When Facebook behaves badly, it is more likely to face an increasing amount of scrutiny from the Federal Trade Commision. When a business gets big, it can also trigger government antitrust scrutiny even without any evidence of bad conduct. This week Facebook got big. It reached 2 billion members in its worldwide community. Although not the first time, Facebook was also abusive this week with anti-competitive behavior to a small business for no apparent reason. The top social media site, which is also in the news streaming business, blocked a small business from sharing news articles on its own Facebook page, which harmed its consumers.
In a Forbes article in March 2012, contributor Robert Hof reported that “Facebook won’t be left alone for long by regulators. ‘Inevitably, antitrust review is going to follow the IPO,’ Eric Goldman, director of the High Tech Law Institute at Santa Clara University, said in an interview. ‘It’s too big to ignore. Facebook is going to be under an antitrust microscope, sooner rather than later.'”
Some early antitrust lawsuits against Facebook have been rejected, but they have involved plug-in type companies that had symbiotic or parasitic relationships with Facebook. Entrepreneurs invest in Facebook-specific applications that can be built up by Facebook or destroyed by Facebook’s self-interest. So far these entrepreneurs haven’t put a dent in Facebook’s walled garden.
Competition Law Main Statutes of the Sherman Act 1890, the Clayton Act 1914 and the Federal Trade Commission Act 1914 …
Restrict the formation of cartels and prohibit other collusive practices regarded as being in restraint of trade;
Restrict the mergers and acquisitions of organizations that could substantially lessen competition;
Prohibit the creation of a monopoly and the abuse of monopoly power.
The bigger problems coming for Facebook will be the result of treating the masses poorly. Being big and hurting consumers, while bragging about their community (infrastructure), won’t end well for Facebook.
Facebook, The Infrastructure
Facebook is increasingly being seen as “infrastructure” or “a utility” like a telephone service. In fact many people are more likely to communicate using Facebook’s timelines, comments and messaging than pick up the phone. Ironically and increasingly, consumers are more likely to use their phone to communicate on Facebook. The characterization of Facebook as a utility, like a mobile phone service or landline telephone service could initiate government regulatory control over Facebook.
Imagine if Verizon Wireless banned your cellphone for a month because they were monitoring something you said that was against their community standard or policies. Facebook is getting to the point, where it should not have that ridiculous abusive power either, but it regularly bans users or suspends some of their features. A more reasonable solution would be something like call or user blocking, which Facebook already has available. If a Facebook page consistently violates community standards, it shouldn’t have major features disabled, and it shouldn’t be banned unless laws are broken or there are clearly inherent risks and dangers involved with the page in the public interest.
Facebook benefits significantly from the network effects of the timelines, embedding and sharing capabilities that are also built into many independent websites. The Facebook network; which includes live video, photo and video sharing, news streaming and commenting, and rating; effectively locks in its users, and it is the only system or network of its type available.
Even if an individual or business owner hates Facebook and its procedures and methods, the individual or business owner is locked in to use the network and cooperate with the network rules. It might seem reasonable that a member of the Facebook community of individuals and businesses has to follow some rules, but lately those rules have seemed to invade and control the freedom of thought and freedom of speech of individual users and businesses — even to the point of instilling fear of losing the ability to fully participate in the community (infrastructure). The engaging lock-in effect gives Facebook some leverage to the control of marketing activities of businesses both on and off Facebook which could have serious economic effects on a business. If a business is not on Facebook, it could be seen as old school, backwards, failing, and lacking customer service. If a business engages the Facebook community and invests and develops a website and Facebook page designed to work together for customers, Facebook has demonstrated its propensity to whimsically ban business pages, or punish business pages by limiting features. This could seriously harm a business economically, and could harm their reputation.
Consumers Are Harmed Too
When Facebook bans a business page or limits its features, this doesn’t only harm the business. It harms consumers too. For example, if people are accustomed to getting public safety alerts, crime alerts, weather alerts, etc. in their Facebook timeline from a news media business, and Facebook suddenly blocks that media business with little or no warning, it harms the consumers of the media business, too.
United States antitrust law is a collection of federal and state government laws that regulates the conduct and organization of business corporations, generally to promote fair competition for the benefit of consumers. The scope of antitrust laws, and the law’s influence on an enterprise’s freedom to conduct business compared to the protection of smaller businesses, communities and consumers is a serious concern — from citizens to lawmakers.
One view of scholars, closely associated with the “Chicago School of economics” suggests that antitrust laws should focus solely on the benefits to consumers and overall efficiency.
In the aforementioned Forbes article, Robert Hof explains Facebook’s coming troubles ahead with the words of Eric Goldman of the High Tech Law Institute at Santa Clara University … “Yet another factor in antitrust is whether a company is using its dominant power to discourage competition. This is where Facebook could be most vulnerable to attack on the legal front. As Goldman points out, Facebook’s famously walled garden leaves it open to charges that it can lock people in and keep rivals out. Increasingly, you can’t even use some other Web sites without signing in using your Facebook identity. ‘Facebook basically controls the user base of competitors,’ Goldman said.”
Hof said looming battles will become increasingly dangerous to Facebook’s autonomy — and profits.
By acting whimsical, immature, and big Facebook — the major news streamer — locks out a small news media company, and calls down the thunder.
See also …
Forbes Facebook’s Looming Post-IPO Challenge: Antitrust
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