I remember learning about monopolies in high school. As I recall, the monopolies we studied were legendary companies such as Standard Oil, American Tobacco, U.S. Steel and the original AT&T.
Based on what we learned in school, the idea that a social media company would ever be considered to be a monopoly seems far-fetched. But according to a comprehensive article by Dina Srinivasan in the Berkeley Business Law Journal, Facebook has risen to a level of monopolistic power.
Examining and debating Facebook’s role in the modern global economy seems especially relevant at this moment. Last week, Facebook CEO Mark Zuckerberg posted a lengthy message in which he said the company would shift its longtime strategy and refocus its efforts to develop more products and services that enable private, encrypted communications.
Zuckerberg’s post, A Privacy-Focused Vision for Social Networking, apparently signals a sea change in Facebook’s long-term vision for the future. But it doesn’t clear up larger questions about the company’s sense of responsibility to its users, many of whom are genuinely worried about how the social network has compromised their personal privacy.
In her article, Srinivasan makes a compelling case for the idea that Facebook indeed has become a monopoly and that its ascent was propelled by monopolistic business strategies.
Why should senior technology executives pay attention to her argument? I believe that Srinivasan raises a legitimate concern that has an impact beyond social media. Here in the technology space, we are well aware of the risks that can arise when companies achieve monopolistic leverage in fundamental areas of tech.
It’s not just a matter of large companies gaining incredible advantages in their markets. Monopolistic practices also hamper the entire tech community by reducing competition and stifling innovation.
Here’s a good example: When Microsoft had monopolistic power, it was far less innovative and competitive than it is today. Microsoft’s descent from its near-monopoly status has become a benefit for the market and for Microsoft.
Another example: The breakup of AT&T opened the door to decades of amazing innovation in the telecom industry, creating thousands of entirely new technologies and millions of new jobs all over the world.
When the U.S. government acts to break up monopolies, it’s not acting on a whim. There are long-term consequences, both intended and unintended.
From Srinivasan’s perspective, Facebook’s rise to dominance was based on more than the innovative use of modern digital technologies. According to Srinivasan, Facebook has a track record of misleading consumers about its true intentions. Facebook started out by promising to serve as a trusted steward for personal data. But a series of unfortunate events occurring over the past couple of years have shown otherwise.
That said, people who like to use social media have limited choices outside of Facebook, which has become the default social network for billions of users.
If Facebook wants to be perceived by the market as a strong competitor but not as a monopoly, what should it do? Here is one of Srinivasan’s recommendations: “Facebook should migrate from a closed to an open communications protocol. A user on Facebook should be able to send a message to, or receive a message from, a user of a competitive social network—in the same way that users of AT&T can call or text a user of Sprint, Verizon, or T-Mobile.”
From my perspective, Srinivasan’s observations and suggestions seem reasonable. At least they are a first step, and they might open the door to more competition and greater innovation across the tech space.