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The Technology 202: Facebook antitrust lawsuits will test government’s ability to rein in Silicon Valley

The prosecutors in the Federal Trade Commission’s complaint called on the court to consider a breakup of Facebook’s empire by forcing it to divest from its acquisitions Instagram and WhatsApp. It also wants significant limitations on Facebook’s ability to buy up other smaller companies in the future. (My colleague Tony Romm has all the details on the lawsuits here.)

It’s significant move after the Federal Trade Commission, which brought one of yesterday’s lawsuits, was pilloried just last year for landing Facebook with a fine following its wide-ranging, months-long privacy probe that critics panned as “a mosquito bite” or “barely a tap on the wrist.” 

The complaint sets the stage for years-long antitrust battles that could remake Silicon Valley. 

Antitrust enforcers want the lawsuit to send a message to all of Silicon Valley at a critical moment when lawmakers from both parties are increasingly scrutinizing the tech industry’s power. It comes as the Justice Department filed a claim against Google, and there are ongoing probes of Apple and Amazon. 

“Today, we are sending a clear and strong message to Facebook and every other company that any efforts to stifle competition, hurt small business, reduce innovation and creativity, [and] cut privacy protections will be met with the full force of our offices,” said Letitia James, the Democratic attorney general of New York, who led attorneys general from 46 states, the District of Columbia and Guam in filing one of the twin lawsuits. 

Facebook is launching an aggressive fight against the suits, calling them “revisionist history.”

Government enforcers will be going up against one of the most powerful lobbying machines in the country. And Facebook is ready for a war. 

Within hours of the lawsuits becoming public, Facebook issued a more than 1,500-word blog post in which it assailed the lawsuit. Facebook has particularly homed in on the fact that the FTC had the authority to block its purchases of Instagram and WhatsApp when they happened years ago, but ultimately declined to do so.

But experts studying antitrust said historically, that hasn’t prevented the government from later breaking up a business. From Margaret O’Mara, a history professor at University of Washington:

The blog post also provides a preview of how Facebook intends to defend itself against the prosecutors’ arguments that its purchases of the companies resulted in a worse experience for consumers because they had fewer choices available. Facebook argues that the acquisitions benefited people because it was able to invest heavily in improving WhatsApp and Instagram. 

“These transactions were intended to provide better products for the people who use them, and they unquestionably did,” Facebook argues. “The FTC and states stood by for years while Facebook invested billions of dollars and millions of hours to make Instagram and WhatsApp into the apps that users enjoy today.”

The antitrust lawsuits notably received broad bipartisan support at a particularly divisive moment in American politics. 

Attorneys general from both parties signing onto the states’ filing, and Joseph Simons, the Republican chair of the Federal Trade Commission, voted to bring the federal lawsuit with two of the agency’s Democratic commissioners. Both Republicans and Democrats in Congress praised the move. 

The legal battle is likely not only to have a deep influence in Silicon Valley, but will be closely watched by lawmakers and policy experts who have been weighing revisions to Washington’s long-standing antitrust laws, which were initially written to address competition in industries such as oil and railroads. A report from the House antitrust subcommittee investigation of the tech industry recommended several major changes to the existing laws earlier this year to ensure broader competition in the digital era. 

Smaller companies have feared Facebook’s bullying tactics for years. 

Now regulators are catching on to that strategy. But it could be more technically complicated to break the company up at this point because WhatsApp and Instagram are more greatly merged into Facebook. 

“Facebook is about to find out if there will be consequences to undermining American democracy and public health,” Facebook critic and former investor Roger McNamee told Elizabeth. “They have scrambled to make the job of regulators more difficult by merging the back end of key products.”

Our top tabs

Google will lift its ban on political ads today. 

The advertising giant had blocked ads mentioning current state or federal officeholders for more than a month in light of concerns about misinformation, Emily Glazer reported. The blackout paused more than 5 million ads referring to the election, Google said in a blog post. 

Google previously told advertisers that it was unlikely it would lift the ban this month, sparking an outcry. Democrats warned that the ban could hurt their chances to win upcoming runoff elections in Georgia. 

“With less than a week to go until early voting starts in Georgia, Google’s decision to lift their ban on political ads is overdue, but this is positive news and Facebook must now do the same,” DSCC Executive Director Scott Fairchild said in a statement.

Amazon added Microsoft and Unilever to its climate initiative. Critics say it’s not enough.

The company added 13 new companies to its Climate Pledge initiative, which pushes companies to meet the goals of the Paris climate agreement 10 years early, Jay Greene reports

“There are now 31 companies from around the world that have signed The Climate Pledge, and collectively we are sending an important signal to the market that there is significant and rapidly growing demand for technologies that can help us build a zero-carbon economy,” Amazon chief executive Jeff Bezos, who owns The Washington Post, said in a statement. 

But the pledge, which does not include standardized rules for what signatories must report or the metric they should use, has attracted the criticism of environmental activists and experts.

 “They’ve wrapped themselves in the cloak of environmental respectability,” said Aseem Prakash, a University of Washington professor and the director of the school’s Center for Environmental Politics. He called the Climate Pledge a branding exercise and  says that Amazon should take meaningful steps such as participating in a more rigorous existing initiative CDP (formerly known as the Carbon Disclosure Project).  Both Unilever and Microsoft already participate in the project. 

Amazon boasts a massive environmental footprint because of its growing e-commerce and cloud computing businesses. Employees have protested the company’s approach to climate policy.

Google’s CEO apologized for the company’s handling of AI ethics researcher Timnit Gebru’s exit.

I’ve heard the reaction to Dr. Gebru’s departure loud and clear: it seeded doubts and led some in our community to question their place at Google, Pichai said in the memo. I want to say how sorry I am for that, and I accept the responsibility of working to restore your trust. 

Gebru claims that Google fired her for speaking out about the company’s request for her to retract Google employees’ names from a research paper critical of artificial intelligence. She accused the company of mistreatment.

Jeff Dean, Google’s head of AI, said the paper did not meet its protocols and standards. He denies that she was fired. Members of Gebru’s team have pushed back against Dean’s claims.

More than 2,000 Google employees signed an open letter demanding answers from the company.  

Gebru dismissed the apology on Twitter.

Rant and rave

IPO Watch

Airbnb is scheduled to make its stock market debut today.

The travel  company is expected to price shares between $56 and $60 per share, Rachel Lerman reports. Airbnb was expected to start trading earlier this year, but the coronavirus resulted in a dramatic slip in business.

The company ended up laying off a quarter of its workforce, citing the pandemic. But it was able to rebound more quickly than the rest of the travel industry this summer thanks to its flexibility and many states reopening. It expects revenue to dip this quarter as more states reinstate stay-at-home orders.

Meanwhile, DoorDash debuted yesterday at soaring prices.

The company’s offering soared to $190 by the end of trading, nearly double its listing price, Faiz Siddiqui reports. The public offering highlights its success in the midst of the pandemic, something it doesn’t expect to sustain. 

“The circumstances that have accelerated the growth of our business stemming from the effects of the covid-19 pandemic may not continue in the future, and we expect the growth rates in revenue … to decline in future periods,” the company said. 

Instead, the company touted its efficiency thanks to algorithms that can predict the “ideal number” of workers at any given time. 

The company, which leads the food delivery market, has been slammed by regulators for previously deceiving consumers and workers about its tipping feature. It settled with D.C.’s Attorney General last month for $2.5 million to resolve the allegations.

Privacy monitor

A major privacy group filed a complaint against providers of online test proctoring tools with the D.C. attorney general. 

The companies have engaged in “unfair and deceptive trade practices” and have collected “excessive personal data” from students, the Electronic Privacy Information Center said in a filing yesterday. The complaint names Respondus, ProctorU, Proctorio, Examity and Honorlock — all companies whose growth has exploded during the pandemic. The emerging industry has attracted scrutiny from privacy advocates and lawmakers for the invasive nature of the monitoring and questionable technology.

“The rapid growth of online test proctoring has all but forced many students to trade away their privacy rights to meet their academic obligations,” EPIC stated.

EPIC’s complaint asks the D.C. attorney general to halt the companies’ “unfair trade practices and impose transparency, data minimization, and algorithmic fairness requirements.”

Trending

Daybook

  • Stanford’s Freeman Spogli Institute for International Studies will host an event “Digital Technology, Socia Media and the 2020 President Election” today at 9am
  • The University of Washington Tech Policy Lab will host “Redressing Privacy Violations” a conversation in partnership with Microsoft today at 12 p.m.

Before you log off

Stephen Colbert rounds up the non-antitrust headlines you may have missed.

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