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Facebook is not a monopoly, and breaking it up would be government overreach

Facebook co-founder Chris Hughes laid out his arguments for breaking up the company in a lengthy op-ed for The New York Times on Thursday.

The essence of his argument seems to be that a single person, Mark Zuckerberg, has too much control over the communications platforms, including Facebook, Instagram and WhatsApp, that billions of people use. Therefore, the government should force Facebook to divest its other communications platforms and create a new agency to regulate tech companies, particularly around privacy.

The break-up argument is compelling if you’re predisposed to dislike Zuckerberg and Facebook after the last few years of blunders related to user data and misinformation, and Facebook’s often tone-deaf or seemingly indifferent responses to these incidents. (Zuckerberg didn’t do himself any favors by cracking an awkward joke about his company’s privacy troubles in his speech at a company conference last week.)

It’s also illogical, difficult and a waste of time.

Facebook is not a monopoly in its actual market — advertising — and the product it offers is not essential to the U.S. economy or society. Even worse, it’s not clear that breaking Facebook up would solve the biggest problems with the platform, such as misinformation and data collection. Those problems would better be solved through targeted, strictly enforced regulation.

Consider the following:

Hughes seems to be defining the relevant market that Facebook dominates as “social networking.” But there’s no clear definition of the term. Is a social network any digital platform that allows users to establish and maintain lists of contacts and communicate with them? If so, then Apple iMessage is a social network. So are generalized mobile text messaging, or SMS, and email platforms such as Gmail.

I would argue that “social network” is an invented marketing term that was used to brand a set of new internet-based communications platforms that emerged in the wake of the dot-com bust. Those platforms didn’t serve any particular new need or function, they simply offered an easier and more fun way to communicate via the web. If you want to break up Facebook, call it what it is — a communications service. There are many of those.

While Facebook offers a communications service to end users, it does this simply to aggregate a huge audience whose attention it can sell to advertisers.

More than 99% of the company’s revenue comes from a single source: online advertising. While Facebook is strong and growing stronger, it’s not the leader in that market. Alphabet, which owns Google and YouTube, has about 37% of the U.S. digital advertising market, compared with 22% for Facebook, according to recent stats from eMarketer. Facebook and Google also face increasing competition from Amazon.

Hughes and others have cited historical precedents such as the government’s breakup of Standard Oil and AT&T as a justification for stricter antitrust regulation against tech giants. But these companies not only had clear monopolies with pricing power that hurt consumers, they also offered products that were vital to the economy.

Facebook, Instagram and WhatsApp are only three of many ways people can communicate digitally, and while many people spend hours every week using them, they are replaceable and inessential — and, in fact, getting away from Facebook and Instagram might make people happier. Even Hughes acknowledges, when he finds himself scrolling through Instagram at idle hours, “The choice is mine, but it doesn’t feel like a choice.”

I uninstalled Facebook from my phone over a year ago, and apart from missing the occasional photo or message that my wife or one of my friends later tells me about, it has not affected my life or happiness in any noticeable way. It’s hard to argue that it’s equivalent to oil or railroads or the phone system.

(To be fair — there have been successful antitrust cases against other arguably inessential businesses, but Hughes and other pro-breakup voices are the ones making the comparison with these gigantic historical break-ups. It’s a lot harder to make an argument about Facebook abusing pricing power, which underpins most of these other cases, since Facebook gives its product away to consumers for free.)

Splitting the core Facebook app from Instagram and WhatsApp would reduce the power Zuckerberg has to decide certain issues that are important to society, like “what kinds of messages are acceptable to spread to a broad audience?” and “what kind of data should online services collect from users and how should they use it?”

But these problems did not arise because of Facebook’s scale or power. They stem from its business model. Right now, the company relies on its billions of users to post the content that keeps everybody checking the site so it can serve ads to them. Even if the rules were perfectly just, smart and clear, there are not enough moderators in the world, and no easy silver-bullet artificial intelligence algorithms, that can effectively catch billions of people violating the rules or testing their limits.

Facebook is pivoting to private messaging, but there the problem of content moderation will be even worse — it’s harder to stop a digital communications campaign spurring ethnic cleansing when you can’t even see the messages being exchanged.

As far as data use, as long as Facebook is free and supported by advertising, its business model demands that it collect information about users so it can help advertisers target messages effectively. Google, Amazon and any other online advertising company does the same thing — although perhaps not as effectively, given how much information Facebook users share about themselves just by using the platform.

The United States is subject to the rule of law and shifts in politics. It would not cost “next to zero,” as Hughes argues. Facebook would fight any attempt vigorously and would appeal any ruling to break it up.

It took the federal government years of court fights before it won a ruling to break up Microsoft, and that was overturned on appeal. Then the administration of George W. Bush decided to settle the case without pressing for a breakup.

Hughes and others may resent Zuckerberg’s personal wealth or the amount of power that Facebook has over its users, and there’s no question that Facebook has been used in some ways that are harmful to society — as well as helpful.

But those problems can be addressed with targeted legislation and strict enforcement.

For instance, imagine if the government repealed or modified the section of the Communications Decency Act of 1996 that protects online platforms from liability for what their users posted. If Facebook were fined $1 million every time somebody posted a video of a murder, you can bet the company’s reliance on user-generated content would disappear in a heartbeat. Instead, it would have to take an editorial model, like the traditional ad-selling media companies that Facebook actually competes against, where content is checked and edited before it’s posted.

Breaking up the company would be expensive, illogical, ineffective and sends a message that will discourage other entrepreneurs: Don’t get too big, or your success will be punished.