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Facebook challenges FTC’s antitrust case with Big Tech’s tattered playbook

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Facebook challenges FTC’s antitrust case with Big Tech’s tattered playbook

Facebook has challenged the FTC’s antitrust case against it using a standard playbook that questions the agency’s arguably expansive approach to defining monopolies. But the old reliable “we’re not a monopoly because we never raised prices” and “how can it be anti-competitive if we never allowed competition” may themselves soon be challenged by new doctrine and the new administration.

In a document filed today, which you can read at the bottom of this post, Facebook lays out its case with a tone of aggrieved pathos:

By a one-vote margin, in the fraught environment of relentless criticism of Facebook for matters entirely unrelated to antitrust concerns, the agency decided to bring a case against Facebook that ignores its own prior decisions, controlling precedent, and the limits of its statutory authority.

Yes, Facebook is the victim here, and don’t you forget it. (Incidentally, the FTC, like the FCC, is designed to split 3:2 along party lines, so the “one-vote margin” is what one sees for many important measures.)

But after the requisite crying comes the reluctant explanation that the FTC doesn’t know its own business. The suit against Facebook, the company argues, should be spiked by the judge because it fails along three lines.

First, the FTC does not “allege a plausible relevant market.” After all, to have a monopoly, one must have a market over which to exert that monopoly. And the FTC, Facebook argues, has not shown this, alleging only a nebulous “personal social networking” market, and “no court has ever held that such a free goods market exists for antitrust purposes.” The FTC also ignores the “relentlessly competitive” advertising market that actually makes the company money.

Ultimately, the FTC’s efforts to structure a crabbed “use” market for a free service in which it can claim a large Facebook “share” are artificial and incoherent.

The implication here is not just that the FTC has failed to define the social media market (and Facebook won’t do so itself), but that such a market may not even exist because social media is free and the money is made in a different market. This is a variation on a standard Big Tech argument that amounts to “because we do not fall under any of the existing categories, we are effectively unregulated.” After all you cannot regulate a social media company by its advertising practices or vice versa (though they may be intertwined in some ways, they are distinct businesses in others).

Thusly Facebook attempts, like many before it, to squeeze between the cracks in the regulatory framework.

This continues with the second argument, which says that the FTC “cannot establish that Facebook has increased prices or restricted output because the agency acknowledges that Facebook’s products are offered for free and in unlimited quantities.”

The idea here is literally that if the product is free to the consumer, it is by definition not possible for the provider to have or abuse a monopoly. When the FTC argues that Facebook controls 60% of the social media market (which of course doesn’t exist anyway), what does that even mean? 60% of zero dollars, or 100%, or 20%, is still zero.

The third argument is that the behaviors the FTC singles out — purchasing up-and-coming competitors for enormous sums and nipping others in the bud by restricting access to Facebook’s platform and data — are not only perfectly legal but that the agency has no standing to challenge them, having given its blessing before and having no specific illegal activity to point to at present.

Of course the FTC revisits mergers and acquisitions all the time, and there’s precedent for unraveling them long afterward if, for instance, new information comes to light that was not available during the review process.

“Facebook acquired a small photo-sharing service in 2012, Instagram … after that acquisition was reviewed and cleared by the FTC in a unanimous 5-0 vote,” reads the document. Leaving aside the absurd characterization of the billion-dollar purchase as “small,” leaks and disclosures of internal conversations contemporary with the acquisition have cast it in a completely new light. Facebook, then far less secure than it is today, was spooked and worried that Instagram may eat its lunch, so it was better to buy than compete.

The FTC addresses this and indeed many of the other points Facebook raises in a FAQ it posted around the time of the original filing.

Now, some of these arguments may have seemed a little strange to you. For instance, why should it matter if a market has no money from consumers being exchanged, if there is value exchanged elsewhere contingent on those users’ engagement with the service? And how can the depredations of a company in the context of a free product that invades privacy (and has faced enormous fines for doing so) be judged by its actions in an adjacent market, like advertising?

The simple truth is that antitrust law and practice have been stuck in a rut for decades, weighed down by doctrine that states that markets are defined by consumer good, defined as the price of a product and whether a company can increase it arbitrarily. A steel manufacturer that absorbs its competitors by undercutting them and then later raises prices when it is the only provider is a simple example, and the type that antitrust laws were created to combat.

If that seems needlessly simplistic, well, it’s more complicated in practice and has been effective in many circumstances — but the last 30 years have shown it to be inadequate to address the more complex multibusiness domains of the likes of Microsoft, Google and Facebook (to say nothing of TechCrunch parent company Verizon, which is a whole other matter).

The ascendance of Amazon is one of the best examples of the failure of antitrust doctrine and resulted in a breakthrough paper called “Amazon’s Antitrust Paradox” that pilloried these outdated ideas and showed how network effects led to subtler but no less effective anti-competitive practices. Establishment voices decried it as naive and overreaching, and progressive voices lauded it as the next wave of antitrust philosophy.

It seems that the latter camp may win out, as the author of this controversial paper, Lina Khan, is reported to soon be nominated for the vacant fifth commissioner position at the FTC. (She has not already been nominated, as this paragraph originally stated.)

Whether or not she is confirmed (she will face fierce opposition, no doubt, as an outsider plainly opposed to the status quo), her nomination validates her view as an important one. With Khan and her allies in charge at the FTC and elsewhere, the decades-old assumptions that Facebook relies on for its pro forma rejection of the FTC lawsuit may be challenged.

That may not matter for the present lawsuit, which is unlikely to be subject to said rules given its rather retrospective character, but the gloves will be off for the next round — and make no mistake, there will be a next round.

Federal Trade Commission v Facebook Inc Dcdce-20-03590 0056.1 by TechCrunch on Scribd


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FTC finds GoodRx shared sensitive health data with Facebook, Google

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FTC finds GoodRx shared sensitive health data with Facebook, Google

Illustration: Gabriella Turrisi/Axios

The FTC on Wednesday filed a court order against GoodRx for failing to notify users that it shared their personal, identifiable health data with Facebook and Google and said it would permanently ban the company from sharing such information for ads, should the court order be federally approved.

Why it matters: The court order is the first FTC action under the Health Breach Notification Rule, which requires companies to notify users when their health data is infringed upon, and includes several safeguards aimed at protecting consumer data.

  • “We’re making clear that apps violating this rule need to come clean with consumers when they share sensitive data improperly,” an FTC official said during a press briefing about the order.
  • The order must be approved by the federal court to go into effect.

Zoom in: The health data GoodRx shared with tech companies includes individually identifiable data on users’ prescription medications and health conditions. Per the complaint:

  • In August 2019, GoodRx compiled lists of users who’d purchased medications for heart disease and high blood pressure and uploaded their email addresses, phone numbers and mobile advertising IDs to Facebook so it could identify their profiles.
  • GoodRx then used that information to target users with relevant ads.

Details: The court order, filed by the Department of Justice on behalf of the FTC in California’s Northern District, found GoodRx shared data with companies including Facebook, Google, Criteo, Branch and Twilio. The order found GoodRx:

  • Monetized users’ personal health data to target them with health- and medication-specific ads on Facebook and Instagram.
  • Let third parties it shared data with use the information for research, development or advertising purposes without getting consent.
  • Misrepresented its HIPAA compliance, displaying a seal at the bottom of its telehealth site falsely suggesting it complied with the law.
  • Failed to maintain sufficient policies or procedures to protect its users’ personal health information.

State of play: GoodRx, which offers prescription discount coupons and telehealth services, lets users track their personal health data to save, track and get alerts about prescriptions, refills, pricing and medication purchase history.

  • Per the complaint, the company collects data from users themselves and from pharmacy benefit managers (PBMs) that confirm when someone buys a prescription drug using one of its coupons.
  • Since January 2017, more than 55 million consumers have visited or used GoodRx’s website or mobile apps, the complaint says.

What they’re saying: A spokesperson for GoodRx told Axios the company does not agree with the allegations, saying the order “focuses on an old issue that was proactively addressed almost three years ago.”

  • “We admit no wrongdoing,” the spokesperson said. “Entering into the settlement allows us to avoid the time and expense of protracted litigation.”

  • “Health data today isn’t just what your doctor keeps in a file behind a desk,” an FTC official said during the briefing. “And the way we’re enforcing this reflects that new reality.”
  • “We expect this to have a significant impact on the marketplace,” the official added.

Flashback: The FTC in 2021 issued a warning to health apps and others that collect or use consumers’ health information that they must comply with the Health Breach rule.

  • “We are now showing the market that we meant business when we issued that policy statement,” the FTC official said.

What’s next: In addition to charging GoodRx with a $1.5 million civil penalty and banning it from disclosing user health information for ads, the order requires that the company:

  • Direct third parties to delete the consumer health data shared with them and inform users about the breaches and the FTC’s enforcement action.
  • Get users’ consent before sharing health data with third parties for purposes other than ads and detail the types of health information it will disclose to those parties.
  • Limit how long it can retain personal health information.
  • Create a privacy program that includes safeguards to protect such data.

Of note: While the order only binds GoodRx, companies including Facebook who received the data “are on notice that they were in receipt of data that was illegally collected,” another FTC official said.

This story has been updated to include the company’s comment.

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Facebook and Google ad oligopoly is over, fund manager says

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Facebook and Google ad oligopoly is over, fund manager says

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Inge Heydorn, fund manager at GP Bullhound, discusses competition in the digital ad market, what investors will be looking for in Meta’s results, and why it’s “all about TikTok.”

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Mike Lindell Says Jimmy Kimmel Wants to Put Him in a Big Claw Machine

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Mike Lindell Says Jimmy Kimmel Wants to Put Him in a Big Claw Machine
  • Mike Lindell says Jimmy Kimmel is requesting to interview him on his show. 
  • But Kimmel had one request, Lindell said: The pillow CEO has to sit inside a giant claw machine.
  • Lindell said this is because he is unvaccinated. 

MyPillow CEO Mike Lindell says late-night show host Jimmy Kimmel had one request of him: The pillow CEO must sit inside a giant claw machine during their interview.

“A lot of you have reached out to me: ‘Mike, don’t do it, he’s going to attack you. Why did you agree to go inside a claw game?'” Lindell said during a Facebook live stream on Tuesday. Lindell is scheduled to appear on Kimmel’s talk show, “Jimmy Kimmel Live,” on Tuesday.

“Which I did, because they, you can’t go inside the studio if you’re not vaccinated. And of course, I’m not vaccinated,” Lindell added. 

“Maybe I’ll find out that that claw game was rigged, huh, the one that picks up the stuffed animals,” Lindell quipped, seemingly referencing his own baseless claims of widespread election fraud.

The pillow CEO said his appearance on Kimmel “should be very, very interesting.” He also said he was only agreeing to the interview because he thinks it will help “save our country.”

Kimmel appeared to confirm Lindell’s account, tweeting: “MyPillow Mike from a claw machine tonight!” 

 

Kimmel said on Monday that Lindell has “repeatedly” asked to be on the show, and that he’s tried to invite Lindell back many times.

Lindell’s last appearance on Kimmel’s show was in April 2021. During their nearly 20-minute conversation, Kimmel pummeled Lindell with questions about his voter fraud claims.

“A lot of people didn’t want you to come on this show. Liberals and conservatives, told me not to have you on, and they told you don’t go on the show,” Kimmel told Lindell in 2021. “But I think it’s important that we talk to each other.”

Lindell is fresh off a big loss in his race for RNC chair, where he only secured four votes.

Lindell and representatives for Kimmel did not immediately respond to Insider’s requests for comment.



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