Facebook Antitrust Suits Disregard Consumer Welfare

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Today the Federal Trade Commission (FTC) and 48 state attorneys general announced antitrust suits against Facebook, asserting the social media company’s acquisitions of Instagram and WhatsApp suppress competition.

U.S. antitrust law is based on consumer harm. That means that to justify antitrust action you would need to see higher prices or less innovation in a market being abused by a monopolist. Those standards are not met in today’s suits against Facebook.  

Prices to consumers for these apps remain at zero, with some exchange of data as compensation for services, of course. That, coupled with falling online advertising costs, means there’s not much of a case for higher prices.   

But what about less innovation? Facebook’s superior resources and expertise took Instagram from a modestly popular and glitchy app to one with a billion users as of 2018. The product was improved and its popularity indicates that consumers are happy with the results. Similarly, WhatsApp remains among the most popular apps in the U.S. Facebook clearly didn’t purchase these apps to let them sit idle or eliminate them from the marketplace. Just the opposite; Facebook expanded their features and their distribution, all to the benefit of their users.   

And how is innovation faring outside of Facebook’s acquisitions, in the broader social media space? Three of the top five apps in the Apple App Store in recent weeks didn’t exist when Facebook purchased Instagram. Parler, MeWe and TikTok all indicate that Facebook’s social media business faces fierce competition in an innovative sector. The COVID pandemic’s orders to work, learn and play at home saw newcomer Zoom dominate the video conference space and leave competitors, including Facebook’s Messenger Rooms, in the dust. Those are just some of the success stories that indicate a healthy and competitive marketplace. Consumers have more choices than ever when it comes to social media apps.

Consumers were not harmed by Facebook’s acquisitions of Instagram or WhatsApp. The marketplace is providing choice and innovation. The only real problem is the innovation that overzealous antitrust regulation prevents.