The ACCC Wants To Breakup Facebook And Google, But Will It Ever Happen?

London, UK - August 01, 2018: The buttons of WhatsApp, Facebook, Messenger, Snapchat and Messages on the screen of an iPhone.

The likes of Facebook and Google have been acquiring startups like they are trading cards in recent years. Facebook has collected 66 companies in the past 12 years and Google purchased 145 companies between 2004 and 2014.

But in a world with competition regulators like the Australian Competition & Consumer Commission (ACCC) active, should these companies face tighter restrictions when it comes to acquiring potential competitors?

ACCC chairman Rod Sims has hinted it might be time.

“In our view, Google and Facebook have commercial incentives to strategically acquire nascent firms even if the chance of these firms ultimately posing a competitive threat is small,” he told the 2019 Competition Law Conference on Saturday.

“Arguably, Facebook’s acquisition of Instagram eliminated the threat of a substantial potential competitor.”

Sims addressed the challenges of applying merger law in these situations, acknowledging the ability of these larger companies “to develop and monetise the innovations of small startups”.

But ultimately, Sims flagged the need to prioritise competition.

“In my view, merger law should focus on whether the acquisition interferes with the competitive process and recognise that the process of competition for the market is not the same as the process of competition within the market,” he said.

“If the prospect that the target will become an effective competitor is small, but the potential increase in competition and consumer welfare is large, greater weight should be put on the potential for competition.”

He also shared the sentiments of the UK’s Competition and Markets Authority, which has described monitoring anti-competition in digital markets as “assessing what may be a small possibility of a large reduction in competition”.

Sims was speaking ahead of the ACCC’s Digital Platforms Inquiry, which is to be handed to the Treasury on 30 June.

Pressure mounting in the US

Similar to Australia, the tide is beginning to turn against Facebook and Google in the United States when it comes to anti-trust regulation.

Presidential candidates for the Democrats Kamala Harris and Elizabeth Warren have both indicated they would push for action to break up big tech companies if successful.

Warren, in particular, is looking to breakup these companies by introducing legislation that deems them ‘platform utilities’ and bars them from owning participants on their platform, meaning Facebook would have to relinquish its ownership of Instagram and WhatsApp.

“Today’s big tech companies have too much power — too much power over our economy, our society, and our democracy,” Warren said.

“I want to make sure that the next generation of great American tech companies can flourish. To do that, we need to stop this generation of big tech companies from throwing around their political power to shape the rules in their favour.

“They’ve bulldozed competition, used our private information for profit, and tilted the playing field against everyone else. And in the process, they have hurt small businesses and stifled innovation.

“That’s why my administration will make big, structural changes to the tech sector to promote more competition — including breaking up Amazon, Facebook, and Google.”

Warren vowed to appoint regulators specifically to unwind existing mergers.

Similarly, Facebook co-founder and Mark Zuckerberg’s former college roommate Chris Hughes, has called for the company to be split into three parts.

Hughes’ proposed plan not only involves unwinding existing mergers, but also creating new laws that limit the amount of privacy these companies can create.

“The F.T.C.’s biggest mistake was to allow Facebook to acquire Instagram and WhatsApp,” he said in an op-ed in the New York Times.

“In 2012, the newer platforms were nipping at Facebook’s heels because they had been built for the smartphone, where Facebook was still struggling to gain traction.

“Mark [Zuckerberg] responded by buying them, and the F.T.C. approved.”




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