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How Facebook is changing to deal with scrutiny of its power

Now the world's biggest social network has started to modify its behavior - in both pre-emptive and defensive ways - to deal with those threats

Mike Isaac | NYT  |  San Fransico 

Instagram and WhatsApp are the main source of FB’s $56-bn business
Instagram and WhatsApp are the main source of FB’s $56-bn business

Senator Elizabeth Warren has called for the breakup of big tech like Regulators have opened investigations into Facebook’s power in social networking. Even one of Facebook’s own founders has laid out a case for why the company needs to be split up.

Now the world’s biggest social network has started to modify its behavior — in both pre-emptive and defensive ways — to deal with those threats.

Late last year, halted acquisition talks with Houseparty, a video-focused social network in Silicon Valley, for fear of inciting antitrust concerns, according to two people with knowledge of the discussions. Acquiring another social network after was already such a dominant player in that market was too risky, said the people, who spoke on the condition they not be identified because the discussions were confidential.

Facebook has also begun internal changes that make itself harder to break up. The company has been knitting together the messaging systems of Facebook Messenger, Instagram and WhatsApp and has reorganized the departments so that Facebook is more clearly in charge, said two people briefed on the matter. Executives have also worked on rebranding Instagram and WhatsApp to more prominently associate them with Facebook.

The social network’s changes are now prompting a debate about whether a more knitted-together Facebook, WhatsApp and Instagram is just smart business or helps strengthen potential anticompetitive practices. Mark Zuckerberg, Facebook’s founder and chief executive, has repeatedly said his company faces competition on all sides and is loath to accept a fragmented version of the social giant. He does not want to lose Instagram and WhatsApp, which are enormous and have the ability to continue fueling Facebook’s $56 billion business.

“The big question is, is this a logical business plan?” said Gene Kimmelman, a former antitrust official in the Obama administration and senior adviser to Public Knowledge, a nonprofit think tank in Washington. “For a social network with enormous growth in photos and messaging, there’s probably significant business justification for combining the units.”

But Representative David Cicilline, Democrat of Rhode Island and the chairman of the House antitrust subcommittee, said Facebook’s moves needed to be scrutinized.

“The combination of Facebook, Instagram and WhatsApp into the single largest communications platform in history is a clear attempt to evade effective antitrust enforcement by making it harder for the company to be broken up,” he said. “We need to hit the pause button.”

Facebook has pushed back on the idea that the company’s moves — particularly in private messaging — are in anticipation of a potential breakup.

“Building more ways for people to communicate through our messaging apps has always been about creating benefits for people — plain and simple,” said Stan Chudnovsky, a vice president at Facebook overseeing messaging. “People want to be able to reach as many people as they can with the messaging app they choose.”

In Washington, Facebook has its eye particularly on the Federal Trade Commission (FTC), the agency that is now investigating it for anticompetitive practices, said two of the people with knowledge of the social network.

The FTC. became interested in looking at Facebook and its power last year when the agency’s investigators were separately examining the company for privacy violations, said two people close to the process. At the time, the FTC’s investigators uncovered internal Facebook documents that prompted concerns around how the company was acquiring rivals, they said.

Facebook’s long string of acquisitions — it bought Instagram in 2012 and WhatsApp in 2014, among many others — have been targeted by academics and policymakers for reducing competition. They have argued that the company engaged in “serial defensive acquisitions” to protect its dominant position in social networking.

This year, the FTC sought clearance from the Justice Department to open an antitrust investigation into potentially anticompetitive behavior at Facebook, the people close to the process said. The FTC was cleared to do so, and notified Facebook in June. By late July, the agency had contacted at least a half-dozen founders of that Facebook had bought over the past 15 years for information on its acquisition practices, said four people with knowledge of the outreach.

Around the time that the FTC activity on Facebook ramped up, the company also stepped back on at least one potential acquisition.


©2019 The New York Times Service

First Published: Mon, August 12 2019. 22:40 IST
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