount. However, Srinivasan points out that while privacy was once central to Facebook’s business model, consumers must now accept Facebook’s policies to use its service. This means accepting broad-scale commercial surveillance.

“Consumers effectively face a singular choice—use Facebook and submit to the quality and stipulations of Facebook’s product or forgo all use of the only social network used by most of their friends, family, and acquaintances,” she writes.

Srinivasan points out that not only does Facebook amass massive amounts of data about its users from the Facebook site itself, but it also collects data from across millions of independently owned websites and mobile applications.

The company’s market power does not end there. The company also sells advertising to marketers, which Srinivasan claims is the bedrock of Facebook’s current revenues and profits. The sale of these advertisements is designed to correlate with data derived from tracking consumers directly.

Srinivasan examines the history of social networking and Facebook to showcase how Facebook gained its market dominance. According to her, Facebook’s dominance was secured through its early reliance on the privacy rights of its users. The company managed to beat out its competition through the promise of protecting consumer privacy, including the specific promise not to track and monitor consumers’ digital footprints.

The company engaged in two failed attempts to rescind its privacy promises during the late 2000s and early 2010s. Facebook’s early attempt to track users through its “Beacon” feature resulted in petitions and class-action lawsuits. The tide changed for the company following its historic public offering and acquisitions that gave Facebook the leverage it needed to make changes.

Srinivasan utilizes the history of Facebook laid out in the first section of her paper to argue in the second part that Facebook’s ability to monitor and record consumers’ digital activity reflects its ability to extract monopoly rents in the social media market.

In part three of her article, Srinivasan examines the indirect evidence that demonstrates that Facebook has a monopoly. The author notes that direct proof of a company’s ability to act as a monopolist often is unavailable. In the absence of direct proof, circumstantial evidence of the market’s structure can indicate whether a particular firm has monopoly power. Srinivasan argues Facebook fulfills this model.

Srinivasan defines the relevant market that Facebook is in as one that only includes other social networks that consumers use interchangeably to identify the swath of other products that can restrain a company’s ability to extract monopoly rents.

The author points out in this section just how vast Facebook’s power is over the U.S. consumer. According to Srinivasan, in the U.S. alone, 210 million consumers have a Facebook account, with roughly three-fourths of those consumers using the platform at least once per day. According to her, U.S. consumers spend approximately 150 million hours per day on Facebook. Across the globe, one in every four persons has a Facebook account, meaning that when factoring in people who have access to the internet, one in every two persons that could have a Facebook account do.

One of the major contentions in the antitrust debate surrounding Facebook is if the relevant market definition should also include the company’s share of the digital advertising market. Under this definition, antitrust activists need to prove that Facebook’s actions were anticompetitive in both markets.

Next, Srinivasan moves onto whether Facebook’s pattern of behavior reaches the level of anticompetitive conduct with which antitrust law concerns itself. Here, Srinivasan argues that Facebook’s conduct, taken collectively, raises serious issues of anticompetitive practices.

According to the author, Facebook’s conduct engendered trust in consumers. However, she says history suggests that Facebook’s commitment to user privacy was disingenuous as the company eventually backed out of its privacy promises. This course of misleading conduct resulted in precisely the type of harm that antitrust law is concerned with, one in which the dominant company begins to extract monopoly rent from the consumer when competition exits the market.

The behaviors that concern Srinivasan are Facebook’s repeated misleading of consumers through false statements and deceptive conduct that benefit the company to the consumer’s detriment. The ultimate cost to consumers is widespread digital surveillance despite users’ preference to the contrary.

In conclusion, Srinivasan focuses on the widespread digital surveillance harming consumers. She claims this level of surveillance is a paradox in a democracy. According to her, American consumers value a state of no surveillance and have attempted to protect this aspect of their privacy. However, today’s free-market offers no real alternative to Facebook and its surveillance, reflecting the failure of competition.

Srinivasan argues that to correct this consumer harm and reduction of choice in the market there must be a remedy that induces competition and stops horizontal coordination. She suggests that Facebook should migrate from a closed to an open communications protocol, allowing for interoperability. Most importantly, consumers must be able to say no to commercial surveillance.

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Dina Srinivasan currently researches tech competition and policy. She is a Fellow with the Thurman Arnold Project at Yale University, and is working on the antitrust case against Google filed by the U.S. State Attorneys General. Srinivasan holds a J.D. from Yale Law School, where she studied law & economics and was an Olin Fellow with the Kauffman Program in Law, Economics, and Entrepreneurship. Srinivasan founded an ad technology company whose technology was acquired by a division of WPP, Kantar Media SRDS and spent four years as an executive there.

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