ST_FacebookisEverywhere

Understanding the landscape By BRIER DUDLEY Seattle Times editorial columnist Facebook clearly dominates social media. But showing how and what Facebook monopolizes is tricky, especially if you’re a regulator pursuing antitrust action against the company. The “Roadmap for an Antitrust Case Against Facebook” published by the Omidyar Network in June begins to make this case in the U.S. But more is needed. Properly defining the market Facebook dominates will be critical to the success of any federal effort to rein in the excessive power Facebook has over civic life and online display advertising. It should also help the public better understand why such a popular and useful website is being singled out. Clear definition of markets dominated by digital giants will also strengthen the political case for regulatory reform and additional funding for enforcement agencies. An anticipated Federal Trade Commission antitrust suit against Facebook will hinge in part on this definition. It could be groundbreaking, setting a precedent for antitrust enforcement and regulation of “free” services that surveil users and exploit that personal information. Defining monopoly power is usually done in terms of price, explained John Kirkwood, a Seattle University law professor and veteran of the FTC Bureau of Competition. “If you don’t have a price then it’s much vaguer, much more indefinite,” he said. It’s easier to show monopolizing conduct. Then, instead of deciding whether a company has monopoly power, the test is whether there’s a significant reduction in competition, Kirkwood said. That’s reflected in the sweeping investigation into competition released Oct. 6 by the U.S. House Committee on the Judiciary’s antitrust subcommittee. The report goes into great detail about Facebook’s conduct, particularly acquisitions and unequal treatment of business partners. But it doesn’t plow much new ground defining the market that Facebook dominates. Facebook’s statement in response to the House report defends the acquisitions, asserts competition is strong and rejects attempts to narrowly define its market. This may also preview its defense: “We compete with a wide variety of services with millions, even billions, of people using them.” For Facebook market definitions, the House investigation leans heavily on the Omidyar Network’s “Roadmap.” The Omidyar report in turn draws on market definitions that the United Kingdom Competition and Markets Authority first published in July 2019. That extensive report on online platforms and digital advertising raised the bar for U.S. regulators. In the U.K., Facebook has more than 50% of the display advertising market and Google has more than 90% of the search-ad market. Together they collected around 80% of total digital ad sales, the U.K. report found. Although many websites have features similar to Facebook — including personal profiles, personal news feeds, contact lists — the U.K. authority said they can be differentiated in part by how much they emphasize communication between users, versus consuming content as on YouTube. Based on time spent on social platforms, Facebook has a 58% share of the U.K. market, or 75% share if counting subsidiaries WhatsApp and Instagram, the Omidyar report notes. The Omidyar report describes Facebook as a social network company, versus the broader “social media” term used by the U.K. authority. It says a key differentiator is the use of a social graph, which is Facebook’s core system for mapping and analyzing not just user activity on the platform, but also the web of connections between users, locations and actions. Yet other online platforms have their own graphs. The differentiation between Facebook’s social networking market and the broader social media market including YouTube is also open to debate. What’s easier to define is the advertising market where Facebook competes. Ad prices and transactions are easier to measure and compare, though Facebook isn’t as transparent and audited as traditional media platforms. Still, Facebook’s share of the display ad market doesn’t reach the 70% range that usually prompts antitrust action. The House investigation referenced a Washington Post article citing an eMarketer forecast predicting Facebook would have 22% of the overall U.S. digital ad market in 2019. Google’s share was expected to fall a percent to 37.2%, so together they’d take 59% of the market. Harms of this power concentration are more thoroughly documented by the Omidyar and House reports. The U.K. report also explains how consumers end up paying for free services. Spending on digital ads amounted to around $650 per U.K. household last year, a cost that drives up prices paid by consumers. The ad cost — and profit margins of Google and Facebook — would be lower if the market was more competitive, it said. Consumers and their communities also suffer when a distorted market deprives content providers, such as newspapers, from revenue needed to invest in news coverage. The House investigation noted that nearly 2,000 newspapers closed or merged since 2004 and more will be lost if digital platforms continue profiting from news content without fairly compensating those producing it. “This cycle has a profoundly negative effect on American democracy and civic life,” the investigation said. Then there are the harms that monopolies and anti-competitive business practices cause to innovation and consumer choice. Cataloguing the symptoms of anticompetitive conduct may turn out to be the easy part, as regulators and Congress embark on a new era of antitrust enforcement. First they must bring definition to the amorphous, evolving markets where Facebook wields its excessive power and influence. Brier Dudley is a Seattle Times editorial columnist and the former technology columnist. Cataloguing the symptoms of anticompetitive conduct may turn out to be the easy part, as regulators and Congress embark on a new era of antitrust enforcement. MARKET DEFINITION AND CHARACTERISTICS By JON TALTON Special to The Seattle Times Dan Gillmor, a veteran journalist and professor, wrote in 2016, “We will be living in the ecosystem of a company that has repeatedly demonstrated its untrustworthiness, an enterprise that would become the primary newsstand for journalism and would be free to pick the winners via special deals with media people and tweaks of its opaque algorithms. If this is the future, we are truly screwed.” Four years later, his prophecy about Facebook seems closer than ever. Never in the history of the republic has a single company posed such a menace to our form of self-government. It is especially amplified as we hurtle to a presidential election of historic importance. On the world’s largest social- media platform, facts are given the same weight as lies or so-called fake news. The latter assumed dangerous proportions during the pandemic, but also in undermining settled science about human-caused climate change and the legitimacy of the election. Facebook is an unwitting partner of QAnon, which peddles far-right conspiracy theories — e.g., the world is run by a satanic cabal from which only President Donald Trump can save the country. It also disseminates lies about voter fraud and the U.S. Postal Service. Worse, QAnon is connected to real-world violence and militia groups. Facebook’s internal probe found that it was being used by thousands of groups associated with QAnon, with millions of members. A crackdown by the company has failed so far as the movement dodges restrictions placed by the company. Globally, the harm has been even greater. In Myanmar, the military government used Facebook to incite genocidal hatred against the country’s Muslim Rohingya minority. Only in 2018 did the company admit its complicity and apologize. Yet Facebook didn’t seem to learn. This year the platform is being blamed for worsening ethnic violence in Ethiopia. As Vice News put it, “This bloodshed was supercharged by the almost- instant and widespread sharing of hate speech and incitement to violence on Facebook, which whipped up people’s anger. Mobs destroyed and burned property. They lynched, beheaded, and dismembered their victims.” All this might come as a shock to people who use the platform to share family photos or wish friends happy birthday, perhaps enjoying a local history page. Facebook comes in many flavors for its 2.7 billion monthly active users — about 190 million in the United States. The reader should know that I’m on the platform. It’s useful to share my columns and news about my books. I’ve reconnected with friends from as far back as elementary school. But I don’t know most of my 2,626 “friends.” Knowing Facebook is a time- suck, I try to limit myself to two short visits a day. And I would never, never rely on the platform for news. I happily subscribe to nine real newspapers committing real journalism. As a result, I’m not the ideal Facebook user. Social media is addictive, creepily rewiring our brains. Facebook wants repeat users all day for as long as possible. Its algorithm “recommendation engine” is designed to send users down ever-increasing rabbit holes. And Facebook sees itself as a 21st century news site, underwritten by revenues from its dominant control of online advertising. It is effectively a monopoly at what it does, which is very bad for the serious journalism needed to inform a self-governing people. As the Columbia Journalism Review put it in 2018, “Facebook’s relationship with the media has been a classic Faustian bargain: News outlets want to reach those 2 billion users, so they put as much of their content as they can on the network. Some of them are favored by the company’s all-powerful (and completely mysterious) algorithm, giving them access to a wider audience to pitch for subscriptions or the pennies worth of ad revenue they receive from the platform.” Facebook and Google are expected to control 85% of the global digital ad market. The CJR wrote that “Facebook’s increasing dominance of that industry poses an existential threat to their business models.” A quarter of all newspapers have died in the past 15 years. To be sure, newspapers made their share of mistakes before the old business model collapsed. I had a front-row seat as a manager at three major newspaper chains. But no “legacy media” had Facebook’s near monopoly. And Facebook doesn’t practice actual journalism, meaning an effort at factual reporting, balance, fairness and sound news judgment. Mark Zuckerberg, who co- founded Facebook while at Harvard, isn’t a journalist. But with $98 billion net worth, third on Forbes list of richest people in the U.S. behind Jeff Bezos and Bill Gates, he enjoys not only wealth but also political power. His and Facebook’s place in the Digital Gilded Age is not only a threat to a healthy, competitive economy but also to American democracy. Jon Talton is the economics columnist of The Seattle Times. Facebook doesn’t practice actual journalism, meaning an effort at factual reporting, balance, fairness and sound news judgment. Facebook’s threat to a competitive economy and democracy THE HARMS G2 Opinion Special Section | | SUNDAY, OCTOBER 25, 2020