Forty-six attorneys general have joined a of Facebook. The investigation is led by New York antitrust investigation Letitia James and was first announced in September. Attorneys general from both the Republicans and Democrats will examine whether Facebook broke any laws related to its dominance of social media.
Facebook has received fierce criticism following the Cambridge Analytica scandal, which revealed that Facebook had compromised the personal data of 87 million users. The scandal raised concerns about how the company stores, collects and uses consumers’ personal data. There is growing sentiment that Facebook and other “Big Five” technology companies (Facebook Amazon, Apple, Microsoft, and Google) pose a threat to consumers and their privacy, therefore, governments need to introduce regulations to curtail their influence.
Details of the investigation
At the commencement of the New York-led investigation in September, the probe initially featured attorney generals from eight states, including Florida and Colorado. The announcement that the number involved has increased to 47 signifies that the investigation has expanded into a national inquiry.
The investigation seeks to determine whether Facebook engaged in anti-competitive practices, such as using consumer data to gain an advantage over competitors and established a monopoly in the technology industry as a result.
It will also explore accusations that Facebook put consumer data at risk, pushed up advertising prices, and reduced consumer choice.
Since its formation in 2004, Facebook has acquired 79 technology companies, which include the $19 billion purchase of WhatsApp in 2014 and the acquisition of Instagram for $1 billion in 2012. Critics argue these purchases are evidence that Facebook has monopolized and consolidated its hold on the technology market, bought out rival companies to eradicate competition, and left consumers with little choice.
Writing in the Berkeley Business Law Journal, Dina Srinivasan, who ‘currently advises on the economics of digital advertising markets and continues to write about tech and antitrust’ explains that “Though the social network market was highly competitive in the beginning the market has since consolidated in Facebook’s favor.”
She adds that “Facebook is a monopoly … engaged in a long line of misleading conduct, which foreclosed competition.”
The expansion of the bipartisan investigation is also symbolic of the growing concern within the U.S. political system about the size and monopolistic nature of Facebook.
“We will use every investigative tool at our disposal to determine whether Facebook’s actions may have endangered consumer data, reduced the quality of consumers’ choices, or increased the price of advertising,” said Attorney General James when launching the probe in September.
Announcing the acquisition of attorneys general from almost every state in the U.S. into the antitrust investigation, James said that “after continued bipartisan conversations with attorneys general from around the country, today I am announcing that we have vastly expanded the list of states, districts, and territories investigating Facebook for potential anti-trust violations.”
James continues, “our investigation now has the support of 47 attorneys general from around the nation, who are all concerned that Facebook may have put consumer data at risk, reduced the quality of consumers’ choices, and increased the price of advertising.”
Concerns about the practices of technology companies have featured on the campaign trail of the 2020 U.S. presidential election. Elizabeth Warren, one of the frontrunners for the Democratic nomination, revealed plans to break up technology companies like Facebook.
Warren has said that “today’s big tech companies have too much power – too much power over our economy, our society and our democracy. They’ve bulldozed competition, used our private information for profit, and tilted the playing field against everyone else.”
Responding to the launch of the investigation in September, Facebook’s vice president for state and local policy, Will Castleberry, said the company would comply with the probe.
“People have multiple choices for every one of the services we provide. We understand that if we stop innovating, people can easily leave our platform. This underscores the competition we face, not only in the U.S. but around the globe. We will work constructively with state attorneys general, and we welcome a conversation with policymakers about the competitive environment in which we operate.”
Controversy encapsulates the recent history of Facebook. The antitrust investigation comes at a time when public trust in Facebook has declined in the wake of the Cambridge Analytica scandal. Subsequent concerns over the platform’s ability to protect consumer data have escalated.
According to two surveys conducted by Consumer Report, one in May 2018 and another in July 2019, 25% of respondents said they were either ‘extremely’ or ‘very’ concerned about the volume of personal information Facebook collects and stores. In the same survey, 65% of participants said it is wrong that Facebook can collect data about them when they are not using the platform.
Although the survey highlighted the concerns of consumers regarding Facebook’s business practices, the same study found that this concern hasn’t translated into members leaving or no longer using the platform. Consumer Report found that only one in 10 Facebook users ceased using the platform after revelations that Cambridge Analytica misused the data of Facebook account holders.
Following the expansion of the anti-trust investigation, Facebook’s stock price decreased by 4.45%.
Previous investigations of Facebook
The investigation of purported anti-competitive practices by Facebook is not the first probe into the company. The fined Facebook a record $5 billion after a probe discovered a wide range of privacy violations that included giving Cambridge Analytica access to the personal information of 87 million people.
Although the fine Facebook received was a record amount, the sum was 22 times higher than the previous record penalty, which was imposed on Google. The revenue of Facebook was $15 billion in the first quarter of 2019 alone, and in 2018 the company’s profits were $22 billion.
The behemoth finances of Facebook pose a challenge to governments attempting to regulate and curtail its influence. The Federal Trade Commission fine demonstrates that, with astronomical capital at its disposal, Facebook can pay even the most severe of penalties.
Alongside the fine imposed by the Federal Trade Commission, Federal prosecutors also conducted an investigation into data deals Facebook established with over 150 other technology companies. The New York Times reported that the deals let the companies see users’ friends, contact information, and other data, sometimes without consent. As a result, technology companies involved in the deals gained access to the personal data of hundreds of millions of users.
The debate surrounding regulation
There is little consensus regarding the regulation of the technology industry. For some, companies like Facebook have become too big and overly powerful, and regulation, alongside the breaking up of companies, is required. For others, regulating Big Tech will only make them stronger and alternative methods, such as the promotion of competition, should be pursued.