To Compete or not to Compete

As reported by Dell Cameron and Andrew Couts in Gizmodo – FTC Refiles Historic Antitrust Lawsuit as Facebook Tries to Bury the News With Shiny Things.The FTC recently re-filed a lawsuit against Facebook for anti-competitive behaviour relating to its purchase of Instagram in 2012 and WhatsApp in 2014. Both transactions were approved at the time, but things have changed. Facebook has leveraged these purchases to become a monopoly in the Social Media world. Fortunately, the FTC wants to re-consider its approvals.

Big Surprise

As early as 2008, Mark Zuckerberg, CEO of Facebook famously declared that “it is better to buy than to compete.” With Zuckerberg already on record as a big fan of anti-competitive behaviour four years earlier than the Instagram purchase, why did the FTC give its blessing to the transaction?

Facebook paid $1 billion for Instagram in 2012 when the company had only 13 employees. Two years later Zuck paid $16 billion for WhatsApp when they had 55 employees. These two start-up companies never had a chance to pose a real competitive threat before Zuckerberg snapped them up and changed the future of social media forever.

Imagine what the Internet could have become if WhatsApp, Instagram and YouTube were allowed to grow independently and compete with Facebook and Google?

Your Not So Smart Phone

There’s lots of talk about Google and Facebook being broken up but don’t forget that Apple is also in front of a judge right now. They are fighting a case against Fortnite founder Epic Games, over draconian control and profiteering within their App store. Fortnite wanted to give its players a less expensive way to play their game but when they tried to cut Apple and Google out of the revenue loop, they were kicked out of both App stores.  

The two major mobile operating systems, iOS and Android, power over 99% of all smart phones. Some of them cost as much as a personal computer, yet an owner cannot load any software that isn’t approved by Apple or Google. Mobile operating systems and App Stores are becoming similar to social media because they operate as ‘walled gardens’ preventing the distribution of mobile applications and the sharing of information between platforms. For example, one cannot iMessage an Android phone. Why not? Actually, Apple has this capability, but has decided not to market it.

Follow the Money

A big anti-competitive hurdle nobody ever talks about is the cash the Big Technology companies have.  Facebook has amassed a startling $60 billion in cash since the acquisition of Instagram and WhatsApp. Apple has a mountainous $196 billion in cash made from owning and controlling your phones and everything that can be loaded on them. Google has $135 billion in cash from owning nearly every Internet search result, then selling the resulting advertising you see.

With this kind of cash, Big Tech could probably buy every other tech company on the planet if they were allowed to. How can this not be an anti-competitive position? If you can literally buy any competitor you wish, and pay any fine levied, how can you not be considered a monopoly? This is why regulators have such an important role ensuring that innovation does not drown in an ocean of dollars.

Big tech routinely makes and breaks all the rules as part of their day to day operations. Add endless piles of cash to the equations and you can be sure they are going to spend it to buy competitors to reinforce their monopoly positions. 

I’ll make it easy for the regulators: assume all Big Tech companies are anti-competitive and make sure you view every proposed acquisition through an electron microscope.  

And, if the company has over $100 billion in cash, they should not be allowed to acquire any other technology or company period.