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Breakingviews

Breakingviews - Facebook-Instagram can open up instead of break up

A visitor takes a picture of the Instagram application logo at the Young Entrepreneurs fair in Paris, France, February 7, 2018. REUTERS/Charles Platiau

SAN FRANCISCO (Reuters Breakingviews) - Facebook and Instagram don’t have to part ways to increase competition. U.S. regulators are reviewing the 2012 social media merger, but unwinding deals is almost impossible. Breaking up what exists today is one option. Forcing technology giants to make switching to rivals easier could be a more productive approach.

An antitrust showdown is coming for Big Tech. The Department of Justice just sued Alphabet-owned Google over internet search. A congressional report released last month lists a raft of deals, including Google’s 2006 purchase of YouTube for $1.7 billion, that raised competition concerns. Facebook’s $1 billion acquisition of Instagram, which is also mentioned in the report, is part of a Federal Trade Commission probe too.

The report from Congress suggests the possibility of unraveling these transactions. But unscrambling the egg, as antitrust lawyers like to describe it, is challenging on legal and practical levels. The deals weren’t initially blocked so watchdogs would have to claim new evidence. Even if such an argument is successful, eight years have passed in the Facebook-Instagram example and, while the brands are separate, much of the operational backbone is integrated.

U.S. trustbusters have sometimes instead dismantled monopolies as they stood at the time. Standard Oil, for example, was forced to divide itself up in 1911 along geographic lines. AT&T got broken up into long-distance and local phone services in the 1980s. How to do something similar with Big Tech isn’t obvious – and it would be hugely controversial.

A comprehensive but less radical way to boost competition would be forcing technology platforms to open up their networks. After Facebook bought Instagram, it prohibited posts on the photo-sharing site to be easily shared on Twitter, for instance.

Facebook’s 2.7 billion monthly active users produce a massive network effect that is a huge barrier to entry for competitors. Requiring open interfaces with other platforms would reduce that obstacle. For example, a post on Instagram could be easily shared on Pinterest, along with connections with followers on either service.

Easily exporting content is another possible area of focus. Facebook already allows for the transfer of photos and video to a Google service. Senator Mark Warner is co-sponsor of a bipartisan bill that would require interoperability and data portability for platforms that have more than 100 million monthly active users. Facebook boss Mark Zuckerberg and other Big Tech leaders might come to see it as the least bad of the possible outcomes.

Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.


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