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FTC Gets Jurisdiction for Possible Facebook Antitrust Probe (wsj.com)
182 points by JumpCrisscross 23 days ago | hide | past | web | favorite | 54 comments



"In 2007, for example, Facebook introduced a program that recorded users’ activity on third-party sites and inserted it into the News Feed. Following public outrage and a class-action lawsuit, Facebook ended the program. 'We’ve made a lot of mistakes building this feature, but we’ve made even more with how we’ve handled them,' Facebook’s chief executive, Mark Zuckerberg, wrote in a public apology.

This sort of thing happened regularly for years. Facebook would try something sneaky, users would object and Facebook would back off.

But then Facebook’s competition began to disappear. Facebook acquired Instagram in 2012 and WhatsApp in 2014. Later in 2014, Google announced that it would fold its social network Orkut. Emboldened by the decline of market threats, Facebook revoked its users’ ability to vote on changes to its privacy policies and then (almost simultaneously with Google’s exit from the social media market) changed its privacy pact with users.

This is how Facebook usurped our privacy: with the help of its market dominance. The price of using Facebook has stayed the same over the years (it’s free to join and use), but the cost of using it, calculated in terms of the amount of data that users now must provide, is an order of magnitude above what it was when Facebook faced real competition."

https://www.nytimes.com/2019/05/28/opinion/privacy-antitrust... Why Privacy Is an Antitrust Issue


>The price of using Facebook has stayed the same over the years (it’s free to join and use), but the cost of using it, calculated in terms of the amount of data that users now must provide, is an order of magnitude above what it was when Facebook faced real competition."

That’s actually a very interesting potential legal issue.

User/FB enter into agreement (user gets access to platform/FB gets access to data), FB unilaterally changes terms of agreement (FB gets greater access to user data, but User doesn’t get anything they didn’t already have)...seemingly these modifications of the agreement should be void/unenforceable for lack of consideration. Yes, the user may have agreed/consented to the changes of the terms (by clicking accept, continuing to use the FB platform) but that doesn’t mean the new agreement is enforceable without additional consideration from FB.


> that doesn’t mean the new agreement is enforceable without additional consideration from FB

Contracts can be re-negotiated for any legal or even no reason. Raising the price without providing additional consideration is fair game if both parties agree. And consumers have, overwhelmingly, agreed to the changes.

The question is whether Facebook abused its monopoly position to coerce its users into said agreement. That's the author's gist, and based on the evidence presented, it's a convincing argument.


>Contracts can be re-negotiated for any legal or even no reason.

Yes, they can be renegotiated, they can not be unilaterally changed without additional consideration (except limited circumstances: UCC, sale of goods, etc...).

Continuation of use or even agreement to the unilateral change doesn’t matter if their is no additional consideration, the new agreement is deemed void/unenforceable.


Does the facebook of today provide a remotely similar experience to the facebook of 10 years ago? There's a lot of additional features that they've added. There is, arguably, reasonable consideration.


>Does the facebook of today provide a remotely similar experience to the facebook of 10 years ago?

Yes.

It could certainly be argued as you say that the services changed - still from a contract Law perspective these are unilateral changes by Facebook not negotiated bargained for exchanges - but assuming there is consideration, over the last 10 years do you really think FB materially changed the services to justify each and every agreement modification? All you need is one unenforceable modification along the way and the whole thing could unravel.


I'm not a lawyer, and I'm admittedly taking a bit of a devil's advocate position, but at the same time I also think that "reprocessing data requires additional consideration" is a reach to begin with, so the counter-reach of "new features are consideration" isn't completely insane.

I don't think there have been more than a handful of privacy policy modifications from facebook in my memory (although I could be completely wrong!) but if it really is, as I perceive it, ~once a year, I think the argument that each year Facebook comes out with compelling enough features to justify additional data collection is, perhaps unfortunately, justifiable.


It would be interesting to see this legal arguement unfold with FB...I just think the problem is FB unilaterally modifying the terms.

In other words FB saying we are going to now start providing you with X services and you are going to give us Y data.

Sure the user might benefit from X, obviously even that could be argued, but the idea is this isn’t a bargained for exchange/negotiation. This is unilateral modification without consideration, it’s not enough for FB to say they modified the data collection/rights which is justified because FB also changed the service.

That’s like saying you ordered a cheese pizza for $10, the company unilaterally charges you for $1,000 and justifies that because they bring you 100 pizzas...at no point was there consideration for the modification of the agreement even though you got 100 pizzas. Similarly can FB just start collecting more data/selling to third parties by unilaterally changing their terms and justify it by saying a unilateral change in service equals legal consideration?


> That’s like saying you ordered a cheese pizza for $10, the company unilaterally charges you for $1,000 and justifies that because they bring you 100 pizzas...at no point was there consideration for the modification of the agreement even though you got 100 pizzas. Similarly can FB just start collecting more data/selling to third parties by unilaterally changing their terms and justify it by saying a unilateral change in service equals legal consideration?

I don't think this is quite a fair comparison. Let me rephrase it and tell me if you still think its illegal (unethical, sure, but illegal):

You subscribe to a pizza delivery service that sends you 1 pizza a month for $10/month. After a few years, they decide to up the minimum subscription to 100 pizzas a month for $1000 (or maybe even $500, there's probably some reasonable economies of scale arguments to be made about FB). They send an email notifying all customers of the ensuing upgrade, and a few months later you start getting charged 50x more and getting a whole lot more pizza than you want.

That's still probably not a good thing to do, and I wouldn't fault you for calling FB shady if they did that. But I'm also not at all certain that that action is illegal, especially from a strictly contract law perspective.


It sounds very similar to the subscription radio case cited in the ABA article I linked:

>in Knutson v. Sirius XM Radio, 771 F.3d 559 (9th Cir. 2014), the terms regarding an automobile’s trial subscription to a satellite radio service were sent to the owner a month after the purchase of the automobile in an envelope marked “Welcome Kit.” The Ninth Circuit refused to enforce the additional terms because there was no mutual assent to the terms. The Ninth Circuit found no evidence that the purchaser of the automobile knew that he had purchased anything from Sirius or was entering into a relationship with Sirius, let alone had agreed to the terms (which contained an arbitration clause). Therefore, continued use of the service by the purchaser did not manifest assent to the terms.

Not exactly on point, and there are other such cases cited in the article that support enforceability...but it’s all going to come down to nitty gritty facts (for example another case found the terms of the change in price were buried in page 4 of an invoice; therefore, unenforceable).


> they can not be unilaterally changed without additional consideration

I think the ship around users accepting privacy policy changes through continued use of a free product has sailed. It shouldn't have. But I don't think this is the case with which to make that point.


>I think the ship around users accepting privacy policy changes through continued use of a free product has sailed.

The following are excerpts from a good article from the American Bar Association:

>The existing case law on online modifications, however, is scant. The few existing opinions rely appropriately on off-line contract modification rules to determine whether the authors of the original contract terms succeeded in effectively modifying those terms. Unfortunately, the decisions to date do not yet provide us with predictability as to the enforceability of online contract modifications.

>in order for a modification to be enforceable, it must be supported by consideration, or, in the case of contracts governed by Article 2 of the Uniform Commercial Code, it must be entered into in good faith. See U.C.C. § 2-209 cmt. 2.

https://www.americanbar.org/groups/business_law/publications...


Good. FB's practice of "buy anyone who looks like they might become a competitor" combined with its inherent dark patterns needs to be investigated. I'm now waiting for an announcement regarding Amazon, which would round out the list.


Out of fairness, the DoJ reviewed both the Instagram [0] and WhatsApp [1] acquisitions for competitive impact prior to acquisition completion as is generally required for deals of this size [2].

It's not like the DoJ has been waiting on the sidelines unable to stop Facebook from buying smaller companies. They looked at it and concluded it wasn't an issue. Remember: the Instagram acquisition came ~1 yr after Google+ was launched and everyone was sure that Facebook was toast.

[0] https://www.ftc.gov/news-events/press-releases/2012/08/ftc-c...

[1] https://www.ftc.gov/news-events/press-releases/2014/04/ftc-n...

[2] https://www.ftc.gov/enforcement/premerger-notification-progr...


> Google+ was launched and everyone was sure that Facebook was toast.

I think that was just your bubble :) The media coverage was decided lukewarm, with "10 Reasons Facebook Will Wipe The Floor With Google+" (business insider), "Why Google+ can never compete with Facebook" (NetworkWorld), "Why Google+ won't hurt Facebook" (Gigaom). Slate actually declared "Google+ Is Dead" in November 2011(!)


That's fair. The hype cycle may have died down faster than I remember. Not a big user of either service.


Pretty much. In Facebook's defense, they did grow Instragram from the small app startup it was to the size it is today.

Also while Google+ is a bad example, Snapchat is one where a new entrant to the market was able to grow quickly and go IPO.


That doesn't say much considering we've been living in an era of tons of corporate consolidation/no antitrust actions whatsoever.

Honestly, I think the vast majority of $1+ billion acquisitions should be rejected by default. I think in almost all such cases it involves one large incumbent buying out the competition = terrible for consumers.

If companies have $1+ billion to buy out other companies they should also have the money to create their own competitor to that company that is worth $1+ billion and they are trying to buy. And that would be much better for the consumer, too, as it would lead to more competition/faster rate of improvement for products.


Facebook’s acquisitions were ridiculed by most people at the time. They look like antitrust issues now because they were successfully integrated, something that was not guaranteed.


The acquisitions were ridiculed mostly for their price, not for the logic behind them or for the additions to the userbase.


I don't know about the others, but Instagram's price tag was a tactic tied to raising hype with the public around FB's upcoming IPO - and it worked.


> Facebook’s acquisitions were ridiculed by most people at the time.

by whom, exactly? FB acquired companies with massive userbases and networks. Instagram is social, WhatsApp is communication. in fact, most of these make sense to me: https://en.wikipedia.org/wiki/List_of_mergers_and_acquisitio...

Oculus is a bit more questionable to me from an integration perspective.


By the members of this site, for example:

https://news.ycombinator.com/item?id=3817850

A choice quote from the top comment: "Seems like mostly a huge waste of cash."


Comparing the comments then and now is hilarious. It’s amazing how quickly people forget things.


I don't think American anti-trust law makes any provisions for buying out potential future competitors.


Not directly but consumer welfare is the central concern of American anti-trust laws, buying out a competitor would presumably be blocked if the post-transaction firm would have greater power over consumers. IIRC, the sprint/t mobile deal was blocked because the resultant firm would probably have been in a situation where it could have harmed consumer welfare.

on the other hand, the Bush and Obama regulators didn't stop any of the airline or tech consolidation so who knows how much that regulatory body is captured.


yes you're right, didn't think about that. Things might look different now if Facebook had been blocked from acquiring Instagram.


And how would this tackle the problem that these tech companies trend towards monopolies? It doesn't really solve anything. You're never going to have 5 social networks with fairly equal market share because the value of a social network comes from the fact that everyone uses it.

I think what we need is regulation to ensure these companies use their power responsibly and operate in the interest of the public first.


Forcing Facebook to give up competitor platforms seems reasonable, but doesn't really solve the problem of the Facebook platform. We need to tackle Facebook at a cultural level or come up with laws that will protect privacy from all technology companies, not just Facebook.


Let's start by breaking up Facebook.


Breaking them up into what? It’s not like Google where you can break out the search functionality from the maps.


Here are at least 3 different companies:

Messenger (which was Beluga)

Oculus

Facebook

I'm pretty sure this message board can keep this list going.


That would make maps significantly worse. If not useless.


What does that mean?


A more sadistic Zuckerberg could play some preemptive hardball and spontaneously take Facebook completely offline in the US for 24 hours replaced with a message directing users to contact their state and local representatives. How much pull does FB still have with Americans and do most Americans like FB the way it is now ?


Very true ... when I read that I started thinking about the sorts of other things an "Evil Zuckerberg"[0] could do. Maybe apply some of that research to tweaking the news feed in a manner to manipulate the prosecution of the case (I can think of a few general and specific ways that would be fun to expand on, but it's late).

    > How much pull does FB still have ...
I've wondered that, myself. I quit 2 years ago. The funny thing is that a few days after I quit Facebook, when people would ask me why I unfriended them/other strange problem related to my quitting Facebook[1], I would say "I quit Facebook". Somewhere between person five and ten, I got a snicker and I looked back, confused. She explained that my tone was humorous because it was more appropriate for quitting smoking or drinking. When I played back in my head, I realized that she was right.

I didn't, though, have very strong feelings about Facebook. I had an experience I can only describe as an apathetic-rage-quit -- I was talking to a family member about something unrelated and mid-sentence, they say "Hey, what was up with you not liking that [adorable picture of personal family event] that I posted?" The next time I was behind a keyboard, I quit. I was, at one point, a very happy Facebook user. Not customer, as in business-buying-advertising, but user as in "the target demographic". It was a life-saver for a service group that I ran, prior to this incident, twice a month[3].

The second that a member of my family invented a new obligation out of it -- and one, mind you, that I was at no fault for having failed on ... I had left a long comment on a post by another, slightly more distant (but beloved) family member, and my spurned family member was offended that the other post came at almost the same time, therefore I had to have seen it and ignored it in favor of the other. We had a legitimate, albeit small and unimportant argument. It made me realize that a lot of the reason I scrolled Facebook was habit mixed with obligation.

The thing is, I've told that story more times than I care to remember. Lately, more people respond with "Oh yeah, me too", and if not that almost everyone expresses some strongly negative opinion about Facebook -- normal, non-tech/dev folks and geeks alike. Most of them have deactivated for extended periods of time. It's crazy, but it sounds like cigarettes before the average person knew about the lung-cancer risk -- lots of people who know it's bad for them (plenty of symptoms), but can't fully articulate the reasons. And then those who quit go on and on (like I am) about how nice it is to have the freedom to "not be aware of crazy important event 4 miles across the state that I should have known about because it was sent out to everyone on Facebook" -- "I don't subscribe to Facebook". Blank stare.

It'd be interesting to see a breakdown of who's leaving by all of those incredibly detailed categories that Facebook knows about its users. It wouldn't surprise me if quitting is higher among tech/dev (especially older) and teenagers in general. My oldest is getting to that age and I have never heard him talk nor have I been asked about Facebook. My kids friends don't ask them to sign up and the vast majority of them do not have accounts[4]. Some of the things their friends do want them to have accounts on are owned by Facebook, so figuring that out without Facebook's internal data would be difficult.

[0] Lest this devolve into an "attack the billionaire-CEO", that was not my intent. I have no opinion on Zuckerberg as a person; I just liked the way it sounded (I was going to say that I thought it was more efficient, but that was before the footnote with parenthesis...!)

[1] I've heard that my name or picture or both are missing from comments; honestly not sure. After I quit, I haven't bothered to look.

[2] Reading it, now, it reads more like I quit working at Facebook. I do not work at Facebook nor am I seeking to do so. :)

[3] A ~130 member church group, almost all retired people when "feature phones" would be more likely to be offered over smart phones for people who are unable to understand how they are going to dial a phone with no number buttons (but dialing with buttons makes sense?). Everybody had e-mail but almost nobody checked it; why would they? And not a damn one of them is reading or sending text messages on the nightmare phone that they rarely have turned on, anyway. They had Facebook - and they were on that at least twice a day. If I had to communicate something on short-notice, it worked so perfectly that I stopped being concerned about following up that everyone received the information.

[4] None of them are over 13; no parents know about that law and every kid figures out how to solve that problem when it arises. Around 2012-2013 this wasn't the case -- many parents allowed their children to have accounts and many children wanted them.

    -:-:-:-:-:-:-:-:-:-
EDIT: I was writing this comment, sitting next to my wife in bed. I finish posting it and she protests. She'd started reading it while I was finishing it up and hadn't finished before I submitted. So I read it to her.

In what will now become my new favorite anecdote while participating in a group-bitch-session about first-world-problems, my wife, who knows the details behind this story, indicated that it looked very obvious that it was her. It was, in fact, not her or any member of my immediate family.

I think this is about as close as I can come on Hacker News to being shamed for failing to comment on a cute family photo. And part of me wonders if my wife will troll my comment history in fear that I have made similar blunders (she will now!).

Prior to today, I couldn't imagine a world where my wife might actually want a Hacker News account. After she reads this ... ?

:P


The stock market reacts accordingly, FB is down 8% at the moment. Considering that Facebook should probably (from my naive standpoint) have not been allowed to buy Instagram nor WhatsApp back in the day, it will be interesting to see how this turns out.


It's pretty obvious that these probes aren't in good faith at all. If the government gave a shit about antitrust law or consumers, we wouldn't see things like Equifax/Transunion or Verizon/AT&T and other oligopolies that currently exist in the states.

The government and both parties want more control over the internet and the tech industry. Antitrust is a convenient trojan horse to get it.


I find it interesting that most of the concerns are over privacy, which should not be understated. I am quite a bit more concerned about freedom of speech as platforms like Facebook and Twitter are increasingly censoring and increasingly lopsided portion of the population, and often under very nebulous circumstance. Yes, they've rolled back decisions after the backlash erupts, but for every mistake they roll back, how many are never resolved?

Twitter has already been judged as effectively a public square by the supreme court, and that politicians may not block the public. When do protections of speech and press extend to what are effectively privately owned public spaces as they do in the physical form?



One of the recent examples of antitrust was Facebook announcing their own dating platform. Considering all dating apps already used Facebook graph, FB can easily take advantage of their power to kill other dating apps.


This is likely to end with Facebook divesting Instagram at the least. I think it’d be interesting to see Systrom back in charge at Instagram.



I’d rather have WhatsApp be split off.


Quick reminder that investigations don't do anything. Nor do they indicate a higher likelihood of legal action, or success of actions initiated in Court.


No, an investigation is necessary for legal action. Without, the likelihood is 0, with it's higher although clearly not a certainty.


The released FTC report, at the very least, will be cited for years in civil lawsuits against Facebook.


> investigations don't do anything

Sure they do. Even if they result in no action, they're a distraction for management and a source of stress for every senior person who has to prepare for providing testimony under oath.


Then what, eBay and Craigslist?


Both of them have reasonable competitors and are hardly anti-competitive. What is your reasoning here?


The reasoning is that the lawmakers don't really give a shit about antitrust or competitiveness of industries (because there are far worse monopolies to target), just control over the internet.


Once the government starts meddling with websites and IT there won't be any stopping it.


[flagged]


The enemy of my enemy is my friend.


I don’t know if I’d call either party an enemy but I see your point.




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