It’s often said that if you don’t believe something, go hear it straight from the horse’s mouth. For the US Federal Trade Commission and 48 US state attorneys general leading a major lawsuit against Facebook, their investigation is looking straight to Mark Zuckerberg, the company’s controversial CEO whose incriminating words have become a new smoking gun in the fight against his monopoly power.
In a recent article published in The Conversation titled “Why Facebook Antitrust Case Relies So Heavily on Mark Zuckerberg’s Emails,” Professor Rebecca Haw Allensworth of Vanderbilt University details crucial evidence being used to challenge Facebook’s anti-competitive practices. As a legal professor with an expertise in antitrust, the report offers insight into how “internal documents can come back to haunt antitrust defendants,” noting how the case focuses on the previously covered “Wrath of Mark,” the prosecution’s legal narrative establishing Zuckerberg, the ambitious yet conniving billionaire, as the “Godfather” of Silicon Valley’s largest empire. And from what’s been presented by Allensworth, it’s understandable why the crown prince of tech will be the face of Facebook’s legal woes.
“It is better to buy than compete,” the CEO allegedly wrote in a 2008 email, according to the report. As antitrust forces call on Facebook to sell off Instagram and WhatsApp, the lawsuit also cites another 2012 email where Zuckerberg described these entities as being “very disruptive” messaging and photo-sharing apps to their business model, explaining to fellow colleagues in another email: “Instagram was our threat… but one thing about startups though is you can often acquire them.”
Allensworth goes on to note that other successful antitrust lawsuits have relied on the death of upstart competitors as proof of antitrust injustice. “The case against Facebook bears similarities to U.S. v. Microsoft, the landmark 2001 case that found the software company liable for monopolization,” Allensworth writes. “Here, the FTC will have to prove that Facebook, like Microsoft, acquired its market power in the social media market by excluding rivals, not merely by making a great product. And in both cases, internal statements by executives play a big role.”
To put this into perspective, the emails help to establish plausible criminality behind Facebook’s intent to purchase the apps. In showcasing Zuckerberg’s damning emails, in particular, the government seeks to prove it was Facebook’s key players at the top who valued swallowing up their small-time enemies as a means to maintain control, intentionally creating an undeserved hierarchy where Facebook became too big to be trusted. And if they can prove this centralized platform also produced harm towards competitors, consumers, innovation, and the entire global economy as we know it, there’s no telling how much Facebook’s empire could be torn apart.
In Facebook’s defense, their argument will be that buying Instagram and WhatsApp was always about improving technology and the greater good, pumping their own money and support into these platforms for the benefit of everyone. And for some people, this might be a compelling argument. For example, Instagram makes lovely filters, boasts a slick design, and has allowed millions of users to generate online content, be it of the artistic, comedic, or erotic variety. As far as the uninitiated know, Facebook simply sought to buy Instagram to improve it, or at least because they saw the potential for it to line their pockets down the road.
As explained by New York Times journalist Ron Chernow, however, making successful products doesn’t acquit someone of being a monopolist, “it simply affirms that they’re a very smart monopolist,” referencing Microsoft CEO Bill Gates when he tried to refute monopoly accusations due to his low-cost computers and programs. As it turns out, his defense that good outcomes require bad tactics didn’t hold much weight.
The matter of intent was also brought up by Allensworth, writing that the Zuckerberg emails will likely add fuel to the accusations that Facebook actively sought to remove its competitors for the sake of control.
“So in most monopolization cases,” Allensworth explains, “courts get stuck if they try to use only market facts to answer the ultimate question: Did the monopolist flourish because of the improvements or because of diminished competition? That’s where “intent evidence,” information about what a defendant was thinking, can help. If a CEO intended a merger to insulate her company from competition, it likely did in fact insulate the company from competition. Judges will attribute some of the company’s dominance to exclusion, and that violates the antitrust laws.”
“What I find truly remarkable about this case is not the volume of internal quotes in the complaint,” she continues, “but the paper trail a sophisticated CEO like Zuckerberg created of Facebook’s transgressions — which is now why a federal antitrust lawsuit poses an existential threat to his company.” I too share this fascination, though my critiques extend beyond just Zuckerberg. As I wrote last week, the antitrust forces at the FTC and AG offices are also looking to Sandberg, who as the COO, I consider to be the underestimated mastermind of Facebook’s financial operations. After all, what’s a powerful CEO without the money men at his side?
The lawsuit cited an internal report from 2008 in which the company identifies strong privacy controls as one of four pillars of the “Facebook Secret Sauce” to maintaining market control. The report observed that “users will share more information if given more control over who they are sharing with and how they share.”
Further information comes from a stunning email from 2011, written during the time Facebook was preparing to take on Google+, which quotes Sandberg directly:
“For the first time, we have real competition and consumers will have real choice … we will have to be better to win,” the former Google executive wrote. The complaint notes this was written back when Facebook was planning to remove users’ ability to untag themselves in photos. Executives panicked. “If ever there was a time to AVOID controversy, it would be when the world is comparing our offerings to G+,” an unspecified executive wrote, “until the direct competitive comparisons begin to die down.”
At the time, these emails seemed to show that Facebook knew that they could rake in users with the promise of better privacy settings, all the while planning to roll back those settings once they had driven competition out of the market. If this is true, the prosecution could prove intent to harm competition, consumers, and innovation — a potential scandal that, if the global markets supporting Facebook suddenly grew anxious, could have tanked one of the most centralized social media platforms in the world. Given that Facebook has continued to face worse scandals such as lobbying to crush privacy laws even after Cambridge Analytica (wherein they allowed a company to deceptively breach the data of 87 million users), it’s fair to say Facebook’s empire is built on an unstable pillar showing cracks.
But even as emperors like Zuckerberg and Sandberg swing their hammers without any clothes, is it enough to focus on internal emails? Here, Allensworth again offers some insight, playing devil’s advocate:
“Judges often say that antitrust law is interested only in the economic effects of a business’s conduct, such as whether it suppressed competition, not the motives of its executives. Critics have argued that CEOs are not economists and are sometimes prone to chest-thumping braggadocio, making their emails and other communications better for wowing juries than making an economic argument. Judges and scholars worry that juries will see all aggressive comments as evidence of exclusionary intent. But you can ‘destroy’ a competitor by outdoing him; economists call that competition.”
She cites Facebook’s employee manual which states: “If we don’t create the thing that kills Facebook, something else will.” This would be a fair argument if we weren’t talking about Facebook. Sure, you could destroy your competition by creating better products, using smarter business strategies, and naturally becoming masters of the universe, but does this really describe the Facebook empire?
After all, this is the company that used “Beacon,” an old tracking device that allowed Facebook to both monitor and record user activity when they’re off the website, abusing consumer data to outdo the competition. This was quite rich coming from a website that in 2004 rightly condemned the Myspace monopoly for its own privacy concerns. And to this day, this argument simply doesn’t fit a company who thought it best to buy Instagram and WhatsApp rather than compete with them. Sure, Facebook has made improvements to its own photo editing and messaging services over the years, allowing these platforms to compete amongst themselves, but it’s controlled opposition all the same. It’s simply a weak argument and Allensworth makes a strong rebuttal.
“Unfortunately for Facebook,” she concludes, “Zuckerberg’s emails are explicit and detailed in describing his desire to avoid competing with Instagram and WhatsApp. The court will find that relevant — and possibly damning. For example, in the months leading up to the acquisition, Facebook’s chief financial officer outlined three reasons for buying Instagram: “1) neutralize a potential competitor?… 2) acquire talent?… 3) integrate their products with ours in order to improve our service?” Zuckerberg responded, “It’s a combination of (1) and (3).” Zuckerberg goes on to explain Instagram’s competitive threat at length. By the time he gets to the product improvement explanation, he’s changed his mind. “(3) is also a factor, but in reality we already know [Instagram’s] social dynamics and we will integrate them in the next 12–24 months anyway.”
There you have it — straight from the horse’s mouth.