If Your Antitrust Case Depends On Pretending TikTok Doesn’t Exist, It’s Going To Fail

from the trickle-down-antitrust dept

Last week’s dismissal of the FTC’s antitrust case against Meta—combined with the earlier limited remedies in the Google search case—demonstrates something that should be obvious by now: antitrust is a pathetically weak tool for increasing competition in digital markets.

This isn’t an argument against competition. Competition in digital markets matters, desperately. But antitrust enforcement is slow, cumbersome, and nearly blind to how fast these markets actually move. It takes years to litigate, offers limited effective remedies, and by the time courts rule, the competitive threats have often shifted entirely. The whole apparatus works fine for more slow-moving industries (which have real competition problems!) but consistently fails when applied to more dynamic markets where the landscape changes every few years.

Over the last decade, figures like Lina Khan and Tim Wu have pushed a more aggressive vision of antitrust—variously called “hipster antitrust” or “neo-Brandeisian antitrust”—that promises to ignore these limitations and wield antitrust as a more punitive tool against large companies. The theory goes that punishing big companies will magically result in greater competition, a kind of antitrust trickle-down economics. The results of the Meta and Google cases suggest that if we want more competition in the digital space, there are much better policy levers than antitrust.

Both cases—originally brought by Trump’s AG Bill Barr as part of a 2020 campaign stunt to show that Trump was “taking on” the hated “Big Tech” were then pursued by the Biden FTC, with amended complaints trying to fix the original weaknesses. But both cases ended up demonstrating the same fundamental problem. Last week’s dismissal of the Meta case was particularly instructive.

As Judge Boasberg noted in his long and thorough opinion, the FTC’s bizarre attempt to define the market Meta was supposedly a monopolist in didn’t pass the laugh test. Notably, the FTC insisted that Meta’s market was just for “personal social networking” among friends and family, in an attempt to avoid the continued growing success of TikTok and YouTube as competitors. Thus, the FTC said the competition for Facebook and Instagram was just the much smaller Snapchat and the barely existing MeWe.

As Boasberg noted, the FTC had to show that Meta continues to have a monopoly in the marketplace to win the case, and the only way the FTC could win that argument was if TikTok and YouTube were excluded from the market definition. But that is laughable:

The FTC contends that Facebook, Instagram, and Snapchat form a distinct market that can be identified by those apps’ unique features. While those apps certainly show some distinct markings, they mostly resemble two other social-media apps that the FTC insists must be excluded: TikTok and YouTube. Their dominant features are identical, people mostly use all four to watch unconnected content that they can send in direct messages, industry participants agree that the apps belong in the same competitive market, they use similar resources and technologies, and they charge the same price to the same customers.

Even when considering only qualitative evidence, the Court finds that Meta’s apps are reasonably interchangeable with TikTok and YouTube…. Taking all the evidence together, it shows that personal social networking is not a separate product market. Instead, Meta competes in the market for social media, and that market includes — at minimum — TikTok and YouTube as well.

The opinion repeatedly demonstrates that Meta was terrified of the growing success of TikTok (and, to a lesser extent, YouTube) and kept adjusting its products (hello “Reels”) to be more like those other apps.

The court also demolished the FTC’s claim that Meta was harming consumers by making its products worse. Quite the opposite according to the actual evidence:

So the FTC instead argues that Meta has degraded these apps’ quality. By offering a worse product for the same price, the agency reasons, Meta has imposed the equivalent of a price increase.

The record, however, shows the opposite: Meta’s apps have continuously improved. The company has added scores of new features to Facebook and Instagram, from Stories to Reels to Marketplace…. The Court simply does not find it credible that users would prefer the Facebook and Instagram apps that existed ten years ago to the versions that exist today

The court points to plenty of natural experiments (bans, downtime, etc.) that show that many users consider the Instagram/Facebook Reels effectively interchangeable with TikTok and YouTube Shorts.

The broader problem here is that by the time the case reached trial, the competitive landscape had already shifted dramatically. Meta’s supposed monopoly was being actively challenged by TikTok’s explosive growth, forcing Meta to completely overhaul its products. The FTC’s case depended on freezing the market in time and pretending this competition didn’t exist.

And, really, this all shows how terrible a tool antitrust is to deal with these markets.

The Google case—which the DOJ technically won—suffered from a similar dynamic. Judge Amit Mehta recognized that the market had shifted quite a bit on its own, with Google’s search dominance being challenged by AI tools like ChatGPT. The remedies he imposed came up far short of what the government requested, precisely because the competitive threats were already emerging without court intervention.

This is not to say that antitrust never makes sense or that we don’t need more competitive markets. But the fact that the FTC has been converted, under both administrations, to be more focused on punishing companies, rather than actually pursuing policies that increase competition is a problem.

Tim Wu wrote an angry response to Boasberg’s decision in the NY Times, and in doing so, accidentally revealed the core problem with the neo-Brandeisian approach. When you strip away the legal arguments, it all comes down to vibes:

Does anyone seriously doubt that Meta is the kind of company that antitrust laws were designed to restrain?

That right there gives away the game. If your antitrust case is built on “doesn’t this company feel bad?” you’re going to take shortcuts, ignore inconvenient facts like the existence of TikTok, and then fail in court.

Wu’s piece is instructive because it shows how the FTC arrived at its laughable market definition. He claims Boasberg dismissed the case “in the face of strong evidence to the contrary, not to mention common sense,” but the “common sense” he’s appealing to is just the intuition that Meta seems big and powerful. The actual evidence—the stuff Boasberg spent pages analyzing—showed robust competition forcing Meta to completely overhaul its products.

Wu even complains that recognizing TikTok and YouTube as competitors represents “strained legal thinking” because they’re “adjacent markets.” But the whole point of antitrust law is to stop companies from abusing monopoly power to prevent competition. Showing that competition exists and is forcing the alleged monopolist to adapt its products is not a technicality—it’s proof that the market is working.

There are ways to bring good antitrust cases, but they have to involve showing that there’s an actual monopoly under the law, that the monopoly is being abused by the monopolist in order to limit further competition and/or make products worse for consumers.

When you start from “Meta feels like a monopoly” and work backward, you end up failing to make the case the law actually requires, and that doesn’t actually help enable a more competitive marketplace. The FTC was so focused on the vibes and how Meta looked bad that it failed to make the actual case it needed to make.

If we want actual competition in the marketplace, maybe stop focusing so much on antitrust laws and look at the issues that keep holding back actual competition: clean up broken copyright and patent laws that restrict competition, fix the CFAA which has been used repeatedly by big tech companies to stifle competition, and stop trying to pass laws that would make it impossible for smaller startups to exist because of the compliance costs.

Those would actually enable much greater competition, but no one wants to do the hard work on those to ensure actual competition exists.

Filed Under: antitrust, competition, ftc, hipster anti-trust, james boasberg, lina khan, market definition, monopoly, social media, tim wu

Companies: google, meta, mewe, snapchat, tiktok