Why Is Facebook Considered a Monopoly?

The role of big tech companies continues to come under fire from the U.S. government. After months of investigation and federal hearings, the Federal Trade Commission (FTC) along with 46 states have filed a ground-breaking lawsuit against social media giant Facebook. The lawsuit claims the company is an illegal monopoly of social media platforms and demands the company divest some of its holdings in order to allow fair market competition in the social media space.

But why, exactly, is Facebook considered a monopoly? Here’s the breadown.

Is the Issue Monopoly or Privacy?

The simple answer is that it’s both. Facebook, along with other technology companies like Google, has been part of an ongoing investigation by the FTC. The investigation has been focused on both the anti-trust violations of the companies as well as their privacy policies. Unfortunately for Facebook, they appear to have issues with both monopoly and privacy.

Earlier this year, Parentology reported that Facebook received a record fine for privacy violations and now the government has gone one step further — declaring the company’s saturation of the social media market unlawful.

No Market Share(ing)

Why Is Facebook Considered a Monopoly — Photo: Shutterstock

The issue is not just Facebook, but its ownership of Instagram and WhatsApp, which account for 3 of the top 4 most utilized social media apps globally.

The government’s lawsuit claims that Facebook’s dominance of this market makes it nearly impossible for any existing or new competitors to participate in this market space. What’s more, the suit claims it was intentional because by purchasing any significant competitors, they’ve achieved a monopoly in the social media space.

Ian Conner, who oversees antitrust at the FTC tells The New York Times, “Our aim is to roll back Facebook’s anticompetitive conduct and restore competition so that innovation and free competition can thrive.” That’s the monopoly part.

What Privacy Settings?

According to Statista, 79% of American use social media. That doesn’t account for the millions of businesses that use it for marketing and transacting. So, it’s safe to assume that social media is an integral part of most Americans’ daily lives, and they are most likely using one of Facebook’s platforms. As such, they are immediately subject to the company’s privacy regulations. Those privacy regulations have changed drastically in recent years and are also being scrutinized by the government.

When Facebook began, it billed itself as the social media platform that offered the most privacy. At that time, its settings allowed you to control who saw your profile and the company touted that they did not collect users’ private information.

However, as the company evolved so have their privacy policies. Since Facebook generates most of its revenue from ad sales, the more they know about their users, the better. Facebook now utilizes “pixel” to track users as they move through the internet—the privacy part.

“Consumer Welfare” at Stake?

Traditionally, monopolies are outlawed so companies cannot control consumer pricing and essentially charge whatever they see fit for their products or services. In the instance of Facebook, which offers all of its platforms to users at no charge, the monopoly charge is based on what the anti-trust law calls “consumer welfare.”

The claim is that consumers who want to participate in social media must succumb to Facebook’s privacy policies to do so, thus making their personal information their “payment” for participation.

“Instead of competing on the merits, Facebook used its power to suppress competition so it could take advantage of users and make billions by converting personal data into a cash cow,” New York Attorney General Letitia James stated in her press release on the pending lawsuit.

The FTC did approve Facebook’s acquisitions of both Instagram and WhatsApp. The agency now essentially seeks to reverse that decision with this lawsuit, claiming that as the social media landscape has changed, Facebook’s dominance combined with its collection of user data is now problematic.

Facebook claims that the FTC initial approval should be all that’s necessary to conduct business as usual, According to Jennifer Newstead, general counsel for Facebook, “The most important fact in this case, which the commission does not mention in its 53-page complaint, is that it cleared these acquisitions years ago.”

The battle will now take place in the courtroom and could have long-lasting impacts on other companies who trade in consumer information. According to James’ statement, “Today’s suit should send a clear message to Facebook and every other company that any efforts to stifle competition, reduce innovation, or cut privacy protections will be met with the full force of our offices.”