{"id":279172,"date":"2020-12-19T08:34:44","date_gmt":"2020-12-19T13:34:44","guid":{"rendered":"https:\/\/canadianinquirer.net\/v1\/?p=279172"},"modified":"2020-12-19T08:34:44","modified_gmt":"2020-12-19T13:34:44","slug":"why-facebook-antitrust-case-relies-so-heavily-on-mark-zuckerbergs-emails","status":"publish","type":"post","link":"https:\/\/canadianinquirer.net\/v1\/2020\/12\/19\/why-facebook-antitrust-case-relies-so-heavily-on-mark-zuckerbergs-emails\/","title":{"rendered":"Why Facebook antitrust case relies so heavily on Mark Zuckerberg’s emails"},"content":{"rendered":"
\"\"<\/a>
Zuckerberg\u2019s emails are voluminous and specific in describing how the mergers will insulate his company from competition. (File Photo<\/a>: Brian Solis\/Flickr,<\/a> CC BY 2.0<\/a>)<\/figcaption><\/figure>\n

Facebook CEO Mark Zuckerberg\u2019s own words play a starring role in the government\u2019s case to break up his social network<\/a>.<\/p>\n

\u201cIt is better to buy than compete,\u201d he allegedly wrote in an email in 2008, according to the lawsuit. Four years later, after Facebook purchased what he had called a \u201cvery disruptive\u201d photo-sharing app, he celebrated by explaining to a colleague in another email: \u201cInstagram was our threat. \u2026 One thing about startups though is you can often acquire them.\u201d<\/p>\n

As an antitrust professor preparing a new spring course called \u201cAntitrust for Big Tech,\u201d I read the FTC\u2019s Dec. 9 complaint<\/a> with great interest. I have taught my students for years that internal documents can come back to haunt antitrust defendants. But I have never seen a plaintiff\u2019s case rely so heavily on a CEO\u2019s own words.<\/p>\n

As I read the FTC\u2019s summary of the arguments it plans to make at trial, I began to highlight every direct quote from an internal Facebook communication. My highlighter ran out of ink.<\/p>\n

Basing a monopolization case on a CEO\u2019s own explanations of his conduct may seem like a straightforward strategy to most people. But among judges and antitrust scholars, it\u2019s actually controversial<\/a>, as it is sure to be in this case.<\/p>\n

Despite that controversy, the FTC\u2019s choice to hoist Facebook by its own petard makes sense. Zuckerberg\u2019s emails are voluminous and specific in describing how the mergers will insulate his company from competition. They avoid most of the problems critics have with using what lawyers call \u201chot documents\u201d to make an antitrust case.<\/p>\n

It worked against Microsoft<\/h2>\n

And anyway, it\u2019s worked before.<\/p>\n

The case against Facebook bears similarities to U.S. v. Microsoft<\/a>, the landmark 2001 case that found the software company liable for monopolization. Here, the FTC will have to prove that Facebook, like Microsoft, acquired its market power in the social media market by excluding rivals, not merely by making a great product. And in both cases, internal statements by executives play a big role.<\/p>\n

In the case, the government produced a 1995 memo<\/a> in which Microsoft founder Bill Gates identified Netscape as \u201ca new competitor \u2018born\u2019 on the internet.\u201d A few years later, another executive allegedly said<\/a>, \u201cWe are going to cut off [Netscape\u2019s] air supply.\u201d<\/p>\n

When Microsoft proceeded to do so by impeding Netscape\u2019s access to Windows users, statements like these made it hard for the company to argue that its conduct wasn\u2019t predatory, and Microsoft lost the case<\/a>.<\/p>\n

As successful and intuitive as the strategy is, courts are surprisingly reluctant<\/a> to hang their antitrust rulings on internal documents revealing an executive\u2019s intent.<\/p>\n

The problem with relying too much on internal emails<\/h2>\n

Judges often say that antitrust law is interested only<\/a> in the economic effects of a business\u2019s conduct \u2013 such as whether it suppressed competition \u2013 not the motives of its executives. Critics have argued<\/a> that CEOs are not economists and are sometimes prone to chest-thumping braggadocio, making their emails and other communications better for wowing juries than making an economic argument.<\/p>\n

Judges and scholars worry that juries will see all aggressive comments as evidence<\/a> of exclusionary intent. But you can \u201cdestroy\u201d a competitor by outdoing him; economists call that competition.<\/p>\n

For example, Facebook\u2019s employee manual reads<\/a>: \u201cIf we don\u2019t create the thing that kills Facebook, something else will.\u201d That sounds ominous, but creating things to keep rival startups at bay is exactly what the antitrust laws<\/a> want Facebook to do \u2013 innovate.<\/p>\n

More fundamentally, relying on statements like these \u2013 where a defendant seems to reveal subjective intent \u2013 is controversial because the law is unclear<\/a> about why or whether a defendant\u2019s intent to suppress competition matters at all. The clearest statement we get on the issue \u2013 from U.S. v. Alcoa<\/a> \u2013 is enigmatic: \u201cTo read the [law] as demanding any \u2018specific\u2019 intent, makes nonsense of it, for no monopolist monopolizes unconscious of what he is doing.\u201d<\/p>\n

Even lawyers haven\u2019t been able to figure out exactly what that means.<\/p>\n

The role of intent as evidence<\/h2>\n

On the other hand, other types of evidence may not be enough to make an antitrust case.<\/p>\n

The inquiry in a monopolization case is often framed as whether the monopolist enjoys its market position because it excluded rivals or because it made a better or cheaper product. The difficulty with using only objective market evidence to answer that question is that the evidence usually points in both directions.<\/p>\n

Defendants can almost always identify some product improvement that came from their conduct, muddying the waters of the plaintiff\u2019s story of exclusion. In the Facebook case, the company has pointed<\/a> to Instagram\u2019s growing user base and improved interface during its time under Facebook\u2019s control.<\/p>\n

So in most monopolization cases, courts get stuck if they try to use only market facts to answer the ultimate question: Did the monopolist flourish because of the improvements or because of diminished competition?<\/p>\n

That\u2019s where \u201cintent evidence<\/a>\u201d \u2013 information about what a defendant was thinking \u2013 can help. If a CEO intended a merger to insulate her company from competition, it likely did in fact insulate the company from competition. Judges will attribute some of the company\u2019s dominance to exclusion, and that violates the antitrust laws.<\/p>\n

That\u2019s why judges will turn to evidence of intent, especially if it is more than just economically ambiguous declarations of war against rivals.<\/p>\n

Neutralizing competitors<\/h2>\n

Unfortunately for Facebook, Zuckerberg\u2019s emails are explicit and detailed<\/a> in describing his desire to avoid competing with Instagram and WhatsApp. The court will find that relevant \u2013 and possibly damning.<\/p>\n

For example, in the months leading up to the acquisition, Facebook\u2019s chief financial officer outlined three reasons for buying Instagram:<\/p>\n

\u201c1) neutralize a potential competitor?\u2026 2) acquire talent?\u2026 3) integrate their products with ours in order to improve our service?\u201d Zuckerberg responded, \u201cIt\u2019s a combination of (1) and (3).\u201d<\/strong><\/em><\/p><\/blockquote>\n

Zuckerberg goes on to explain Instagram\u2019s competitive threat at length. By the time he gets to the product improvement explanation, he\u2019s changed his mind. \u201c(3) is also a factor, but in reality we already know [Instagram\u2019s] social dynamics and we will integrate them in the next 12-24 months anyway.\u201d<\/p>\n

[Deep knowledge, daily.<\/em> Sign up for The Conversation\u2019s newsletter<\/a>.]<\/p>\n

After the Microsoft case, many companies adopted communications policies that discourage the creation of documents just like these. Google, for one, circulates a five-point antitrust \u201ccommunications safety\u201d policy<\/a> to employees.<\/p>\n

What I find truly remarkable about this case is not the volume of internal quotes in the complaint, but the paper trail a sophisticated CEO like Zuckerberg created of Facebook\u2019s transgressions \u2013 which is now why a federal antitrust lawsuit poses an existential threat to his company.\"The<\/p>\n

Rebecca Haw Allensworth<\/a>, Professor of Law, Vanderbilt University<\/a><\/em><\/p>\n

This article is republished from The Conversation<\/a> under a Creative Commons license. Read the original article<\/a>.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Facebook CEO Mark Zuckerberg\u2019s own words play a starring role in the government\u2019s case to break up his social network. …<\/p>\n","protected":false},"author":44,"featured_media":172231,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[19],"tags":[],"class_list":["post-279172","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business","mauthors-rebecca-haw-allensworth-vanderbilt-university","mauthors-the-conversation"],"_links":{"self":[{"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/posts\/279172","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/users\/44"}],"replies":[{"embeddable":true,"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/comments?post=279172"}],"version-history":[{"count":2,"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/posts\/279172\/revisions"}],"predecessor-version":[{"id":279174,"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/posts\/279172\/revisions\/279174"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/media\/172231"}],"wp:attachment":[{"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/media?parent=279172"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/categories?post=279172"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/tags?post=279172"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}