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Just the Beginning: Big Tech Is In for a Monopoly Reality Check

Big Tech Lawsuit

Billionaire Peter Thiel is undoubtedly scoffing his biggest scoff right about now, given his penchant for equating free-market capitalism with monopoly. 

U.S. regulators, however, beg to differ. 

The Attorneys General of 48 states and the Federal Trade Commission (FTC) this week filed much anticipated antitrust lawsuits against Facebook, alleging that the social media giant illegally pushed out competition. 

In the lawsuit, the states’ claim that Facebook bought competitors “illegally” and in a “predatory manner” in order to grow and preserve its market power. 

Attorneys general from Alabama, Georgia, South Carolina and South Dakota did not join the lawsuit. 

The FTC filed a twin lawsuit on the same allegations.  

Both are asking the courts to force Facebook to spin off Instagram and WhatsApp, as well as to seek government approval for future mergers.

In line with Facebook CEO Mark Zuckerberg’s infamous quote “it is better to buy than compete,” the company acquired its competitors, photo-sharing app Instagram for 1$ billion in 2012 and messaging app WhatsApp for $19 billion two years later. Both lawsuits claim that Facebook depended on these acquisitions to become the monopoly it is today. 

Now, more than 2.1 billion people use one of the Facebook-owned apps daily.

“Facebook has maintained its monopoly position by buying up companies that present competitive threats and by imposing restrictive policies that unjustifiably hinder actual or potential rivals that Facebook does not or cannot acquire,” the commission said in the lawsuit. 

However, Facebook pointed out in the statement the FTC approved the Instagram and WhatsApp acquisitions at the time.

“…the government now wants a do-over with no regard for the impact that precedent would have on the broader business community or the people who choose our products every day,” the company said. 

The antitrust lawsuits earned rare bipartisan support while the other players within the industry are keeping quiet. 

What happens to Facebook will be a fairly accurate barometer for the rest of the tech industry.

The bosses of Facebook, Google, Amazon and Apple testified before the Congress this summer as part of a bigger investigation into their influence on the market. 

The lawsuits have been years in the making, with the authorities recently increasing efforts to place growing tech companies under its oversight.

They come on the heels of an October report published by a U.S. House Subcommittee on Antitrust that determined that the social media giant has a monopoly. 

Again, this isn’t just about Facebook. Facebook is the test case. There will be issues with Apple, Amazon and Google, as well. 

Following a 16-month investigation into potential abuse of power by these corporate giants, the 400-page report four concludes that Big Tech companies enjoy monopoly power and suggest Congress should change antitrust laws in a way that could result in parts of their businesses being separated out. 

In particular, the report says, Congress should look at forcing "structural separations" of the companies and beefing up enforcement of existing antitrust laws.

And this isn’t an exclusively American problem. Big tech has gotten ahead of everyone and regulators the world over are having a hard time playing catch-up.  

The European Commission is also reportedly preparing new rules and regulations as it attempts to increase its own powers to counter this monopoly.

Given their size and influence, Google, Apple, Facebook and Amazon are very likely to be affected by the new rules-scheduled to be revealed later this month- designed to rebalance data control and spread the wealth.

In July this year, a landmark European Court of Justice dealt a blow to a Facebook mechanism for outsourcing data processing from the EU to the U.S. That ruling left the door open for EU regulators to throw up roadblocks if they think European data is going to unsafe locations. 

Facebook has faced criticism in recent years over its collection and use of personal data harvested from its users, as well as what content it chooses to display.

China, too, is grappling with its own tech giants, attempting, on one hand, to use them to achieve global tech dominance, and on the other hand, trying to reign them in to reduce the threat they pose to the Communist Party’s grip on leadership. We saw earlier this quarter how bold Jack Ma--founder of giant Ant Group--placed himself in the crosshairs of the Chinese government by criticizing regulators publicly. The consequence? A slate of new rules governing fintech micro-lending about to be released and the quashing of Ant’s planned IPO.  

By Fred Dunkley for Safehaven.com

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