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Buying WhatsApp Tipped Facebook to Monopoly; Why Didn’t FTC Probe Purchase?

Anyone concerned with the anticompetitive state of digital advertising, and how to fix it, should focus like a laser on the circumstances surrounding the 2014 FTC’s pass on formally investigating if the Facebook-WhatsApp acquisition would “substantially lessen competition” under the Clayton Antitrust Act.

That obvious FTC mistake in hindsight, triggered a winner-take-all domino effect that not only tipped Facebook to a social advertising monopoly, but also tipped the overall digital advertising market to the anticompetitive digital advertising cartel that evidently predominates today.

Some brief context is helpful here. This big 2014 FTC mistake was the fourth of a pattern of big anticompetitive FTC mistakes concerning the digital advertising marketplace over the last decade.  

What Happened Since FTC Secretly Shut 2012 Google-Android Antitrust Probe?

If only the 2012 FTC appreciated “an ounce of prevention is worth a pound of cure,” the Simons-FTC would not be left to treat and contain the now evident, out-of-control, Androidopoly epidemic.

Google’s 2012 search-syndication monopoly scale has rapidly metastasized Google’s market power in scope to: Android licensable OS, Google Play app store, Google Location Services, Chrome browser, Google Maps, and YouTube video.

Lax 2013-2017 FTC antitrust enforcement has consequences.

Evident Internet Market Failure to Protect Consumer Welfare -- White Paper

Below is the executive summary of my new white paper, “Internet Market Failure to Protect Consumer Welfare,” which can be accessed here.

It is a timely and relevant submission to two different and current U.S. Department of Justice efforts to learn more about the impact of Internet-related issues.

 

1.      Submission for: the U.S. DOJ Cyber-Digital Task Force June 2018 Report to the Attorney General
 Tasked to “…ensure that Internet-based technologies remain sources of enrichment, rather than becoming forces of destruction and vectors of chaos;” and

 

The U.S. Needs Network Reality Policy

In 2003, Professor Tim Wu coined the term “net neutrality.”

Fifteen years later, it’s now time for a network reality check. That’s because net neutrality is back in the news with a quixotic Senate vote that proposes what a majority of the House and the FCC, and the President all oppose, all while rejecting real legislative proposals to enshrine net neutrality consumer protections permanently into law.   

How is network reality today different from 2003?

When net neutrality was conceived in 2003, Amazon was a company with ~$5b in revenues, Google just started generating revenues, and Facebook didn’t exist. Now America’s largest network company by annualized revenues is Amazon at $193b, not AT&T, at $160b.

The annualized revenues of the three largest edge-networks, Amazon, Google, and Facebook will likely surpass the collective revenues of the three largest ISP networks, AT&T, Verizon, and Comcast, sometime this fall.

If current revenue growth rates continue, expect Amazon, Google, and Facebook’s collective revenues to be twice that of AT&T, Verizon, and Comcast in less than three years.

That is network reality.

New FTC Faces Same Unfair Competition Problem with Google Amazon & Facebook

Note: This analysis is a response to DOJ Antitrust Chief Makan Delrahim’s public call last month for “fresh thinking” on antitrust approaches to digital platforms. He said: “…we should encourage fresh thinking on how our legal tools apply to new digital platforms. We need more thinking—diverse thinking—about these questions. And, we need a civil discourse on this topic.” “I believe that, as enforcers, we should be open and receptive to empirical evidence that companies in digital markets may be engaging in predatory pricing or other exclusionary conduct to drive out competition and cause long-run harm to consumers.”

 

Summary: Fresh Thinking on the Unfair Competition Problem of Google, Amazon, and Facebook.

Will protecting the process of fair competition be a priority of the new Simons-FTC?

Why New FTC Will Be a Responsibility Reckoning for Google Facebook Amazon

“The Responsibility Reckoning” that everyone has been witnessing over the last year evidently is finally coming to the FTC -- the Federal Government’s main Internet accountability agency in “The Era of Internet Irresponsibility” -- with the Senate confirmation of a clean slate of FTC commissioners -- Joe Simons (Chairman), Rohit Chopra, Christine Wilson, Rebecca Slaughter and Noah Phillips.

Close observers of the FTC appreciate that since Google politically shut down all five FTC antitrust probes of itself January 3, 2013, FTC antitrust and privacy accountability of Google, Facebook, and Amazon, evidently ceased, and remained dormant until yesterday’s Senate confirmation of the new FTC sheriff and deputies that will be sworn in soonest.

The facts of this de facto, 2013-2017, FTC political pardon of Internet platforms -- are overwhelming (see below.) 

Sadly, potential complainants against Google, Facebook and Amazon, got the tacit message over the last five years that the FTC’s leadership was more concerned with protecting Internet platforms’ welfare than consumer welfare, so they reasonably took their complaints to the EU.

The Huge Hidden Public Costs (>$1.5T) of U.S. Internet Industrial Policy

This post introduces a new white paper here with a first-of-its-kind, cost-estimation model of the cumulative hidden public costs of U.S. Internet industrial policy* entitled: “Internet Platform Corporate Welfare and Leechonomics.” *U.S. Internet-first, industrial policy in the 1996 Telecom Act, effectively exempted only Internet companies from: all U.S. communications law, regulation, and public responsibilities; normal non-communications Federal/State regulation; and normal civil liability for what happens via their platforms and business models.

Nutshell Summary: Sweeping Government exemptions and immunities from risks and costs overwhelmingly favor zero-sum, parasitic policy arbitrage and corporate welfare, which perversely fosters unproductive “leechonomics.” U.S. Internet policy most incents platform business that maximizes arbitrage spreads, i.e. taking maximal societal risk that un-immunized competitors can’t take, where the benefits can be capitalized by platforms, and the costs socialized to the public (>$1.5T), because the government has only exempted and immunized platforms from normal accountability and responsibility for consumer welfare. 

4 Strategic Hearing Questions for Facebook CEO Zuckerberg

 

If Congress wants to better understand how Facebook is at the center of so many privacy, data security, and consumer protection problems, Senators and Representatives have a rare opportunity to ask Facebook CEO Mark Zuckerberg the four strategic questions below, when he testifies before Congress on Tuesday and Wednesday.

 

All four are designed to help Congress understand: “How could this happen? And keep happening?

 

How Did Americans Lose Their Right to Privacy?

Americans want their right to privacy restored.

Prior to 1996, Americans had a well-established, offline right to privacy based on the Fourth Amendment of the U.S. Constitution and several strong federal privacy statutes passed in 1974, 1974, 1978, 1984, 1986, 1988, 1994, and 1996.

Facebook Fiasco Is Exactly What US Internet Law Incents Protects & Produces

One gets what one rewards and tolerates.

U.S. Internet law and policy, which exempts and immunizes Internet platforms from most normal social responsibility and government accountability, has created a de facto anti-social contract with the American people; a cheaters charter for Internet platforms; and an increasingly corrosive culture of unaccountability.

Inputs drive outputs. Favoring unaccountability, favors irresponsibility.

This latest Facebook fiasco is just the latest in a long series of Internet-unaccountability wake-up calls for Congress.

The problem here is not tech, technology, the Internet, or a business model. They are mere tools that can be used for good or for bad.

The problem here is Congress predicated 1996 U.S. Internet law and policy on the implicit utopian ideal and naïve presumption that Internet technologies and businesses would only be forces for social good and not harm.

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Q&A One Pager Debunking Net Neutrality Myths