Meta's real antitrust problems are just beginning

Why the FTC's investigation into the company's VR ambitions is more important than the ruling on the lawsuit

Just 13 months ago, the Trump-era Federal Trade Commission tried to break up Facebook. The lawsuit went on for a long time — it sought to undo acquisitions made in 2012 (Instagram) and 2014 (WhatsApp) — and, in its original form, it was laughed at. Judge James E. Boasberg ruled at the time that the FTC had not reasonably demonstrated that Facebook had a monopoly and therefore could not proceed with the trial.

Still, Bosberg gave the FTC a second chance: to back up its core claims with more evidence, to reopen the lawsuit, and perhaps to move on to trial. In the intervening months, President Trump was ousted and antitrust fighter Lina Khan took the helm of the Federal Trade Commission. Unsurprisingly, she accepted the changes proposed by Bosberg. In a ruling released this week, Bosberg ruled the case could be heard.

Cat Zakrzewski wrote in the Washington Post:

Bosberg said the revised complaint contained enough facts to "plausibly prove" that Facebook had a monopoly on personal social networks, referring to a service that allowed people to stay in touch with family and friends online. Bosberg said the FTC's first complaint about the "Achilles Heel" was a lack of data to support its claim that "no other social network of similar size exists in the United States." But the revised complaint includes data from analytics firm ComScore, which says Facebook has accounted for more than 70 percent of the daily active users of apps that offer personal social networking in the United States since 2016.

"In short, the FTC did its homework this time," Bosberg wrote.

By the way, the homework this time isn't particularly exhaustive: the FTC just collected some Comscore data, including the amount of time people spend using Facebook products, and the number of daily and monthly active users of other products in the field. It's worth noting that, if not surprisingly, the Trump Ft. Can't even meet such low standards.

In any case, the New York Times said Bosberg gave the FTC "a major victory aimed at weakening the power of big tech companies." At the very least, the judge helped save face for the FTC: After more than five years of condemnation of Facebook's size and influence by lawmakers and regulators, the agency has not even brought the case to trial, which is beyond embarrassment.

It would be embarrassing if the agency hadn't even been able to hear the case

However, as I wrote in filing the lawsuit, the monopoly case of the FTC's monopoly case is weakening year by year, and the agency has spent a full year in 2021 trying to keep it alive. According to Cloudflare, despite the agency's woes, TikTok was born and reached a huge scale — in 2021, it's the most visited website in the world. The government would argue that TikTok is fundamentally different from Facebook, claiming that the latter has a monopoly on so-called "personal social networking services." However, anyone can open Facebook or Instagram and notice day in and day out how they are gradually adopting more and more of the features of TikTok, which is said to be very different from TikTok.

Facebook, meanwhile, is now Meta, "a metacosmic company." On the question of whether it is possible to compete with Instagram or WhatsApp, historians seem more interested than the next generation of entrepreneurs, who are now content (perhaps foolishly) rebuilding the entire internet, including social networks, on the blockchain.

One of the most original arguments against splitting Facebook is that the market will eventually end the company's dominance, and probably much sooner than any lawsuit. There is no doubt that Facebook is still the hegemon of social networks. But there are cracks in its armor.

All of this suggests that while Bosberg allowed the case to proceed, he wrote, "The agency is likely to face a daunting task ahead in proving its allegations." In the 48-page pleading, he has pointed out time and time again that he has not been allowed to assess the accuracy of the facts stated in the FTC case. Instead, his job is to determine whether a reasonable allegation of misconduct constitutes if the facts are true. At this point, he decided, they did.

(He adamantly dismissed another part of the lawsuit that argues that Facebook illegally restricted the transfer of data to third-party developers.) This particular policy ended in 2013, and even by the standards of this case, any misconduct is a cliché. )

Don't get me wrong: I think Facebook did reduce the competitiveness of the social network when it acquired Instagram and WhatsApp. We'll never know what benefits these companies will bring to consumers if they remain independent.

But 2014 was a long time ago. And the upcoming lawsuit and the inevitable appeal will last for years. At this point, even if the government succeeds in forcing Instagram and WhatsApp to break up, these companies will be reborn into a world that keeps moving forward.

The good news for consumers and competition is that the FTC is also moving forward. Even if the lawsuit ultimately fails, the agency has shown by filing a lawsuit that it will scrutinize any future bid by Meta to acquire other social networking products. As new social networks rise in the future, the lessons learned from Instagram and WhatsApp will almost certainly inspire tighter scrutiny of future acquisitions in the space. (This is already happening: Last November, the UK blocked Meta's acquisition of a GIF search engine.) )

What Meta wants to buy in VR is far more important than what Facebook bought 10 years ago

In my opinion, even better, the FTC has begun to focus on where it really should be: Meta is working to acquire all the big studios and talent in the virtual reality and augmented reality space. As I write this last June, Meta has acquired Big Box VR, Unit 2 Games, Beat Games, Sanzaru Games, and Ready at Dawn. Then, in October, it made its biggest acquisition in the space to date: it reportedly bought Los Angeles-based VR company Within, the maker of the popular subscription fitness app Supernatural, for $400 million.

Meta owns the Oculus App Store and is very clear about which games are selling high and converts Quest users into everyday users. In that sense, it's a sequel to the company Onavo. Onavo is a Facebook app that once provided important early warnings for emerging competitors. In 2022, what Meta wants to buy in VR is more important than what Facebook bought 10 years ago.

That's why I was pleased to see The Information report last month that the FTC has launched a formal investigation into Meta's acquisition of Within:

Meta's first five VR app acquisitions all passed because they were too small to trigger hasty scrutiny by U.S. antitrust regulators. But according to two people familiar with the matter, the regulators are slowing down the Supernatural deal, which is worth more than $400 million. Shortly after Thanksgiving, the U.S. Federal Trade Commission launched an in-depth investigation into the acquisition, meaning it could be another year before Meta completes the acquisition, provided the agency does not formally challenge the deal in court, resulting in additional delays.

That's what the FTC really focuses on: Not in the distant past, but in the moment when it can still be grabbed, Meta is using its profits to sell the Quest 2 at a lower-cost price — a huge success this holiday season — and to get access to all of the most used software in the space.

What happened on Instagram and WhatsApp is still very important. But what happens on next-generation platforms may be more important. The bad news is that the FTC's current lawsuit came too late to change the status quo. The good news is that it seems determined not to make the same mistake again.