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Government’s antitrust case against Facebook seeks a villain in Mark Zuckerberg

Antitrust enforcers are casting the billionaire executive, once one of American tech’s ‘darling superstars,’ as a sneaky and rapacious brawler who vowed to ‘crush’ the competition

Facebook CEO Mark Zuckerberg. (Michael Reynolds/EPA-EFE/Shutterstock)
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Anyone who still thinks of Facebook chief executive Mark Zuckerberg as the awkward Harvard undergrad portrayed in “The Social Network” — sneaky and ambitious, sure, but also longing for human connection — might be startled to encounter the bare-knuckled operator portrayed in a pair of government lawsuits filed Wednesday.

In calling for the breakup of his $800 billion company, federal and state officials portray a Zuckerberg who could more easily star in a Silicon Valley update to “The Godfather.” Rivals cower at the thought of “the wrath of Mark” as he schemes to “eliminate” competitors, who face being “snuffed out” if they defy him, according to the 123-page complaint from state officials.

One anecdote central to the cases depicts Instagram co-founder Kevin Systrom seeking advice from a company investor while considering a $1 billion offer to sell his company to Facebook in 2012: “Will he go into destroy mode if I say no?”

The answer: “Probably.”

Systrom soon decided to sell, taking an offer that, in the telling of the state and federal officials, he couldn’t really refuse.

The dramatic language, bolstered by damaging emails unearthed by investigators, paints Zuckerberg as Silicon Valley’s leading villain, one whom the public might be persuaded to loathe, as some already do. It’s particularly striking, coming two months after the Justice Department’s antitrust complaint against Google, which is long on charts, data and industry analysis but does not even name the company executives whose decisions led to the allegedly monopolistic actions.

“The prose of the complaints is very different because of the behavior and the paper trail,” said Gene Kimmelman, a former Justice Department antitrust official now working as a senior adviser to the public interest advocacy group Public Knowledge. “Facebook was ‘Move fast and break things,’ so Zuckerberg was not careful, especially in those earlier years.”

U.S., states sue Facebook as an illegal monopoly, setting stage for potential breakup

Many of the anecdotes in the federal and state antitrust complaints against Facebook recount familiar, factual tales long shared within the technology industry. But the decision to vilify one of the 21st century’s most successful entrepreneurs — not to mention the creator of the industry leader in a competitive global market — was a tactical choice likely to fuel the all-out battle brewing between a bipartisan group of government officials and a spectacularly wealthy private company.

Zuckerberg already vowed, in July, to “go to the mat and … fight” efforts to break up his creation. It’s an approach that he alone could decide to pursue given his controlling power over Facebook’s voting shares — something that no individual at Google’s parent company, Alphabet, has.

“Google is much more of a machine, while Facebook is essentially a machine built around an identity of one, which is Zuck. Everyone at the company tries to essentially act how Zuck would,” said Ashkan Soltani, who was the former chief technologist at the Federal Trade Commission from 2014 to 2015 and the technical lead on the 2011 FTC privacy case against Facebook.

While Facebook can afford the world’s best lawyers, it also has the ability, should it choose to do so, to deliver its counterarguments directly to billions of users worldwide by activating the most far-reaching communications networks in world history. This is an asset that Standard Oil, AT&T and Microsoft, in landmark antitrust cases of previous generations, did not have.

Such political factors may ultimately prove important. The authors of the lawsuits filed Wednesday — one by the FTC and a longer, more elaborate one by the attorneys general of 46 states, the District of Columbia and Guam — offer what they say is extensive evidence of a kind of Silicon Valley thuggery by Zuckerberg. But some of the drier legal arguments are harder to follow and less immediately convincing, as they call for a variety of sanctions, including the breaking off of Instagram and WhatsApp from Facebook.

Antitrust experts reviewing the complaints seized on familiar issues that have bedeviled antitrust scrutiny of technology companies for years, starting with the uncertainty over what market, exactly, Facebook is monopolizing. Are the key competitors vanquished rivals such as Myspace, or thriving social media platforms Twitter, LinkedIn, TikTok and WeChat (the last two of which are owned by Chinese companies)?

“There’s a practical problem in arguing that they’re stifling competition, except for all of these competitors,” said Jessica Melugin, an associate director at the Competitive Enterprise Institute, a free-market think tank in Washington. “I mean, come on, the New York attorney general went on Twitter to talk about her case … and there’s a lot of complaining about monopolies on other social media websites.”

Adding to this confusion is that Google, another alleged monopolist in the U.S. government’s telling, has a walk-on role in the complaint against Facebook, as the creator of failed social network Google Plus. So, the argument goes, both companies are dangerous monopolies in the same technology industry, but different parts of that industry. This will surely resonate with many people familiar with today’s technology industry, dominated as it is by a handful of powerful players that prey on weaker rivals and arguably stifle innovation, but it’s one more logical step that government officials will have to prove in court.

Justice Department sues Google, alleging multiple violations of federal antitrust law

The complaints also strain to define the nature of the harm Facebook has inflicted on its customers, long a sticking point when government trustbusters scrutinize services that are free to use, making the potential for higher costs a nonissue.

Evidence abounds in the complaints of ruthless tactics and damage to competitors — something more important to European antitrust law than the weaker U.S. versions — but the arguments about the consequences of Facebook’s monopolistic behavior come down to this: A freer, more competitive market would lead to better products with more stringent privacy protections.

That might be true, but it’s not inherently obvious that more thriving social media companies necessarily would lead to less collection and exploitation of customer data — especially in a country where the nation’s legislators, unlike those in many other parts of the world, have enacted few laws to protect that same personal data. Using antitrust law to secure consumer privacy that Congress has so far neglected requires multiple logical steps, each of which would face scrutiny in court.

“We need our rules and thinking to be of the future and not from 100 years ago,” said Om Malik, a partner at the Silicon Valley venture capital firm True Ventures. He argued that the companies should be able to still buy smaller firms to expand their core business without gobbling up side companies so that they can sprawl across unrelated markets.

“There has to be a way to prevent” Facebook, Google and other companies from being “able to reuse their preexisting data advantage, buy a start-up in a brand new market and then dominate the market” without relying only on “reactive and retroactive” ideas of how a monopoly works, Malik said.

Then there is the challenging question of: Why is the government acting against Facebook and Google now?

This is complicated by the political backdrop of President Trump’s years of open warfare against Silicon Valley companies for a variety of supposed harms — with unproven claims of bias against conservatives being at the top of the list — that feature nowhere in the actual complaints.

Such questions may be particularly tricky in the case of Google, given that the FTC aggressively and publicly pursued the company over several of the same issues featured in the October complaint before accepting a weak voluntary agreement in 2013 that, based on the government’s recent claims, did little to curb the company’s allegedly monopolistic ambitions.

The politics surrounding Silicon Valley surely have changed since the tech-friendly Obama administration, but it’s less clear that the viability of the legal arguments has — especially as the federal judiciary has grown more conservative with four years of appointments by Trump.

The anti-monopoly research group Open Markets Institute argued that the passage of time has made government antitrust enforcement more viable.

“They were still seen as America’s darling superstars, our success stories,” when regulators previously looked at Google and Facebook, said Sally Hubbard, director of enforcement strategy for the Open Markets Institute. “But as companies get to become long-standing, durable monopolies, they start to treat people badly — they start to treat their consumers badly, they start to treat their employees badly, they start to treat other businesses badly. Because that’s what monopolies do. And so people started to see the harm.”

As in the Google case, the one against Facebook relies on old, familiar stories. The same federal government that filed suit Wednesday claiming antitrust violations in the acquisition of Instagram and WhatsApp approved both of those deals at the time. But here is where the efforts of government officials to personalize their case against Facebook could play an important role.

For a company devoted to earning the most possible money for the most possible years — a description that applies to most of corporate America — any public battle exists on several planes at once. There’s winning in court, with judges. Then there’s winning in the court of public opinion, with current and potential future customers, not to mention advertisers that have, at times, asserted themselves against even the most powerful tech companies.

Zuckerberg once wanted to sanction Trump. Then Facebook wrote rules that accommodated him.

Facebook’s response Wednesday was heavy on the legal aspects of the case, with the company’s general counsel, Jennifer Newstead, issuing a statement ready for a courtroom: “People and small businesses don’t choose to use Facebook’s free services and advertising because they have to, they use them because our apps and services deliver the most value.”

But after years of declining public affection for Facebook and Zuckerberg personally — not to mention deteriorating relations with Congress, state regulators and leaders of both major parties — there is an unquestioned cost to a long, drawn-out battle that might ultimately require Zuckerberg to take the stand.

The best dramas need villains. It’s clear state and federal regulators pursuing Facebook already have settled on theirs. And he’s not the character you met in “The Social Network.”