Facebook Debacle Seen as Opening for ‘Big Data’ Crackdown

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By Alexei Alexis

U.S. antitrust regulators should closely scrutinize technology firms and merger deals involving large amounts of consumer data in light of growing concerns about industry giants such as Facebook Inc., competition advocates told Bloomberg Law.

Antitrust regulators should be open to “fresh thinking” when it comes to digital markets and data, Justice Department antitrust chief Makan Delrahim said April 19.

“It would be particularly helpful for the bar and the academy to ask how the current toolkit can address the emerging problems of digital platforms based on existing jurisprudence,” he said in a speech at the University of Chicago.

Proponents of increased oversight see an opening for change, particularly at the Federal Trade Commission, which is expected to get a new slate of commissioners soon. The new FTC’s focus should include a look at potential antitrust problems related to Facebook’s control over “big data,” the advocates said.

Facebook’s dealings with Cambridge Analytica, a British firm with ties to President Donald Trump’s 2016 campaign, have heightened public awareness about the potential risks of big data, said Marshall Steinbaum, a fellow and research director at the Roosevelt Institute, a left-leaning think tank.

The FTC is already investigating the consumer privacy implications amid revelations that Facebook transferred the personal data of more than 80 million users to the analytics firm without their consent. Privacy regulation alone won’t solve the problem, Steinbaum said.

“I think we are finally coming to see the way that big data plays into the business models of dominant tech platforms and the need for federal antitrust authorities to be more judicious about their power in this area,” Steinbaum told Bloomberg Law. “I think the risks had been kind of opaque, but they’re now becoming very clear.”

Shifting Mood

Washington has largely embraced tech firms in years past, but the political atmosphere appears to be shifting, according to Stuart Plunkett, an antitrust partner in the San Francisco office of Baker Botts LLP.

The data privacy scandal adds to earlier revelations that social-media companies such as Facebook and Twitter Inc. were key elements of Russian efforts to influence the U.S. presidential election.

“I think what it means for antitrust is that we’ll see a greater level of enforcement directed at tech companies and potential combinations in the tech area,” he told Bloomberg law.

Republicans and Democrats in Congress have criticized Facebook in recent weeks, signaling an increasing willingness to crack down. “Facebook is a virtual monopoly, and monopolies need to be regulated,” Sen. Lindsey Graham (R-S.C.) said in an April 11 statement after grilling Facebook CEO Mark Zuckerberg at a hearing.

Facebook’s strategy includes making key acquisitions to add specialized employees and complementary companies, products, or technologies, according to Bloomberg Intelligence. The firm’s most high-profile deals have included the acquisitions of mobile messaging provider WhatsApp and photo-sharing company Instagram.

Change Coming

U.S. antitrust regulators have the power to address big data concerns but have shied away from doing so, unlike their counterparts in Europe, according to Chris Sagers, a professor of antitrust law at Cleveland State University.

“The argument that aggregations of data are of competitive significance is very plausible and could be part of some kind of federal action against Facebook,” he told Bloomberg Law.

The newly configured FTC could make that shift easier. “It’s unprecedented to have the FTC totally turn over like this,” said Matt Stoller, a research analyst for the Open Markets Institute, a competition advocacy group. “It gives them an opportunity to start with a clean slate, which you don’t ordinarily see at the FTC.”

The five-seat commission has been operating with three vacancies for more than a year. Democratic Commissioner Terrell McSweeny is leaving the agency at the end of the month. Acting Chairman Maureen Ohlhausen and has been nominated to serve as a judge on the U.S. Court of Federal Claims.

Trump tapped veteran antitrust law veteran Joseph Simons to be the next FTC chairman. The nominees for the other seats are Republicans Noah Phillips and Christine Wilson and Democrats Rohit Chopra and Rebecca Slaughter. All the nominees are awaiting confirmation by the Senate.

Tech Firms on Notice

The nominees have pledged to hold tech companies accountable to the antitrust laws if they behave badly.

Simons, the nominee for chairman, told senators at his Feb. 14 confirmation hearing that big companies may have gotten big because they offer a valuable service for customers, and that’s OK. But, he said, “companies that are already big and influential can sometimes use inappropriate means, anticompetitive means, to get big or to stay big. And if that’s the case, then we should be vigorously enforcing the antitrust laws and attacking that conduct and prohibiting it.”

“Big isn’t necessarily bad on its own,” Slaughter said at her April 11 confirmation hearing before the Senate Commerce Committee. “But where you have extreme market concentration, you have more opportunity for abuse of that market power.”

Tech firms don’t just have the government to worry about. They could also face a wave of private antitrust litigation, Plunkett said.

Asserting such claims won’t be easy for the government or private plaintiffs, he added.

“Generally, you have to show that a company has monopoly power in a defined product market,” he said. “That might be tough when you’re dealing with consumer information. A defense attorney would argue that the market is very broad and includes all sorts of data.”

To contact the reporter on this story: Alexei Alexis in Washington at aalexis@bloomberglaw.com

To contact the editor responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com

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