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Home Tech “Facebook Has Destroyed This F--king Town”: Facing a Legal Onslaught, Mark Zuckerberg...

“Facebook Has Destroyed This F–king Town”: Facing a Legal Onslaught, Mark Zuckerberg Gets Ready to Fight Back

You would think that Facebook’s stock would have taken a vertiginous fall on Wednesday. That the company’s valuation would have been cut by double- or even triple-digit billions of dollars. That the sky over Facebook would have fallen, and it would have felt as if the end of the world was nigh. After all, following an 18-month investigation, the Federal Trade Commission, along with 48 attorneys general from around the country, accused the company of massive antitrust in two separate lawsuits, and said that Facebook should sell off WhatsApp and Instagram, which collectively boast more than 3 billion monthly active users, and which are expected to generate as much as $30 billion in revenue next year for Facebook. As New York attorney general Letitia James said in regard to the states’ regulatory suit (which at times reads more like a suit against a mafia don), Facebook had purchased both of these platforms in order to “crush smaller rivals” and “snuff out competition.” And yet, while Facebook’s valuation fell by a couple of percentage points on Wednesday, its stock didn’t look much different than it would on any typical day on Wall Street for the social network. That’s because Wall Street doesn’t believe that the FTC and 48 state attorneys general will, and can, break up Facebook.

For the last several years, we’ve been hearing murmurs about a legal sledgehammer being taken to Facebook by regulators, not just in the U.S., but around the globe. And indeed, government entities and countless countries have been trying. Facebook has been embroiled in antitrust-related legal battles with European Union regulators, as well as with individual countries across Europe, including Germany, Italy, and the United Kingdom. And now, as of Wednesday’s antitrust action, with 48 states—48!—across the United States and with the Federal Trade Commission—not to mention previous actions by the Securities and Exchange Commission, investigations by the Justice Department, and a long list of other legal battles. Even Mark Zuckerberg himself has invited Congress to regulate his company, though for data collection and privacy protections, not for being too big. Many Silicon Valley insiders viscerally hate the company. “Facebook has destroyed this fucking town,” a venture capitalist said to me recently. “You look around and there’s no innovation, no new start-ups, and there certainly isn’t another Facebook being built here. That’s because Mark Zuckerberg won’t allow that to happen—he has destroyed all competition here.”

Yet while Wednesday’s announcement by the FTC might seem like the long-awaited baseball bat to Facebook (telling the company to divest Instagram and WhatsApp is the most impactful punishment the government could throw at Facebook), it’s something that Facebook has been preparing for for a very long time—and like the company is with all threats, it’s fully prepared to fight back. For the past few years, Facebook has been bolstering its lobbying efforts in Washington. Last year the company spent almost $17 million on lobbying in D.C. alone. It has also hired former employees from various regulatory agencies, including Barbara Blank, a former attorney in the Bureau of Competition’s Anticompetitive Practices Division (you don’t say) at the FTC, who has investigated Google in the past, and Kate Patchen, who previously led the Justice Department’s antitrust office in San Francisco and was the department’s top antitrust enforcer in Silicon Valley. And then there’s Jennifer Newstead, vice president and general counsel at Facebook, who issued the company’s first response after the suits were filed on Wednesday, saying that “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 government now wants a do-over.” Newstead’s bio on the Facebook website takes the time to note that she has held many “senior roles in government,” including working with the White House, the Department of Justice, the U.S. Department of State, and even clerking for the U.S. Supreme Court and the U.S. Court of Appeals for the D.C. Circuit, which means she likely built countless relationships within government over the past two decades before she went to Facebook. Maybe this is why Wall Street didn’t panic about Wednesday’s news and sell the stock en masse.

In Silicon Valley and on Wall Street, insiders offered bifold viewpoints about the news, telling me that Facebook being broken up was “a long time coming,” and yet, in the same breath, that Facebook being broken up “won’t ever happen,” as one venture capitalist told me. The reason, insiders said, is because, while the company is clearly, incomprehensibly massive in its size and scale, and evil in the way it operates beyond almost any tech company on the planet, specifically in the way it tracks people like you and me, it is not clear whether Facebook is a monopoly in the classic sense of the word.

“People are asking the wrong question. The question is not: ‘Are they too big?’ It’s not illegal to be too big. In reality the spirit of antitrust is if a company is making it impossible to compete with them,” a Wall Street investor told me. “The only question that matters for antitrust is if their power is limiting competition. And when I look at Facebook, I don’t necessarily know if it is.” The investor noted that if you look at Microsoft in the 1980s, it truly was a company that was limiting competition, because no one could contend with Bill Gates and the monopoly he had over computing. But today, while the FAANG—Facebook, Amazon, Apple, Netflix, and Google—companies are all colossal in size, and have inconceivable resources (now collectively worth nearly $6 trillion), those numbers do not necessarily equate to being monopolies.

The other problem for the regulators with these suits is that their entire premise might prove to be a little too much, too late. Too much because there are now more than enough companies competing with Facebook, and yet a few years ago, there were so few. For example, Facebook is no longer the only large social network on the planet, whereas in, say, 2014, it was. Today TikTok has around 850 million monthly active users; Snapchat has more than 350 million; Twitter has surpassed 330 million; and even Pinterest boasts almost half a billion people on its social platform. Do they compete with Instagram? A half-skilled lawyer could argue that they do, as these are all companies that allow people to share photos and videos, just like Instagram. When it comes to messaging platforms like WhatsApp, there’s even more competition from services like Telegram, Signal, Line, Kik, Skype, and even iMessage. 

What does separate Facebook-Instagram-WhatsApp from those competitors, however, is that Facebook has enabled these collective businesses to share data about their respective (and often overlapping) users back and forth in a chilling data play. (As a former CIA operative and former Facebook employee said last year, “Facebook knows you better than the CIA ever will. Facebook knows more about you than you know about yourself.”) This intercompany data sharing seems like the one place where Facebook might actually be vulnerable with regulators, at least in the United States. But while it’s unlikely that the government will be able to make Facebook divest Instagram and WhatsApp (the last time this actually happened was in 1984, with AT&T, and let’s not forget, the FTC approved the acquisitions of both Instagram and WhatsApp years ago, when it had the opportunity to say no), the suits filed Wednesday are going to certainly be thorns in the side of Mark Zuckerberg’s continued plan for complete world domination. What is likely, though, is that the next time an Instagram- or WhatsApp-like competitor does come along, and Zuckerberg has the foresight to buy it, and “snuff it out” before it becomes an existential threat to his own company, the FTC will not let that happen again. So while it’s highly unlikely that Facebook will be brought to its knees with one fell swoop by the government (or any government for that matter), it’s a clear and distinct possibility that this could be the beginning of a death by a billion cuts.

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