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The only practice listed in the paper that could be construed as anti-competitive is acquiring other “social networks.” However, it’s a stretch to consider ever

The only practice listed in the paper that could be construed as anti-competitive is acquiring other “social networks.” However, it’s a stretch to consider every website that a user can use a competitor to Facebook. It’s not like Facebook acquired a MySpace or anything. But why are acquisitions anti-competitive? Nothing forces the competitor to sell. Acquisitions prove people can compete. It’s a contradiction to say the network effect protects Facebook but at the same time say they had to buy Instagram because they were successfully competing despite the network effect. Facebook’s network effect didn’t stop Instagram, Snapchat, WhatsApp, etc.

deathgrips 6y ago
>But why are acquisitions anti-competitive? Because now there's less competition.
- alexmingoia 6y ago
  Instagram didn't have to sell. Less competition isn't the same thing as preventing competition. For example, imagine three restaurants competing. Two of them make an agreement with a common supplier to shut out the third competitor. That is what I think of as anti-competitive.
  - kthxbye123 6y ago
    There’s over a hundred and twenty years of antitrust enforcement in this country. Why does HN insist on reinventing antitrust law from their own intuition about what “anti-competitive” means?
    - btmoney06 6y ago
      There’s over a hundred and twenty year of antitrust law that says that conduct is improper if it leads to higher prices for consumers. Why does Yale insist that antitrust can apply when prices are 0?
      - arrosenberg 6y ago
        That philosophy emerged only 50 years ago in the 70s with the Chicago School of Economics, led Robert Bork and other ideologues.
      - bretpiatt 6y ago
        The real price to consumers isn't zero for Google or Facebook. Both platforms charge other businesses to advertise, because of the limited options businesses have to advertise they can charge high prices. Those advertising costs get passed on to consumers in the form of higher prices on products.
      - rydre 6y ago
        Price in this case is calculated by the amount of Ads you have to see, the effect on mental health because of Facebook's physiological experiments on its users, Facebook not obeying laws of smaller countries where it operates in, Facebook not paying taxes in other countries, owning Instagram - effectively the second largest competitor to Facebook is also owned by Facebook, too late to take anti discriminately actions for ads (if they were smaller and feared a boycott, they would take earlier precautions) etc. We need to look beyond the "Price = 0" narrative when we're investigating things that in this new era are free.
        YarickR2 6y ago
        Instagram is a Facebook competitor ? That's a sick joke; those two social networks have less in common than birds and mammals
        alexmingoia 6y ago
        The Yale paper wants it both ways. If any app with friends/follows is a competitor then there’s plenty of competitors and the acquisition didn’t substantially reduce competition. Yet if only products similar to Facebook are considered competitors then they’ve never acquired a competitor.
        beagle3 6y ago
  - jlmorton 6y ago
    Antitrust legislation is not designed to protect other companies, it's designed to protect consumers. In the United States, when the Justice Department blocks a merger, it is not simply deciding to disallow the merger. It does not have the power to do so. Instead, the actual mechanism is via antitrust lawsuit. If the merger is likely to reduce competition to such an extent that it would harm consumers, and if the Justice Department is so inclined, the Department files an antitrust lawsuit to block it.
    - alexmingoia 6y ago
      I don't think the legal code for preventing acquisitions says anything about consumers. 15 USC §18 says "No person engaged in commerce or in any activity affecting commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital and no person subject to the jurisdiction of the Federal Trade Commission shall acquire the whole or any part of the assets of another person engaged also in commerce or in any activity affecting commerce, where in any line of commerce or in any activity affecting commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly." Nevermind that, let's say it is about protecting consumers. How have consumers been harmed by the Instagram acquisition? Facebook didn't shut them down, substantially change the product, or force users to use their other products. IIRC Facebook reduced the price of WhatsApp by removing the dollar fee.
      - mav3rick 6y ago
        In the long run, this has stifled innovation. No social startup gets funding, as FB either crushes them or buys them out for cheap.
        blackoil 6y ago
        "Cheap" is not an adjective which people used to describe those acquisitions at the moment.
      - netcan 6y ago
        Are you asking "why is a monopoly bad?" or "why do acquisitions representing large market share promote monopoly?" The 2nd one is quite obvious. Afterwards, there is less competition and the aquire has increased their market share, buying power, control of a supply chain, platform, infrastructure or some other market dominance position. The 1st one... Do you prefer a theoretical reason? Empirical examples? rhetorical, political, philosophical? There are lots of reasons why monopolies are harmful. The legislation itself, and the reasoning behind it was liberal-economics... ie "capitalism." Capitalism, from a pro-captialist perspective, works because of a superior price system. Monopolies break price systems, whether they are public or private monopolies. There are a lot of other reasons too. Since this is about digital monopolies and "platform" is a primary form of market dominance.... Compare to WWW-vs-AOL. One was a closed, private, system where a single companies dominates a primary bottleneck. One was open. Do you think the WWW would have achieved what the WWW achieved if they had won that platform war?
  - fsckboy 6y ago
    ? but you are wrong. Buying your competitors is only possible because you offer them more than they agree they are worth. Why would you do that? because reducing competition will earn you more money through your anticompetitive actions.
  - rorykoehler 6y ago
    I can think of a billion reasons why you're right in theory and wrong in practice.
  - deathgrips 6y ago
    Doesn't matter. It results in less competition. The government's goal is to promote competition.
  - beagle3 6y ago
    Snapchat refused to sell, and Facebook pushed 3 different Snapchat competitors at the same time as a result, none of which were a success on their own - but which did make a significant dent in Snapchats growth. This is a “I’ll push you out of the market by taking a loss” behavior, similar to MS inclusion of IE in Windows. Whether or not NS or SC was/is a good product is irrelevant. This is the behavior that antitrust legislation is supposed to stop. The law iirc does not require that prices increase directly; rather that customers be harmed (of which price increase is a possible expression) The customers in this case are advertisers, and they are definitely harmed - there are now two online advertising venues, Google and Facebook, both making outsized profits because they are the only two games in town. (Which on its own is NOT illegal - but using dominant position to maintain it, as Facebook has done with e.g. Onavo, instagram, Snapchat) is anticompetetive.
    - scarface74 6y ago
      Snapchat refused to sell, and Facebook pushed 3 different Snapchat competitors at the same time as a result, none of which were a success on their own - but which did make a significant dent in Snapchats growth. So FB pushed an offering that consumers didn’t want and it wasn’t successful - all of this without government intervention.
      - beagle3 6y ago
        It didn't have to be successful to harm Snapchat (which it arguably did), and that's exactly the problem: Facebook put out, at roughly the same time, 3 products competing with Snapchat and among themselves. You can surely weasel out some explanation for this product strategy that does not include "suffocating Snapchat", but neither Facebook nor any other company that I'm aware of has done anything similar[0]. And the only reasonable reason Facebook will do that, and can afford to, is its monopoly -- the use of which to further itself is likely an antitrust violation. [0] Apple regularly does multiple competing products - but they are all internal. Only the "winner" is put on the market.
        scarface74 6y ago
  - onion2k 6y ago
    Less competition isn't the same thing as preventing competition. Buying a competitor so they can't compete with you is preventing competition. You might have a definition that says it's not, but that just means your definition is wrong. The FTC and United States Department of Justice Antitrust Division examine every significant merger to test whether or not it's anti-competitive. Every government has a department looking at mergers and acquisitions for this reason (https://www.ftc.gov/policy/international/competition-consumer-protection-authorities-worldwide https://www.ftc.gov/policy/international/competition-consume...).
  - Nasrudith 6y ago
    Some of anti trust historically has included too much higher of a barrier to effective entry which is how vertical monopolies are coherent as a concept. The issue isn't that owning a chain of iron mines, steel refineries, and factories using the steel stop anyone from running one or their own chains of those things but that to be a competitor a massive amount of capital is required. Effectively creating say an effective hundred million dollar moat to be competitive. In which case the investment might not even be worth the revenue earned as returns diminish as it is either duplicate the production of the leader to match economies of scale or lose by produce more expensive commodities. I don't quite agree with it philosophically (vertical intergration done right boosts efficency for everyone and done wrong only hurts themselves making it ironically procompetitive for those who don't make the same mistakes) but I can see the logic behind it.
alkibiades 6y ago
the network effects aren't anti-competitive alone. the acquisitions alone aren't anti-competitive. their combined effect has been for them to be in a monopoly position and prevent any competition.
rbecker 6y ago
> It’s a contradiction to say the network effect protects Facebook but at the same time say they had to buy Instagram because they were successfully competing despite the network effect. It's not a contradiction if you allow that protection may not be perfect.
- alexmingoia 6y ago
  Then what's the evidence the network effect has protected them from competition?
btmoney06 6y ago
This is dead on. Moreover, I find it a bit funny that the authors consider WhatsApp to be a social media platform, but not iMessage. Similarly, they consider YouTube to be a social media platform, but not Twitch (or any of the paid services like Netflix). If they were intellectually honest, Facebook's market share would be nowhere near what they claim.
- rorykoehler 6y ago
  I'm a heavy Apple user and have been for over a decade and still don't understand why iMessage exists? WhatsApp and iMessage aren't comparable.
  - anymoonus 6y ago
    What fraction of this week's WWDC was spent on iMessage?
    - rorykoehler 6y ago
      No idea, I didn't watch it.
Ozzie_osman 6y ago
> It’s not like Facebook acquired a MySpace or anything. I'd say Instagram and WhatsApp are pretty close.
boomboomsubban 6y ago
The paper lists five different things as anticompetitive, why do you disagree with their assessment? Allowing Vine to use your API and then blocking it after Twitter acquired it seems anticompetitive.
- alexmingoia 6y ago
  Because none of the things besides acquisition is anti-competitive in the context of anti-trust law. Facebook doesn’t owe competitors their data. It’s absurd to construe not actively helping competitors by giving them your data as “anti-competitive.”
  - boomboomsubban 6y ago
    >Because none of the things besides acquisition is anti-competitive in the context of anti-trust law. Have you read antitrust law? The Sherman Act is vague enough that anything that could be considered anticompetitive would violate the law. The "Rule of Reason." > It’s absurd to construe not actively helping competitors by giving them your data as “anti-competitive.” Publicly agreeing to an agreement allowing something and then changing the terms to control how competitive they can be is.
- scarface74 6y ago
  Can I call up your company and get a list of your customers to create a competing service?
  - boomboomsubban 6y ago
    How is that remotely similar?
    - scarface74 6y ago
      A competitor wanted to get a list of FB users to create a competitor. How is it not similar?
baryphonic 6y ago
> It’s a contradiction to say the network effect protects Facebook but at the same time say they had to buy Instagram because they were successfully competing despite the network effect. Facebook’s network effect didn’t stop Instagram, Snapchat, WhatsApp, etc. It's not a contradiction, since network effects can be unstable over time (e.g. people get older and young people "enter the pipeline," sometimes with different preferences). By the time of the acquisitions, Friendster had disappeared and MySpace was in the throes. Facebook had the network effects at time t=0 and determined that Instagram and then WhatsApp would have the dominant network effects at t=1 and t=2, respectively. I somewhat agree that we shouldn't punish Facebook because they understood Instagram's and WhatsApp's value than Instagram or WhatsApp did, but network effects can be fickle if a company like Facebook doesn't try to co-opt/buy competitors.
- alexmingoia 6y ago
  I don’t follow how the existence of companies succeeding in the face of competitors with “network effects” supports the idea that network effects limit competition... I agree network effects are part of the value of the product, but I don’t see how that limits competition. Users can have both a Facebook and a Twitter, or Facebook and MySpace, etc. Network effects don’t stop people from joining other networks.
  - baryphonic 6y ago
    Because MySpace was a substitute good for Facebook and vice versa. If only a fraction of (certain strongly-connected) MySpace users stop updating there and only use Facebook, MySpace's network effects collapse and thus competition decreases. This is of course what happened. I joined Facebook when it was first opened for my school (long ago). I immediately loved the UI over the XSS dumpster fire that was MySpace, but I knew like two or three people there. I kind of forgot about it, but checked back a couple months later, and suddenly I knew a bunch of people on Facebook. My days of using MySpace at that point were basically over. The data indicates this was not merely an anecdote, but basically how MySpace died. EDIT: Also, the way antitrust law is written, anything that has this kind of network effect will likely be a candidate for a monopoly. It's almost inevitable. The courts and legal establishment have over time added the criterion that antitrust should only be enforced when monopoly power harms consumer welfare (usually understood to mean higher prices), which is a much trickier proposition in the case of Facebook.

deathgrips 6y ago

>But why are acquisitions anti-competitive? Because now there's less competition.

alexmingoia 6y ago
Instagram didn't have to sell. Less competition isn't the same thing as preventing competition. For example, imagine three restaurants competing. Two of them make an agreement with a common supplier to shut out the third competitor. That is what I think of as anti-competitive.
- kthxbye123 6y ago
  There’s over a hundred and twenty years of antitrust enforcement in this country. Why does HN insist on reinventing antitrust law from their own intuition about what “anti-competitive” means?
  - btmoney06 6y ago
    There’s over a hundred and twenty year of antitrust law that says that conduct is improper if it leads to higher prices for consumers. Why does Yale insist that antitrust can apply when prices are 0?
    - arrosenberg 6y ago
      That philosophy emerged only 50 years ago in the 70s with the Chicago School of Economics, led Robert Bork and other ideologues.
    - bretpiatt 6y ago
      The real price to consumers isn't zero for Google or Facebook. Both platforms charge other businesses to advertise, because of the limited options businesses have to advertise they can charge high prices. Those advertising costs get passed on to consumers in the form of higher prices on products.
    - rydre 6y ago
      Price in this case is calculated by the amount of Ads you have to see, the effect on mental health because of Facebook's physiological experiments on its users, Facebook not obeying laws of smaller countries where it operates in, Facebook not paying taxes in other countries, owning Instagram - effectively the second largest competitor to Facebook is also owned by Facebook, too late to take anti discriminately actions for ads (if they were smaller and feared a boycott, they would take earlier precautions) etc. We need to look beyond the "Price = 0" narrative when we're investigating things that in this new era are free.
      - YarickR2 6y ago
        Instagram is a Facebook competitor ? That's a sick joke; those two social networks have less in common than birds and mammals
        alexmingoia 6y ago
        The Yale paper wants it both ways. If any app with friends/follows is a competitor then there’s plenty of competitors and the acquisition didn’t substantially reduce competition. Yet if only products similar to Facebook are considered competitors then they’ve never acquired a competitor.
        beagle3 6y ago
- jlmorton 6y ago
  Antitrust legislation is not designed to protect other companies, it's designed to protect consumers. In the United States, when the Justice Department blocks a merger, it is not simply deciding to disallow the merger. It does not have the power to do so. Instead, the actual mechanism is via antitrust lawsuit. If the merger is likely to reduce competition to such an extent that it would harm consumers, and if the Justice Department is so inclined, the Department files an antitrust lawsuit to block it.
  - alexmingoia 6y ago
    I don't think the legal code for preventing acquisitions says anything about consumers. 15 USC §18 says "No person engaged in commerce or in any activity affecting commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital and no person subject to the jurisdiction of the Federal Trade Commission shall acquire the whole or any part of the assets of another person engaged also in commerce or in any activity affecting commerce, where in any line of commerce or in any activity affecting commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly." Nevermind that, let's say it is about protecting consumers. How have consumers been harmed by the Instagram acquisition? Facebook didn't shut them down, substantially change the product, or force users to use their other products. IIRC Facebook reduced the price of WhatsApp by removing the dollar fee.
    - mav3rick 6y ago
      In the long run, this has stifled innovation. No social startup gets funding, as FB either crushes them or buys them out for cheap.
      - blackoil 6y ago
        "Cheap" is not an adjective which people used to describe those acquisitions at the moment.
    - netcan 6y ago
      Are you asking "why is a monopoly bad?" or "why do acquisitions representing large market share promote monopoly?" The 2nd one is quite obvious. Afterwards, there is less competition and the aquire has increased their market share, buying power, control of a supply chain, platform, infrastructure or some other market dominance position. The 1st one... Do you prefer a theoretical reason? Empirical examples? rhetorical, political, philosophical? There are lots of reasons why monopolies are harmful. The legislation itself, and the reasoning behind it was liberal-economics... ie "capitalism." Capitalism, from a pro-captialist perspective, works because of a superior price system. Monopolies break price systems, whether they are public or private monopolies. There are a lot of other reasons too. Since this is about digital monopolies and "platform" is a primary form of market dominance.... Compare to WWW-vs-AOL. One was a closed, private, system where a single companies dominates a primary bottleneck. One was open. Do you think the WWW would have achieved what the WWW achieved if they had won that platform war?
- fsckboy 6y ago
  ? but you are wrong. Buying your competitors is only possible because you offer them more than they agree they are worth. Why would you do that? because reducing competition will earn you more money through your anticompetitive actions.
- rorykoehler 6y ago
  I can think of a billion reasons why you're right in theory and wrong in practice.
- deathgrips 6y ago
  Doesn't matter. It results in less competition. The government's goal is to promote competition.
- beagle3 6y ago
  Snapchat refused to sell, and Facebook pushed 3 different Snapchat competitors at the same time as a result, none of which were a success on their own - but which did make a significant dent in Snapchats growth. This is a “I’ll push you out of the market by taking a loss” behavior, similar to MS inclusion of IE in Windows. Whether or not NS or SC was/is a good product is irrelevant. This is the behavior that antitrust legislation is supposed to stop. The law iirc does not require that prices increase directly; rather that customers be harmed (of which price increase is a possible expression) The customers in this case are advertisers, and they are definitely harmed - there are now two online advertising venues, Google and Facebook, both making outsized profits because they are the only two games in town. (Which on its own is NOT illegal - but using dominant position to maintain it, as Facebook has done with e.g. Onavo, instagram, Snapchat) is anticompetetive.
  - scarface74 6y ago
    Snapchat refused to sell, and Facebook pushed 3 different Snapchat competitors at the same time as a result, none of which were a success on their own - but which did make a significant dent in Snapchats growth. So FB pushed an offering that consumers didn’t want and it wasn’t successful - all of this without government intervention.
    - beagle3 6y ago
      It didn't have to be successful to harm Snapchat (which it arguably did), and that's exactly the problem: Facebook put out, at roughly the same time, 3 products competing with Snapchat and among themselves. You can surely weasel out some explanation for this product strategy that does not include "suffocating Snapchat", but neither Facebook nor any other company that I'm aware of has done anything similar[0]. And the only reasonable reason Facebook will do that, and can afford to, is its monopoly -- the use of which to further itself is likely an antitrust violation. [0] Apple regularly does multiple competing products - but they are all internal. Only the "winner" is put on the market.
      - scarface74 6y ago
- onion2k 6y ago
  Less competition isn't the same thing as preventing competition. Buying a competitor so they can't compete with you is preventing competition. You might have a definition that says it's not, but that just means your definition is wrong. The FTC and United States Department of Justice Antitrust Division examine every significant merger to test whether or not it's anti-competitive. Every government has a department looking at mergers and acquisitions for this reason (https://www.ftc.gov/policy/international/competition-consumer-protection-authorities-worldwide https://www.ftc.gov/policy/international/competition-consume...).
- Nasrudith 6y ago
  Some of anti trust historically has included too much higher of a barrier to effective entry which is how vertical monopolies are coherent as a concept. The issue isn't that owning a chain of iron mines, steel refineries, and factories using the steel stop anyone from running one or their own chains of those things but that to be a competitor a massive amount of capital is required. Effectively creating say an effective hundred million dollar moat to be competitive. In which case the investment might not even be worth the revenue earned as returns diminish as it is either duplicate the production of the leader to match economies of scale or lose by produce more expensive commodities. I don't quite agree with it philosophically (vertical intergration done right boosts efficency for everyone and done wrong only hurts themselves making it ironically procompetitive for those who don't make the same mistakes) but I can see the logic behind it.

alkibiades 6y ago

the network effects aren't anti-competitive alone. the acquisitions alone aren't anti-competitive. their combined effect has been for them to be in a monopoly position and prevent any competition.

rbecker 6y ago

alexmingoia 6y ago
Then what's the evidence the network effect has protected them from competition?

btmoney06 6y ago

This is dead on. Moreover, I find it a bit funny that the authors consider WhatsApp to be a social media platform, but not iMessage. Similarly, they consider YouTube to be a social media platform, but not Twitch (or any of the paid services like Netflix). If they were intellectually honest, Facebook's market share would be nowhere near what they claim.

rorykoehler 6y ago
I'm a heavy Apple user and have been for over a decade and still don't understand why iMessage exists? WhatsApp and iMessage aren't comparable.
- anymoonus 6y ago
  What fraction of this week's WWDC was spent on iMessage?
  - rorykoehler 6y ago
    No idea, I didn't watch it.

Ozzie_osman 6y ago

> It’s not like Facebook acquired a MySpace or anything. I'd say Instagram and WhatsApp are pretty close.

boomboomsubban 6y ago

The paper lists five different things as anticompetitive, why do you disagree with their assessment? Allowing Vine to use your API and then blocking it after Twitter acquired it seems anticompetitive.

alexmingoia 6y ago
Because none of the things besides acquisition is anti-competitive in the context of anti-trust law. Facebook doesn’t owe competitors their data. It’s absurd to construe not actively helping competitors by giving them your data as “anti-competitive.”
- boomboomsubban 6y ago
  >Because none of the things besides acquisition is anti-competitive in the context of anti-trust law. Have you read antitrust law? The Sherman Act is vague enough that anything that could be considered anticompetitive would violate the law. The "Rule of Reason." > It’s absurd to construe not actively helping competitors by giving them your data as “anti-competitive.” Publicly agreeing to an agreement allowing something and then changing the terms to control how competitive they can be is.
scarface74 6y ago
Can I call up your company and get a list of your customers to create a competing service?
- boomboomsubban 6y ago
  How is that remotely similar?
  - scarface74 6y ago
    A competitor wanted to get a list of FB users to create a competitor. How is it not similar?

baryphonic 6y ago

> It’s a contradiction to say the network effect protects Facebook but at the same time say they had to buy Instagram because they were successfully competing despite the network effect. Facebook’s network effect didn’t stop Instagram, Snapchat, WhatsApp, etc. It's not a contradiction, since network effects can be unstable over time (e.g. people get older and young people "enter the pipeline," sometimes with different preferences). By the time of the acquisitions, Friendster had disappeared and MySpace was in the throes. Facebook had the network effects at time t=0 and determined that Instagram and then WhatsApp would have the dominant network effects at t=1 and t=2, respectively. I somewhat agree that we shouldn't punish Facebook because they understood Instagram's and WhatsApp's value than Instagram or WhatsApp did, but network effects can be fickle if a company like Facebook doesn't try to co-opt/buy competitors.

alexmingoia 6y ago
I don’t follow how the existence of companies succeeding in the face of competitors with “network effects” supports the idea that network effects limit competition... I agree network effects are part of the value of the product, but I don’t see how that limits competition. Users can have both a Facebook and a Twitter, or Facebook and MySpace, etc. Network effects don’t stop people from joining other networks.
- baryphonic 6y ago
  Because MySpace was a substitute good for Facebook and vice versa. If only a fraction of (certain strongly-connected) MySpace users stop updating there and only use Facebook, MySpace's network effects collapse and thus competition decreases. This is of course what happened. I joined Facebook when it was first opened for my school (long ago). I immediately loved the UI over the XSS dumpster fire that was MySpace, but I knew like two or three people there. I kind of forgot about it, but checked back a couple months later, and suddenly I knew a bunch of people on Facebook. My days of using MySpace at that point were basically over. The data indicates this was not merely an anecdote, but basically how MySpace died. EDIT: Also, the way antitrust law is written, anything that has this kind of network effect will likely be a candidate for a monopoly. It's almost inevitable. The courts and legal establishment have over time added the criterion that antitrust should only be enforced when monopoly power harms consumer welfare (usually understood to mean higher prices), which is a much trickier proposition in the case of Facebook.