10 State AGs Join Forces, Will Sue To Stop T-Mobile Sprint Merger

from the bigger-ain't-better dept

While the FCC has indicated it's more than eager to approve T-Mobile's $25 billion merger with Sprint (despite an endless list of red flags), other regulators have proven to be a harder sell. The DOJ, for example, seems a bit sheepish on signing off on a deal that will reduce already semi-tepid US wireless competition by 25%. They're correct to worry: US telecom is awash with examples of how such consolidation tends to devastate employment, and results in significantly higher rates for consumers and businesses alike.

Granted with the DOJ now run by former Verizon attorney Bill Barr, it's still very possible the DOJ approves the deal anyway. But even then, the deal is going to have to get past a new coalition of 10 state attorneys general, who say they've joined forces and will file a lawsuit to block the deal whether the DOJ approves it or not. New York Attorney General Letitia James and California Attorney General Xavier Becerra were fairly blunt in a statement announcing the move:

"When it comes to corporate power, bigger isn’t always better,” said Attorney General Letitia James. “The T-Mobile and Sprint merger would not only cause irreparable harm to mobile subscribers nationwide by cutting access to affordable, reliable wireless service for millions of Americans, but would particularly affect lower-income and minority communities here in New York and in urban areas across the country. That’s why we are going to court to stop this merger and protect our consumers, because this is exactly the sort of consumer-harming, job-killing megamerger our antitrust laws were designed to prevent."

While everybody is certainly welcome to their own opinions when it comes to tech policy, there's really not much of a debate when it comes to the impact mindless M&As have had on the telecom sector.

Comcast (and it's comically terrible customer service) was born from the mindless sector obsession with growth for growth's sake. This consolidation, especially in wired broadband, has left us with a clearly unhealthy sector with little real competition, resulting in some of the highest prices and slowest speeds in the developed world. There's not a single telecom metric the US isn't mediocre in, and it's a direct reflection of two things: regulatory capture and mindless merger mania. That's now being extended to wireless, where the reduction of overall competitors from four to three will dramatically reduce any incentive to, you know, actually try.

It's also pretty clear that when government tries to "fix" these anti-competitive unions via condition, it rarely works out well. The conditions imposed in these deals are often flimsy and proposed by the companies themselves (usually because they know they don't actually do much). Even then, companies are routinely free to ignore conditions without meaningful penalty, and many bipartisan incarnations of the FCC have simply refused to enforce them anyway. Pre-merger promises (and there's plenty attached to the T-Mobile deal) aren't worth the paper they're printed on, yet US policymakers adore pretending otherwise.

With former Verizon lawyers running both the FCC and DOJ, the chance that this administration imposes and then enforces tough deal conditions is slim to none. That leaves the more simple option: blocking the deal entirely. Some variant of this deal has been blocked twice already (AT&T's attempted T-Mobile acquisition in 2011, and Sprint's attempted merger in 2014), and for obvious reasons. Still, T-Mobile and Sprint executives are hoping that the Trump administration opens the door wide to approval anyway, leaving it (yet again) up to state AGs to actually protect the market and consumers in the face of federal apathy.

Filed Under: antitrust, california, doj, mergers, new york, state ags
Companies: sprint, t-mobile

Trump Whines About AT&T, Ignores His FCC Has Spent Two Years Kissing The Company's Ass

from the ill-communication dept

While there are countless news outlets that justifiably criticize the President, Trump has long been particularly fixated on CNN. So fixated, in fact, that it's believed this disdain for the network (in addition to Rupert Murdoch's competitive desires) played a starring role in his DOJ's bungled effort to try and block AT&T's $86 billion merger with CNN parent company Time Warner.

This week, Trump doubled down once again, proclaiming that the public should stop using AT&T services as punishment for CNN's criticism of the President:

The tirade resulted in a fairly feeble effort to get the #DumpATT hashtag trending on Twitter, and some consternation and furrowed brows among journalists who took the rambling Tweet a bit too seriously.

The irony here, at least if you're an adult who has actually paid attention to this administration's policies, is that AT&T has received a near-endless list of favors from Trump's administration, many of which it's not entirely clear that Trump is even aware of. In fact, AT&T has probably received more regulatory handouts from this administration than any other administration in American history. Which, if you tracked the favors doled out by Bush-era FCC boss Michael Powell (now the top lobbyist for the cable industry), that's saying something.

AT&T was a massive beneficiary of the Trump tax cuts, now saving $3 billion annually in perpetuity. According to AT&T, that money was supposed to go back into the company's network and employees, but instead resulted widespread layoffs. Trump's FCC also gave AT&T a massive regulatory handout when it helped kill broadband privacy protections, killed net neutrality rules with popular bipartisan support, and voluntarily eroded its own authority over ISPs like AT&T at lobbyist behest. Trump's FCC has also routinely turned a blind eye to AT&T scandals like its failure to police location data sales.

There's countless other favors AT&T has gleaned from the Trump administration as well, whether it's the FCC decision to weaken the very definition of broadband competition or the killing of plans to bring more competition to the cable box. The Trump administration fealty to AT&T is so severe, we're at the point that when reporters contact Trump's FCC for information, they've occasionally been directed to US Telecom, a lobbyist organization spearheaded by... AT&T.

People tend to look at the Trump DOJ's decision to sue to thwart the Time Warner merger (which again had more to do with helping Rupert Murdoch and hurting CNN than any disdain for AT&T) as a sign of Trump's "opposition" to AT&T, but you'd be pretty hard pressed to find a company that's done as well under Trump as CNN's new parent company. That quickly forgotten $600,000 AT&T's lobbyists paid now-imprisoned Trump lawyer Michael Cohen for broader access to the administration seems to have been money well spent.

The entire fracas once again highlights how Trump's Twitter tirades are only tangentially related to reality, and very rarely tethered to his administration's actual policies. In fact, based on his comments on net neutrality, it's not really clear the President of the United States has the foggiest understanding of what his own FCC is doing. If Trump really wanted to hurt AT&T and CNN, a good first step would probably be to stop kissing the Dallas-based telecom giant's massive, monopolized ass.

Filed Under: antitrust, doj, donald trump, fcc, oversight, regulations, subsidies, telcos
Companies: at&t

If 'Big Tech' Is a Huge Antitrust Problem, Why Are We Ignoring Telecom?

from the ill-communication dept

Over the last week or so, Google, Amazon, and Apple have all taken a significant beating on Wall Street amidst rumblings of looming antitrust investigations by the DOJ and FTC. Google, we're told, is subject of a looming antitrust probe by the DOJ. Amazon, we've learned, is facing growing scrutiny from the FTC. Apple stock also did a nose dive on the news that it too may soon be subject to a significant new antitrust probe.

On its surface, many of these actions aren't all that surprising. After all, experts have noted for a decade than US antitrust enforcement has grown toothless and frail, and our definitions of monopoly power need updating in the Amazon era. Facebook's repeated face plants on privacy (and basic transparency and integrity) have only added fuel to the fire amidst calls to regulate "big tech."

Oddly missing from coverage from these probes is the fact that much of this behavior by the Trump administration may (*gasp*) not be driven by a genuine interest in protecting markets and consumer welfare. For one, it's hard to believe that an administration that has shown it's little more than a rubber stamp for sectors like telecom is seriously worried about monopoly power. Two, it's hard to believe an administration obsessed with nonexistent censorship is going to come at these inquiries with integrity, and not, say, as a vessel to pursue a pointed partisan persecution complex.

I've been arguing for a while that while many of the calls to regulate big tech are driven by genuine worries about monopoly power, a lot of it is being driven by the telecom sector. For years now, telecom lobbyists and policy folks have been using the anger over Facebook to covertly call for heavier regulation of Silicon Valley. You see, these telecom lobbyists, who just got done convincing the Trump administration to neuter FCC oversight of their own natural monopolies, are looking for any advantage they can get as they try to compete with companies like Google in the online ad space.

This is how former FCC boss turned cable lobbyist Michael Powell put it at a recent conference:

"Our governmental authorities need to get a handle on what kind of market power and harm flow from companies that have an unassailable hold on large pools of big data, which serve as barriers to entry, allowing them to dominate industries throughout the economy. For years, big tech companies have been extinguishing competitive threats by buying or crushing promising new technologies just as they were emerging. They dominate their core business, and rarely have to foreclose competition by buying their peers. Competition policy must scrutinize more rigorously deals that allow dominant platforms to kill competitive technologies in the cradle."

If you've watched as telecom giants have crushed every and any competitive threat by buying state and federal government, this entire paragraph should be fairly amusing to you. Powell's clients couldn't care less about anti-competitive behavior. What they do want is, again, for government to erect regulatory barriers that hamper the Silicon Valley companies whose ad revenues giants like AT&T and Comcast have drooled over for the better part of the last fifteen years. In the Trump administration they've finally found a vessel for this agenda.

The problem, of course, is there's enough legitimate bipartisan worry about the power of big tech that this little telecom sector lobbying gambit has been able to fly under the radar as the real driver of this new Trump administration push. Even with former Verizon lawyers now at the head of the DOJ (Bill Barr) and the Trump FCC (Ajit Pai). But there's a reason the Trump administration ignores telecom's monopoly and privacy issues while amplifying Silicon Valley's, and I'd argue it has a lot more to do with protectionism than a genuine worry about healthy markets.

If you were remotely serious about addressing the US' monopoly and antitrust problems, there's no way you'd simply ignore telecom. Giants like AT&T and Comcast already enjoy natural monopolies over the on ramp to the internet. They've then increasingly hoovered up countless media companies as they also position themselves to dominate the media flowing over those connections. This conflict and the potential for anticompetitive behavior sits at the heart of the net neutrality debate. Now, giants like AT&T want to become the next Google, with data harvesting plans every bit as problematic if not more so.

Yet again, notice how telecom gets a free pass by the Trump administration? Notice how Silicon Valley is demonized, but telecom's surveillance and anti-competitive gambits see zero backlash? I don't think it's happenstance that this new Trump "big tech" antitrust push comes as big telecom has asked for just such a push to aid its own competitive agenda. A lot of folks on both sides of the political aisle who'd like to see more done to rein in "big tech" seem a touch oblivious to the possibility that this new antitrust push may not be entirely in good faith.

There's a good chance these antitrust inquiries into Google, Facebook, and Apple are little more than partisan fever dreams co-driven by telecom lobbyists, yet a lot of outlets and experts are acting as if market health and consumer welfare are genuine motivators. It's entirely unclear what the Trump administration did to suddenly earn this blanket trust, but as the net neutrality fracas and trade wars have made pretty clear, it sure as hell isn't its several year track record on coherent tech policy.

Filed Under: antitrust, broadband, competition, doj, ftc, monopoly, telcos
Companies: amazon, apple, facebook, google

Qualcomm Used Patent Monopolies To Shake Down The Entire Mobile Phone Industry For Decades

from the and-we-all-suffered dept

Just a few weeks ago, Qualcomm and Apple settled a massive patent dispute on the eve of a trial. In the run-up to the settlement, Apple had made a really compelling case that Qualcomm's practices involve blatant abuse of its patents to jack up prices to insane levels and to limit any real competition. Just recently we wrote about how media-tracking giant Nielsen was abusing patents for anticompetitive purposes, but they looked like blatant amateurs compared to Qualcomm. As we noted in that post, our founding fathers worried quite a bit about the impact of patent monopolies and how they would stifle innovation and competition. James Madison said:

"But grants of this sort can be justified in very peculiar cases only, if at all; the danger being very great that the good resulting from the operation of the monopoly, will be overbalanced by the evil effect of the precedent; and it being not impossible that the monopoly itself, in its original operation, may produce more evil than good."

And Thomas Jefferson, who grudgingly ran the patent system for a while (and where he tried to institute rules to prevent abuse) seemed to regret the entire concept of patents:

... generally speaking, other nations have thought that these monopolies produce more embarrassment than advantage to society; and it may be observed that the nations which refuse monopolies of invention, are as fruitful as England in new and useful devices.

But one quote regarding such monopolies that sticks most with me is that of UK Parliament member Thomas Macauley, who gave a famous speech in 1841, in which he declared:

Sir, that I may safely take it for granted that the effect of monopoly generally is to make articles scarce, to make them dear, and to make them bad...

He further noted that if there is a case that the only way to remunerate people is through such a monopoly they may grudgingly be granted, but warns of the evil this will enable if allowed to do more than incentivize the original creation:

It is good that authors should be remunerated; and the least exceptionable way of remunerating them is by a monopoly. Yet monopoly is an evil. For the sake of the good we must submit to the evil; but the evil ought not to last a day longer than is necessary for the purpose of securing the good.

I'm thinking about these quotes, yet again, in relation to Qualcomm. Just a month after settling the lawsuit with Apple, a federal judge in an ongoing antitrust lawsuit filed by the FTC, laid out in massive detail just how evil Qualcomm has been in using its monopoly powers to stifle innovation and competition. The 283-page ruling is incredibly damning -- and if you don't feel like reading the whole thing, Tim Lee over at Ars Technica has an only slightly shorter summary of just how Qualcomm's shake down scam worked.

I read every word of Judge Koh's book-length opinion, which portrays Qualcomm as a ruthless monopolist. The legal document outlines a nearly 20-year history of overcharging smartphone makers for cellular chips. Qualcomm structured its contracts with smartphone makers in ways that made it almost impossible for other chipmakers to challenge Qualcomm's dominance. Customers who didn't go along with Qualcomm's one-sided terms were threatened with an abrupt and crippling loss of access to modem chips.

"Qualcomm has monopoly power over certain cell phone chips, and they use that monopoly power to charge people too much money," says Charles Duan, a patent expert at the free-market R Street Institute. "Instead of just charging more for the chips themselves, they required people to buy a patent license and overcharged for the patent license."

Qualcomm -- which it should be noted has been one of the most aggressive agitators against patent reform (and sometimes in favor of making patent law much, much worse) -- is basically the world's largest patent troll, and it loved every minute of it.

Qualcomm's patent licensing fees were calculated based on the value of the entire phone, not just the value of chips that embodied Qualcomm's patented technology. This effectively meant that Qualcomm got a cut of every component of a smartphone—most of which had nothing to do with Qualcomm's cellular patents.

"Qualcomm charges us more than everybody else put together," Apple executive Jeff Williams said. "We've never seen such a significant licensing fee tied to any other IP we license," said Motorola's Todd Madderom.

And, of course, Qualcomm leveraged its position to hold everyone over a barrel:

These high royalties reflected an unusual negotiating tactic called "no license, no chips." No one could buy Qualcomm's cellular chips unless they first signed a license to Qualcomm's patent portfolio. And the terms of these patent deals were heavily tilted in Qualcomm's favor.

Once a phone maker had signed its first deal with Qualcomm, Qualcomm gained even more leverage. Qualcomm had the right to unilaterally terminate a smartphone maker's chip supply once the patent licensing deal expired.

"If we are unable to source the modem, we are unable to ship the handset," said Motorola executive Todd Madderom in a deposition. "It takes many months of engineering work to design a replacement solution, if there is even a viable one on the market that supports the need."

That made Qualcomm's customers extremely vulnerable as they neared the expiration of a patent licensing deal. If a customer tried to negotiate more favorable terms—to say nothing of formally challenging Qualcomm's patent claims in court—Qualcomm could abruptly cut off the company's chip supply.

And, of course, Qualcomm used this power to crush the competition and stamp out any kind of non-Qualcomm innovation.

Qualcomm's first weapon against competitors: patent licensing terms requiring customers to pay a royalty on every phone sold—not just phones that contained Qualcomm's wireless chips. This gave Qualcomm an inherent advantage in competition with other chipmakers. If another chipmaker tried to undercut Qualcomm's chips on price, Qualcomm could easily afford to cut the price of its own chips, knowing that the customer would still be paying Qualcomm a hefty patent licensing fee on every phone.

Also notable: right after Apple and Qualcomm settled their legal dispute in April, Intel announced it was exiting the mobile 5G chip space, and admitted it was entirely because of that settlement:

“In light of the announcement of Apple and Qualcomm, we assessed the prospects for us to make money while delivering this technology for smartphones and concluded at the time that we just didn’t see a path,” [Intel CEO Bob] Swan said.

And the ruling a month later made clear, Qualcomm's patent attack against Apple was very much driven by fear of competition from Intel:

Freed of Qualcomm's chip supply threat, Apple began to challenge Qualcomm's high patent royalty rates. Qualcomm responded by cutting Apple off from access to Qualcomm's chips for new iPhone models, forcing Apple to rely entirely on Intel for the cellular chips in its 2018 models. Qualcomm sued Apple for patent infringement in courts around the world, while Apple pressed the Federal Trade Commission to investigate Qualcomm's business practices.

And, of course, Qualcomm has long used its patents to directly stifle any competition as opposed to the indirect versions described above:

Chipmakers are ordinarily expected to acquire patents related to their chips and indemnify their customers for patent problems. But Qualcomm refused to license its patents to competitors, putting them in a difficult position.

"The prevailing message from all of the customers I engaged with was that they expected us to have a license agreement with Qualcomm before they would consider purchasing 3G chipsets from MediaTek," said Finbarr Moynihan, an executive at chipmaker MediaTek.

If a chipmaker asked to license Qualcomm's patents, Qualcomm would only offer a promise not to sue the chipmaker itself—not the chipmaker's customers.

As Tim Lee highlights, Qualcomm was so comically evil in executing this plan, it literally laid out the details of how to starve MediaTek (MTK) in a PowerPoint presentation:

This is summarized in the judge's opinion:

The slide includes the strategy “make sure MTK can only go after customers with WCDMA SULA,” with an arrow leading to “Reduce # of MTK’s 3G customers to ~50.”... The next strategy is “Formulate and execute a GSM/GPRS strategy to destroy MTK’s 2G margin & profit,” with an arrow to “Take away the $$ that MTK can invest in 3G.” .... Thus, Qualcomm’s refusal to license MediaTek was designed to (and in fact did) limit MediaTek’s customer pool and reduce MediaTek’s revenue base to invest in future cellular generations.

There's a LOT more in the ruling by Judge Lucy Koh and it basically lays out a road map of pure evil by Qualcomm, allowing it to skim a ton of (literal) monopoly rents off the entire mobile phone market, even when its own innovations were a minimal part of that market -- while at the same time abusing its patent position to deliberately stifle competition and innovation. The court order says that Qualcomm needs to renegotiate its licenses, and can no longer use its "no license, no chip" deals that block customers from buying Qualcomm chips if they don't have a license.

Of course, Qualcomm won't go down without a fight, and has announced that it's appealing the ruling. So this will go on for some time. But if you ever want a pure example of the "evil" created by excessive patent monopolies, Qualcomm is about as pure an example as you can find.

Filed Under: antitrust, extortion, licensing, lucy koh, mobile phones, monopolies, no license no chips, patents, shake down
Companies: apple, intel, mediatek, qualcomm

Nielsen Using Patent Monopolies To Act Like A Monopolist

from the seems-a-bit-questionable dept

For many years, we've highlighted how patents are monopolies and they provide monopolistic power. Indeed, the founders of the US recognized this. James Madison was quite skeptical:

"But grants of this sort can be justified in very peculiar cases only, if at all; the danger being very great that the good resulting from the operation of the monopoly, will be overbalanced by the evil effect of the precedent; and it being not impossible that the monopoly itself, in its original operation, may produce more evil than good."

Jefferson was similarly dubious of the need for patents:

... generally speaking, other nations have thought that these monopolies produce more embarrassment than advantage to society; and it may be observed that the nations which refuse monopolies of invention, are as fruitful as England in new and useful devices.

Eventually, Jefferson was convinced to support such a system -- and even reluctantly ran it for a while -- but he did so with great concern about how these "monopolies" could hinder actual innovation.

Fast forward a couple centuries, and let's look at the case of Nielsen. You know, the company that "measures" freaking everything. Once synonymous with television ratings and "Nielsen homes," it has expanded into other entertainment measuring markets over time -- and has certainly had something resembling a monopoly during much of that period -- and it has often used patents to retain that monopoly. And this goes back a very, very long time.

In the 1940s, Nielsen worried about a competitor taking away its "exclusive" market and used patents to kill it off:

The challenge to Nielsen's meter monopoly was too real to be taken lightly. Charles Wolcott, a top executive of A.C. Nielsen wrote to Mr. Nielsen: "I fail to see how we can turn our backs on the possibility that RADOX could complicate our situation--that is, if RADOX continues to develop, we are no longer exclusively the proud possessors of measurement by electronic means." It did not take Nielsen long to move. RADOX was vulnerable on two fronts--patent and finance--and each front was quickly attacked. Regarding patents, it turned out that both parties had patents pending, and the U.S. Patent Office ultimately declared "interference" existed. Nielsen's major thrust, Sindlinger maintained, was to use the cloudy patent situation to chill the interest of the investor group in any financing help for RADOX.

Years later, Nielsen's son more or less admitted that his father talked investors out of supporting Sindlinger and the RADOX system:

A man by the name of Ralph Bard Sr. who lived in Chicago and had been Secretary of the Navy called on my father. He was considering investing in Sindlinger’s operation and asked my father for his opinion of the company. My father wrote him a letter concluding that Sindlinger’s device would not be a success. In short, in my father’s opinion, this would not prove to be a good business.

A little over a decade later, the FTC actually had to go after Nielsen for using its patents to pressure competitor Arbitron, leading to a consent decree:

A patent infringement suit brought by Nielsen also arguably deflected ARB from competing head-to-head with Nielsen in network television ratings with its Arbitron instantaneous audience measurement system in the late 1950s. More recently, to deal with measurement of cross-platform viewing, Nielsen has used acquisition to build its intellectual property portfolio and continues to use litigation to slow down its competitors.

While the outcome of patent disputes may be uncertain, litigation or licensing undertaken to protect and/or monetize patents does not itself present unusual legal reisk to the patent holder. Such risk does adhere, however, if the patent was fraudulently acquired or was leveraged to extend beyond its rightful metes and bounds. The FTC found Nielsen guilty of such misconduct leading to a 1963 consent decree. Two of Nielsen's business practices that violated the FTC Act were (1) the systematic use of patent proceedings "to discourage potential and actual competitors from developing and using... devices for... measuring... audiences... and has attempted to impede and sabotage the financing of these competitive efforts.

So what does something that happened more than 50 years ago have to do with today? It appears that Nielsen has continued to leverage this particular playbook. First, Nielsen freely admits that it holds a monopoly in the ratings game:

Neither party disputes that Nielsen exercises monopoly power over the television audience measurement services industry, both nationally, for the United States as a whole, and for 210 local markets

And it's still using patent claims to stifle competition. Back in 2016, Nielsen bought Gracenote for $560 million just three years after it had been sold for $170 million. Just what could have represented so much value for Nielsen? Well, just a couple months before Nielsen bought Gracenote, Gracenote had sued a company called Sorenson Media for patent infringement. Sorenson Media had an "automatic content recognition" ACR platform for measuring viewers of TV broadcasting -- exactly the market Nielsen wishes to maintain its monopoly over.

How did that turn out? Well, Sorenson declared bankruptcy last fall (in large part due to an incredibly stupid contract it had signed), but I'm sure the cost of a patent lawsuit didn't help. Oh, and in February, Nielsen bought up Sorenson's assets at firesale prices.

And that's not all. Last year another small competitor, ErinMedia, sued Nielsen, claiming antitrust violations and that Nielsen was using "predatory practices designed to prevent competitive entry by companies like ErinMedia." A few weeks later, the company announced that it was effectively shutting down, noting that Nielsen had "chilled" its ability to close an investment round.

Oh, and remember Arbitron? The company that was at issue back in the 1960s? Nielsen bought them a few years back, leading the FTC to put some conditions on the deal in hopes that it would not "substantially lessen competition." So far that doesn't seem to be working.

And that brings us to the latest Nielsen use of patents against an upstart competitor. Last fall, Nielsen sued upstart competitor Samba TV, claiming patent infringement. The patents at issue -- 9,066,114, 9,479,831 and 9,407,962 -- all are incredibly vague and generic, and appear to be the kind of patents that aren't supposed to be allowed in a post-Alice world.

As Samba notes in its motion to dismiss, nothing here should have been patented in the first place:

For centuries, families and friends have gathered for plays and concerts—and more recently, for television and radio programming. Most silently observe. But others, often because they are already familiar with the programming, offer commentary: about the director, the actors, or the scenes. Some react to the content in order to enhance it: a lawyer presenting an animation typically offers comments at preplanned moments; or a theater employee may need to adjust lighting or curtains at the conclusion of certain scenes. The process of recognizing parts of a video, song, or other content and reacting—either instantly or at a later time (e.g., during a commercial break)—is not patentable. It is an abstract concept involving the three main stages of memory: processing, storage, and retrieval. Alice Corp. Pty. v. CLS Bank Int’l, 134 S. Ct. 2347, 2356 (2014) (a “method of organizing human activity” is not eligible for patenting).

Gracenote’s patents claim abstract concepts without contributing any new inventive technology to achieve them. Instead, the claims merely use existing technologies—technologies Gracenote does not even claim to have invented—as tools to carry out the concepts. The ’114, ’831, and ’962 patent claims use identifiers, called fingerprints, to recognize portions of audio or video signals and trigger responsive actions at predetermined times during the playback, such as providing information about a scene at its conclusion. The patents, however, do not purport to have invented fingerprints or even an improved fingerprinting technique. Using known fingerprinting technology as a tool to perform the abstract concept of signal recognition and reaction is patent-ineligible under 35 U.S.C. § 101.1

And yet, whether or not the court recognizes this and throws out the case, this lawsuit still might be effective in basically stifling a competitor's ability to even exist in the market. As James Madison once warned: "the monopoly itself, in its original operation, may produce more evil than good."

Filed Under: antitrust, arc, ftc, monopoly power, patents, tv tracking
Companies: arbitron, erinmedia, gracenote, nielsen, samba tv, sorenson

DOJ Staffers Think T-Mobile's Merger Benefit Claims Are Nonsense

from the merge-ALL-the-things! dept

While the FCC announced this week it would unsurprisingly be a rubber stamp for Sprint and T-Mobile's proposed $26 billion merger, the DOJ still isn't buying the companies' claims that further consolidation of the wireless sector will be wonderful for competition and American consumers. Reports this week surfaced that DOJ staffers were still recommending that the agency block the $26 billion merger, based on fears that the deal would reduce market competition and likely result in higher prices overall:

"The U.S. Justice Department’s antitrust division staff has recommended the agency file a lawsuit to block T-Mobile US’s $26 billion acquisition of smaller rival Sprint, according to two sources familiar with the matter. The final decision on whether to allow two of the four nationwide wireless carriers to merge now lies with political appointees at the department, headed by antitrust division chief Makan Delrahim."

History and antitrust data is pretty clear on this point: when you reduce the overall number of major competitors in telecom, the end result is almost always higher prices, fewer jobs, and worse service. Growth for growth's sake may be wonderful for investors and executives over the short term, but over the longer term it's immensely harmful. You need only look at the US Telecom sector; one of the most despised, uncompetitive, and aggressively terrible sectors in all of American industry. That we refuse to learn that mindless consolidation is harmful directly reflects our refusal to learn from history.

Time and time again, telecom companies promise that somehow this merger will finally fix the universe of problems caused by... mindless merger mania. And time and time again, these telecom giants fail utterly to follow through on their promises, using the reduction in competition (and regulatory apathy) to jack up prices and lag on innovation and network expansion.

The fact that T-Mobile CEO John Legere plays a hip Millennial on Periscope and sometimes says "fuck" on Twitter doesn't change this equation. A major reason T-Mobile was so competitive and disruptive is (and "government is incapable of ever doing good" folks like to ignore this bit of history) that the DOJ blocked AT&T's attempted 2011 acquisition of the company, a decision based not only on the evidence that such consolidation would hurt consumers, but because the companies involved made a wide variety of merger benefit claims that were downright preposterous.

The DOJ did the same thing in 2014 when Sprint and T-Mobile tried to merge, again pointing to data in numerous international markets showing such consolidation raises prices and harms competition. The only reason we find ourselves once again in the same position is because T-Mobile and Sprint executives want to take advantage of the Trump administration's almost mindless belief that letting industry do whatever the fuck it wants somehow results in near-mystical outcomes (the exact kind of thinking that gave us Comcast in the first place).

While DOJ staffers are advising blocking the deal, that doesn't mean Delrahim will actually listen to them (especially if Trump applies pressure), or will do a good job in court defending consumers from mindless merger mania should the DOJ decide to sue.

Delrahim has been an odd duck to nail down in terms of antitrust enforcement. It's true that his DOJ sued to stop the AT&T Time Warner merger, but only after Rupert Murdoch (for his own competitive reasons) heavily pressured Trump to demand it. And while his antitrust enforcers' efforts to outline the obvious perils of that deal were hamstrung by ever-narrowing US antitrust guidelines and a ridiculously myopic ruling by U.S. District Court Judge Richard Leon, many of Delrahim's wounds were self-inflicted (like failing to mention net neutrality as essential competitive context at any point during the trial or appeal).

If the FCC and DOJ both wind up approving the deal, numerous State AGs have said they'll sue to prevent it from succeeding. That said, it's still pretty abundantly clear that America has no intention of learning from history and experience. We collectively hate Comcast, but there's still a sizeable segment that hasn't realized telecom's monopoly problems (and resulting price hikes, atrocious customer service, and patchy availability) are thanks to two things: our collective gullibility when it comes to merger mania and empty merger promises, and regulators and lawmakers that are either too timid or politically compromised to do the right thing and defend healthy markets, competition, and American consumers.

Filed Under: antitrust, competition, doj, fcc, merger
Companies: sprint, t-mobile

Supreme Court Says iPhone Users Can Pursue Antitrust Claims Against Apple Over App Store

from the could-get-intereseting dept

Earlier today, the Supreme Court ruled (mostly as expected, though with some caveats) in Apple v. Pepper, a case concerning whether or not iPhone users could sue Apple for antitrust concerning how it controls pricing in the iOS App Store. Most of the news on this focuses either on how this could have a big impact on Apple and other marketplaces, or on how this case (somewhat oddly) split between the two Justices appointed by President Trump, with Justice Kavanaugh writing the majority opinion (joined by Justices Ginsburg, Breyer, Kagan, and Sotomayor) and the dissent written by Justice Gorsuch (joined by Justices Roberts, Thomas and Alito).

It will be interesting to see how this plays out, but my first impression is that this case may not prove to be that big of a deal long term. It is not saying anything, really, concerning whether or not Apple's practices are an antitrust violation. It is merely letting a case go forward. And, to some extent, I think that Justice Gorsuch may be correct that all that this case will end up doing in the long run is getting Apple and other platforms to change their contracts in terms of how the money flow officially goes.

The key in this case is that Apple sought to have the antitrust case tossed, saying that iPhone owners were not the "direct purchasers" from Apple, and thus had no standing to sue. An earlier case, Illinois Brick v. Illinois, said that only direct purchasers could sue for antitrust violations, rather than those further down the supply chain. Here, the majority said that Illinois Brick doesn't exclude iPhone users, because they did, in fact, make the purchase from Apple, and thus were "direct purchasers."

The plaintiffs purchased apps directly from Apple and therefore are direct purchasers under Illinois Brick. At this early pleadings stage of the litigation, we do not assess the merits of the plaintiffs’ antitrust claims against Apple, nor do we consider any other defenses Apple might have. We merely hold that the Illinois Brick direct-purchaser rule does not bar these plaintiffs from suing Apple under the antitrust laws.

This does seem fairly straightforward, but Apple's counter-argument was that, as the market controller, it is merely setting the percentage fee that goes back to Apple, and not the actual price of the app:

Apple’s theory is that Illinois Brick allows consumers to sue only the party who sets the retail price, whether or not that party sells the good or service directly to the complaining party. Apple says that its theory accords with the economics of the transaction. Here, Apple argues that the app developers, not Apple, set the retail price charged to consumers, which according to Apple means that the consumers may not sue Apple.

The majority rejects this ruling, saying that it is not actually supported by the law (which says that injured parties can sue), that Apple is stretching the meaning of the Illinois Brick ruling from one about "direct purchasers" to one about "who sets the price," and finally that under Apple's interpretation of the rule, any market operator could strategically structure their market to avoid being liable to any antitrust effort:

...if accepted, Apple’s theory would provide a roadmap for monopolistic retailers to structure transactions with manufacturers or suppliers so as to evade antitrust claims by consumers and thereby thwart effective antitrust enforcement.

The dissent, by Gorsuch, more or less suggests that this ruling, as opposed to the reverse, is actually what will allow market operators to avoid antitrust, just by strategically structuring deals in a different way:

To evade the Court’s test, all Apple must do is amend its contracts. Instead of collecting payments for apps sold in the App Store and remitting the balance (less its commission) to developers, Apple can simply specify that consumers’ payments will flow the other way: directly to the developers, who will then remit commissions to Apple. No antitrust reason exists to treat these contractual arrangements differently, and doing so will only induce firms to abandon their preferred—and presumably more efficient—distribution arrangements in favor of less efficient ones, all so they might avoid an arbitrary legal rule.

This is why, frankly, I'm not convinced this case is that big of a deal, despite some general concerns that people have raised about the ruling. As a gut reaction, it does seem to make sense that those injured by supposedly monopolistic behavior should have the right to sue over that harm, but this ruling seems more technical than anything else, and is fairly early on in the process of what appears to be a very long case that has no end in sight. Apple, and other large companies, would obviously have liked to have seen it go the other way, and to face less of a threat of antitrust lawsuits from the users of the markets they set up, but that, alone, isn't a sensible reason for blocking these cases.

For what it's worth, if I were Apple, I would preempt this issue entirely by no longer requiring that the App Store be the only way to get apps on the phone. Google allows competing marketplaces on Android, but they really don't get much usage -- in part because Google (correctly) notes that you're likely to have better security by going through the official Google Play store, rather than alternatives. However, it has still allowed alternatives, and a few of them (including Amazon's) have been able to build up a niche in the market.

Filed Under: antitrust, app store, brett kavanaugh, direct purchaser, ios, neil gorsuch, standing, supreme court
Companies: apple

Facebook Co-Founder Chris Hughes Calls For Facebook's Breakup... But Seems Confused About All The Details

from the details-matter dept

Lots of folks are talking about a new opinion piece in the New York Times by Chris Hughes, one of the small group of college buddies of Mark Zuckerberg who are often called "co-founders" of the company. Hughes left pretty early, and has dabbled (unsuccessfully) in politics and (unsuccessfully) in media. The key point of the opinion piece is obvious from the title: It's Time to Break Up Facebook.

It is absolutely worth reading and thinking about. It's also does not make a very compelling argument. It does seem to have people who already think Facebook should be broken up declaring that it's a compelling argument, but that's because it's confirming their prior feelings, not because of anything in the article. To be clear: I'm actually on the fence about the idea of breaking up Facebook. I've previously discussed why I think Elizabeth Warren's plans to break up all of the big internet companies don't make sense, but as a short version, my main issue is that I'm not sure any of these plans actually solve the problems people think they will solve (for a debate on this, listen to my podcast with Cory Doctorow where he and I disagreed over this point).

Facebook's value comes from the fact that it's a global service in which everyone can reach everyone. So, you couldn't break up "Facebook" in a way that separates the company into, say, geographic regions or that limits the overall reach of the company. Instead, most of the focus is on splitting off some of its big acquisitions, mainly Instagram and Whatsapp, to create "competing" social media and messaging platforms. Again, I'm not totally against this idea -- it's the cleanest possible setup and at the very least would create some greater competition -- but I'm not convinced that it actually solves any of the "problems" people are really concerned about, such as the company's sucking up lots of data on everyone and (sometimes) exposing some of that data to those who shouldn't have it. It is possible that a broken up Facebook faces more competitive pressure to be a better actor in the space, but I'm not really sure how true that is. For all the claims of people being concerned about privacy, their own actions don't show that in practice. If people were truly concerned about these issues, we'd see more movement to other kinds of platforms, but we haven't yet seen that.

So, I'm not convinced that cleaving off Instagram and Whatsapp would necessarily be bad, but I'm equally confused as to how it would actually help deal with any of the concerns people normally raise.

That's my bias. Now, let's dig into Hughes' piece.

Mark’s influence is staggering, far beyond that of anyone else in the private sector or in government. He controls three core communications platforms — Facebook, Instagram and WhatsApp — that billions of people use every day. Facebook’s board works more like an advisory committee than an overseer, because Mark controls around 60 percent of voting shares. Mark alone can decide how to configure Facebook’s algorithms to determine what people see in their News Feeds, what privacy settings they can use and even which messages get delivered. He sets the rules for how to distinguish violent and incendiary speech from the merely offensive, and he can choose to shut down a competitor by acquiring, blocking or copying it.

This opening is the most compelling argument in the piece. Perhaps by controlling all three of those platforms, Zuckerberg does have too much power over the internet as a whole. But, again, I'm not convinced that splitting up those companies truly changes things in any significant way. There are, already, plenty of competitors to Whatsapp. And Whatsapp already offers end-to-end encryption, so the "privacy" concerns people usually scream about aren't nearly as present with that platform. There are (reasonable) concerns about the spread of disinformation on Whatsapp, but that seems to have little to nothing to do with Facebook's dominance and power. Before everyone was screaming about disinformation on Whatsapp, they were doing the same about Telegram, a program not owned by Facebook.

Mark is a good, kind person. But I’m angry that his focus on growth led him to sacrifice security and civility for clicks. I’m disappointed in myself and the early Facebook team for not thinking more about how the News Feed algorithm could change our culture, influence elections and empower nationalist leaders. And I’m worried that Mark has surrounded himself with a team that reinforces his beliefs instead of challenging them.

Again, that's a valid criticism of Zuckerberg and his top execs, but it's unclear how breaking up the company solves any of that. The "influencing elections" and "empowering nationalist leaders" aspect doesn't rely on the fact that Facebook owns three separate platforms. It is based on the reach of those platforms -- which wouldn't be broken up via antitrust anyway. And, of course, there are lots of other platforms with global reach as well. So, breaking up Facebook doesn't... actually... change any of the things Hughes says he's concerned about.

The government must hold Mark accountable. For too long, lawmakers have marveled at Facebook’s explosive growth and overlooked their responsibility to ensure that Americans are protected and markets are competitive.

Accountable for what? For reflecting the fact that there are awful people in society? And that those people will abuse systems for power? It's a cheap shot to blame Facebook for awful people. And Facebook's "responsibility" is not to make sure people are "protected" (whatever that means) or that "markets are competitive." We may value both of those things (and we should), but if you think they're somehow Facebook's responsibility, then that leads to a much larger discussion about fiduciary responsibility and how public companies are measured and valued. That may actually be a really important and relevant discussion, but it's an entirely separate discussion from whether or not Facebook should be broken up.

Sense a pattern here? Hughes is certainly highlighting some societal issues that have been exposed and arguably exacerbated by Facebook. But he fails to explain how breaking up the company actually tackles those problems. It's the same old "we must do something, this is something, we will do it!" kind of argumentation that gets us into trouble so often.

After Mark’s congressional testimony last year, there should have been calls for him to truly reckon with his mistakes. Instead the legislators who questioned him were derided as too old and out of touch to understand how tech works. That’s the impression Mark wanted Americans to have, because it means little will change.

Again, Hughes is pointing fingers in semi-random places. Is it Facebook's fault that Congress didn't bother to educate itself or figure out how to ask good questions? If that's the problem, then (again!) the solution has little to do with breaking up Facebook, but reforming the political system or (at the very least) how Congress is educated on tech issues.

We are a nation with a tradition of reining in monopolies, no matter how well intentioned the leaders of these companies may be. Mark’s power is unprecedented and un-American.

It is time to break up Facebook.

I'd argue that this kind of power is both extremely precedented and extremely American, but fair enough. What's still lacking is how "breaking up Facebook" actually solves any of the problems.

America was built on the idea that power should not be concentrated in any one person, because we are all fallible. That’s why the founders created a system of checks and balances. They didn’t need to foresee the rise of Facebook to understand the threat that gargantuan companies would pose to democracy. Jefferson and Madison were voracious readers of Adam Smith, who believed that monopolies prevent the competition that spurs innovation and leads to economic growth.

America also has a long, long history of having tremendous power concentrated in just a few people. Sometimes those companies get broken up by antitrust, and sometimes they don't. I also agree that monopolies can be quite dangerous and am all for the proper application of antitrust to break up abusive monopolies. But this opinion piece does little to reckon with the larger question: is the problem Facebook or is the problem humanity, when connected. It points to the latter and assumes the former. But if the problem is humanity, then that's a different discussion, and one that is not solved by breaking up Facebook.

A century later, in response to the rise of the oil, railroad and banking trusts of the Gilded Age, the Ohio Republican John Sherman said on the floor of Congress: “If we will not endure a king as a political power, we should not endure a king over the production, transportation and sale of any of the necessities of life. If we would not submit to an emperor, we should not submit to an autocrat of trade with power to prevent competition and to fix the price of any commodity.” The Sherman Antitrust Act of 1890 outlawed monopolies. More legislation followed in the 20th century, creating legal and regulatory structures to promote competition and hold the biggest companies accountable. The Department of Justice broke up monopolies like Standard Oil and AT&T.

This is all true and something that many in the "break up Facebook" crowd like to repeat, but they fail to recognize that Facebook is a very, very different kind of beast. It's not price-fixing. It's not a monopoly in the sense of Standard Oil or AT&T (the latter of which had a literal monopoly in that there were no other phone companies). On the internet, there are lots of other players. And while it's true that Facebook has bought up a few competitors, there remain many more. And it's quite easy for many more to pop up as well. Indeed, the continual beating that Facebook has received over the past few years seems to be inspiring a bunch of new competitors seeking to provide better solutions.

Starting in the 1970s, a small but dedicated group of economists, lawyers and policymakers sowed the seeds of our cynicism. Over the next 40 years, they financed a network of think tanks, journals, social clubs, academic centers and media outlets to teach an emerging generation that private interests should take precedence over public ones. Their gospel was simple: “Free” markets are dynamic and productive, while government is bureaucratic and ineffective. By the mid-1980s, they had largely managed to relegate energetic antitrust enforcement to the history books.

This shift, combined with business-friendly tax and regulatory policy, ushered in a period of mergers and acquisitions that created megacorporations. In the past 20 years, more than 75 percent of American industries, from airlines to pharmaceuticals, have experienced increased concentration, and the average size of public companies has tripled. The results are a decline in entrepreneurship, stalled productivity growth, and higher prices and fewer choices for consumers.

So, uh, just to be clear, the two industries he directly cites as evidence of the "gospel" of free markets--airlines and pharmaceuticals--are two of the most heavily regulated industries in existence. Neither are anything even remotely like a free market. And, at least in the airline space, the elements of deregulation that have occurred have in fact created significant competition in the market, including much lower airfare than what was there before. I do think there are arguments that crony capitalism, regulatory capture, bad intellectual property laws and more have contributed to the concentration of megacorps, but it's difficult to argue with a straight face that it's "free markets" that are the problem here. Also, the "higher prices" argument doesn't exactly apply to free social media services, now does it?

The same thing is happening in social media and digital communications. Because Facebook so dominates social networking, it faces no market-based accountability. This means that every time Facebook messes up, we repeat an exhausting pattern: first outrage, then disappointment and, finally, resignation.

"The same thing" being higher prices? Again, the services are free to users. And the price of advertising keeps going down and down. Not up. And, yes, the outrage over Facebook's regular fuck-ups don't seem to lead to a grand exodus, but that might have more to do with the fact that most people aren't as concerned about the impact of those fuck-ups as the media and politicians are.

Facebook’s dominance is not an accident of history. The company’s strategy was to beat every competitor in plain view, and regulators and the government tacitly — and at times explicitly — approved. In one of the government’s few attempts to rein in the company, the F.T.C. in 2011 issued a consent decree that Facebook not share any private information beyond what users already agreed to. Facebook largely ignored the decree. Last month, the day after the company predicted in an earnings call that it would need to pay up to $5 billion as a penalty for its negligence — a slap on the wrist — Facebook’s shares surged 7 percent, adding $30 billion to its value, six times the size of the fine.

Ignoring the consent decree is a real problem. But how does breaking up Facebook change that? How does it make the company any more likely to abide by the FTC's rules?

For the next part, let me pull together two separate paragraphs that are a few paragraphs apart in Hughes' piece, but should be read together:

It was this drive to compete that led Mark to acquire, over the years, dozens of other companies, including Instagram and WhatsApp in 2012 and 2014. There was nothing unethical or suspicious, in my view, in these moves.

[....]

The F.T.C.’s biggest mistake was to allow Facebook to acquire Instagram and WhatsApp. In 2012, the newer platforms were nipping at Facebook’s heels because they had been built for the smartphone, where Facebook was still struggling to gain traction. Mark responded by buying them, and the F.T.C. approved.

The moves were not unethical or suspicious... and yet the FTC made a big mistake by not blocking them? I've argued elsewhere that Zuckerberg's internalization of Clayton Christensen's concept of "The Innovator's Dilemma" is what caused him to effectively overpay for both Instagram and Whatsapp, recognizing that rapidly growing competitors could present the kind of disruptive innovation that would undermine Facebook in the first place. The fact that he mostly let those companies run independently (until recently) seems to confirm that.

And that leaves us again wondering if the critique here is of Facebook, or the nature of technological change and innovation? If we want to establish as a policy goal that new disruptors always kill off older companies, that's one view that perhaps makes sense, but might also lead to other troubling consequences and should be carefully considered. If the new position is that Facebook (and Google and Amazon and Apple) should never be allowed to acquire startups, there are deeper impacts to the competitive ecosystem. For example, that makes it that much more difficult for startups to exit, which means it will be more difficult for them to raise money in the first place. In other words, if the policy is to stop large internet companies from acquiring small ones to increase competition, it might actually decrease competition by shutting off the market for capital funds to make those companies viable in the first place.

None of this is to say that we should just let Facebook continue on its merry way. I get that the company is quite powerful and in a position to fuck up lots of stuff (which it regularly seems to do). But a remedy for the sake of a remedy, without any understanding of the wider impact, is bound to cause problems.

When it hasn’t acquired its way to dominance, Facebook has used its monopoly position to shut out competing companies or has copied their technology.

The News Feed algorithm reportedly prioritized videos created through Facebook over videos from competitors, like YouTube and Vimeo. In 2012, Twitter introduced a video network called Vine that featured six-second videos. That same day, Facebook blocked Vine from hosting a tool that let its users search for their Facebook friends while on the new network. The decision hobbled Vine, which shut down four years later.

And yet YouTube still dominates the video side, and Vimeo still appears to be going strong. Yes, Facebook's practices concerning video have been obnoxious, but for whatever "market power" it supposedly has, it didn't work against YouTube.

Snapchat posed a different threat. Snapchat’s Stories and impermanent messaging options made it an attractive alternative to Facebook and Instagram. And unlike Vine, Snapchat wasn’t interfacing with the Facebook ecosystem; there was no obvious way to handicap the company or shut it out. So Facebook simply copied it.

So, um, competition worked?

(There is little regulators can do about this tactic: Snapchat patented its “ephemeral message galleries,” but copyright law does not extend to the abstract concept itself.)

It is difficult to take anyone seriously when they confuse patents and copyright.

As markets become more concentrated, the number of new start-up businesses declines. This holds true in other high-tech areas dominated by single companies, like search (controlled by Google) and e-commerce (taken over by Amazon). Meanwhile, there has been plenty of innovation in areas where there is no monopolistic domination, such as in workplace productivity (Slack, Trello, Asana), urban transportation (Lyft, Uber, Lime, Bird) and cryptocurrency exchanges (Ripple, Coinbase, Circle).

This seems like a very simplistic view of the market. There have been a bunch of new entrants in e-commerce and search (and even in parts of social media). Not all have been successful, but direct competition is never going to excite investors in the first place. It's always the indirect competitors who represent the true disruption. The newer markets have more competition for now because they haven't shaken out yet, but it seems likely that they will also over time.

Facebook’s business model is built on capturing as much of our attention as possible to encourage people to create and share more information about who they are and who they want to be. We pay for Facebook with our data and our attention, and by either measure it doesn’t come cheap.

And, again, splitting off Instagram and Whatsapp don't change that one bit. If you want to force Facebook to change its business model that is, again, a different discussion.

The vibrant marketplace that once drove Facebook and other social media companies to compete to come up with better products has virtually disappeared.

I literally had a phone call this morning with a company looking to "disrupt" Facebook with a totally different approach. Just because Chris Hughes doesn't know these companies exist doesn't mean they don't.

The most problematic aspect of Facebook’s power is Mark’s unilateral control over speech. There is no precedent for his ability to monitor, organize and even censor the conversations of two billion people.

Facebook engineers write algorithms that select which users’ comments or experiences end up displayed in the News Feeds of friends and family. These rules are proprietary and so complex that many Facebook employees themselves don’t understand them.

I'm going to sound like a broken record (for those of you young enough to remember what that means) but how does breaking up Facebook solve this?

How would a breakup work? Facebook would have a brief period to spin off the Instagram and WhatsApp businesses, and the three would become distinct companies, most likely publicly traded. Facebook shareholders would initially hold stock in the new companies, although Mark and other executives would probably be required to divest their management shares.

How does that solve any of the problems Hughes outlined above?

But the biggest winners would be the American people. Imagine a competitive market in which they could choose among one network that offered higher privacy standards, another that cost a fee to join but had little advertising and another that would allow users to customize and tweak their feeds as they saw fit. No one knows exactly what Facebook’s competitors would offer to differentiate themselves. That’s exactly the point.

I've said many times in the past that I agree that more competition is valuable, but merely breaking up a bunch of big, centralized platforms doesn't seem likely to offer that kind of solution. This is why I've long advocated a solution that focuses on moving to protocols instead of platforms as a way to truly "break up" big tech. Merely separating Facebook out into Facebook, Instagram and Whatsapp doesn't solve most of the problems discussed above. People will still be locked into those proprietary, centralized platforms if they want to communicate with others on those platforms.

Moving to a world of protocols, in which you could move away from Facebook but still have access to the content and people who stayed on Facebook is the real solution. It removes the lock-in that is the true issue of dominance. And, unless antitrust somehow forces that to happen, a separate Instagram doesn't solve any of these issues.

Just breaking up Facebook is not enough. We need a new agency, empowered by Congress to regulate tech companies. Its first mandate should be to protect privacy.

The Europeans have made headway on privacy with the General Data Protection Regulation, a law that guarantees users a minimal level of protection. A landmark privacy bill in the United States should specify exactly what control Americans have over their digital information, require clearer disclosure to users and provide enough flexibility to the agency to exercise effective oversight over time.

This is one of those "feel good" ideas that again requires actual details to understand. So far, remember, all the GDPR has done to date is concentrate the power of Facebook and Google, rather than diminish it.

The agency should also be charged with guaranteeing basic interoperability across platforms.

Hey, one thing I agree with! Though, it's not clear why you should need an agency to enforce interoperability. Ideally we'd start moving to a world where interoperability on top of an open API is table stakes to play in the internet social media space.

Finally, the agency should create guidelines for acceptable speech on social media. This idea may seem un-American — we would never stand for a government agency censoring speech. But we already have limits on yelling “fire” in a crowded theater, child pornography, speech intended to provoke violence and false statements to manipulate stock prices.

Oh come on. We've spent years (decades?!) pointing out that the whole "fire in a crowded theater" line is bullshit. It is not the law, and is based on a throwaway comment from a case long since surpassed by other rulings, and was used to jail someone who was speaking out to protest the military draft. Pulling out that line here is just crazy.

We will have to create similar standards that tech companies can use. These standards should of course be subject to the review of the courts, just as any other limits on speech are. But there is no constitutional right to harass others or live-stream violence.

Hughes' understanding of what the Constitution does and does not allow is not in sync with what the Constitution actually does and does not allow.

This movement of public servants, scholars and activists deserves our support. Mark Zuckerberg cannot fix Facebook, but our government can.

The amount of faith Hughes puts in our currently dysfunctional government is kind of shocking.

There's a lot more in Hughes' piece, but this is already long enough. Once again: even if you believe that Facebook is evil, you need to actually make the case for specifically what the problems are (is it disinformation? is it privacy? is it productivity? is it security? is it democracy?) and recognize that fixing one of those might make others worse (i.e., increasing privacy via encryption can increase the spread of disinformation by making it harder for companies to monitor content). And then you need to explain how these solutions (cleaving off Instagram and Whatsapp) actually solve the specific problems you've laid out.

Despite everything here, I'm very open to someone laying out an actual case of how antitrust would solve specific problems. My concern is that no one has yet done so. And Hughes definitely does not do so here. There's a lot of handwaving highlighting many very real problems (though some of those problems appear to be with the nature of Wall Street, fiduciary duty, human nature and the like), more handwaving about the fact that Facebook is very big (mostly ignoring that there is real competition from other big internet companies, and some smaller ones to boot) and then saying we need to break up the companies, and heavily regulate them, to fix these things... without ever explaining how the last part deals with the first.

There may well be a good case for breaking up Facebook. Chris Hughes, however, did not make it.

Filed Under: antitrust, breakup big tech, chris hayes, mark zuckerberg, privacy, social ills
Companies: facebook, instagram, whatsapp