On Wednesday, the US Federal Trade Commission and 48 US state attorneys general filed major lawsuits that argue that Facebook is a monopoly whose anti-competitive practices harm Americans. The lawsuits attempt to frame “the wrath of Mark” Zuckerberg, the social media giant’s ambitious yet conniving CEO, as the true “Godfather” of Silicon Valley’s largest empire. A new email shows lawmakers should also set their sights on Sheryl Sandberg, the underestimated COO who just dropped their smoking gun.
So how did Facebook fall from grace?
The case cites 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. In diplomatic terms, the report observed, “Users will share more information if given more control over who they are sharing with and how they share.” This dynamic further informs the 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.”
The emails show both that Facebook knew that they could rake in users with the promise of better privacy settings and that they could roll back those settings as they succeeded in driving competition out of the market.
In a 2019 paper titled “The Antitrust Case Against Facebook,” legal scholar Dina Srinivasan hypothesized that Facebook came into the market against the privacy-lacking MySpace, only to become the very thing it destroyed. This email is the smoking gun to the paper’s central argument that the company will only preserve user privacy when it fears competition and degrades such privacy when it doesn’t — a clear and present example of monopolistic danger for consumers and competitors.
Only this was wishful fulfillment, as proven by Facebook’s record thereafter.
Srinivasan reminds us that Facebook’s infamous “glory days” were in a time dominated by MySpace. Founded in 2003, MySpace was the so-called “internet darling” following the dot com bust of 2001. For two years the social media giant was in the midst of a heated bidding war between two media conglomerates, Rupert Murdoch’s News Corp. and Sumner Redstone’s Viacom. This resulted in an acquisition by News Corp. for over $580 million dollars. Heading into 2006, MySpace soon overtook Google to become the most visited website in the U.S. with a hundred million users, according to the report. And by 2007, MySpace signed a $900 million advertising deal with Google. Lots of competition remained, but none had prevailed as the new top dog… yet.
“Journalists referred to the next generation not as ‘millennials,’ but as the ‘MySpace generation’ And though it looked as though MySpace had tipped the scales, and that it would inevitably become the de facto social media platform, it would not,” Srinivasan concludes. Facebook certainly needed its own money man, even if its chief executive wasn’t actively looking. In late 2007, Zuckerberg was fortunate enough to meet Sandberg at a friend’s Christmas party, describing the former Google executive as “a perfect fit” for the role of their new Chief Operating Officer, maintaining control over the site’s “sales, marketing, business development, human resources, public policy, and communications,” according to Facebook.
By all accounts, Sandberg was to become the brains behind making Facebook profitable, even if Zuckerberg was to indeed remain the company face. Under Zuckerberg and Sandberg’s combined guidance, the Facebook of 2007 later saw growing momentum in the marketplace, soon trying to aid their rise through an initiative known as “Beacon,” an old tracking device which allowed Facebook to both monitor and record user activity when they’re off the website, clearly attempting to keep tabs on users in order to utilize their consumer data. Beacon was immediately controversial, publicly reporting your purchase habits on friends’ NewsFeeds without concrete consent.
At the time, Zuckerberg called it a “mistake” (once the criticism started to fly), though Srinivasan argues its failure was “evidence of what competition demanded of Facebook from a privacy perspective.” After all, where does Facebook stand today? After rivals like MySpace exited the digital stage as the dunce of social media, Facebook had less to fear, opting to reengage such measures under the name “Pixel,” which is essentially the same tracking service as Beacon only expanded to its billion users and without the annoying newsfeed posts. They’ve allowed companies such as Cambridge Analytica to deceptively breach the data of 87 million users. They’ve even lobbied to crush privacy laws designed to prevent such abuses in the future. If you look even on the surface, Facebook is no innocent actor when it comes to privacy, and their apologetic words mean little in the face of their predatory actions.
Data is the very profit motive behind Facebook’s power, as argued by New York Attorney General Letitia James who leads the 48-state lawsuit team. At a press conference, James accused Facebook of “using its vast troves of money” to “reduce choices, stifle innovation and degrade privacy protections for millions of consumers,” according to Deadline. The lawsuit alleges Facebook deliberately acquired smaller rivals like Instagram and WhatsApp to quash competition and that it uses its monopoly position to erode privacy for users. The company itself boasted in 2011 that “Facebook is now 95% of all social media,” informing us why Google’s entry into the social media space scared their executives.
Am I accusing Sanderberg of hatching these schemes all by herself? No. Unlike her faux-feminist toe suckers, let’s not attribute too much credit to a single girl-boss executive. Facebook is the total sum of its executives, programmers, advertisers, clients, and even its users to a certain extent. But it is odd that in private, Sandberg perfectly embodies Facebook’s new economic culture ever since becoming their financial savior in 2007, all the while the rest of her colleagues walk down this path hand-in-hand without question. It’s just a matter of whether the states and FTC, facing an institutional battle where an indoctrinated judiciary favors big business, can prove this culture has culminated in substantive harm.
“Part of an antitrust case is to show anticompetitive harms, and because this is a market where users aren’t paying for the product, diminished quality is a really important measure of anticompetitive harm,” added Charlotte Slaiman, a former FTC lawyer and the director of competition policy at Public Knowledge. I would argue this framing is flawed, particularly as the privacy argument can show how even if the product is free, users are paying the price in another form. If successful, the great $800 billion enterprise could see limits to their control over data, including on Instagram and WhatsApp, or could even be broken up to allow new entrants the ability to compete. “We really want Facebook to have to compete based on the quality of their product,” she said.