The case for breaking up Facebook and Instagram

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Facebook is widely expected to refashion Instagram into a fully integrated sub-unit of Facebook — which, given Facebook’s record, suggests minimal privacy and maximized advertising. But it’s also clear, in retrospect, that the Instagram acquisition helped reinforce the dominance by Facebook of the social-networking world. A key question has been lost in coverage of the transition: Just why is Facebook in control of Instagram, its greatest natural competitor, in the first place? Isn’t antitrust law supposed to stop companies from buying off their rivals to achieve market dominance? The answer is that we — the Obama administration’s antitrust enforcers — blew it. Our standards for assessing mergers, fixated on consumer prices, were a poor match for the tech economy and are effectively obsolete.

Establishing better standards for the review of tech platform mergers means supplementing economic analysis, not abandoning it. It means assessing competition in attention markets in fresh ways: In such markets, as economist David Evans argues, the relevant metric is user time, not price. Regulators also ought to make reasonable predictions as to whether firms may become future competitors, even if they are not present competitors — a doctrine largely neglected since the 1980s. Finally, enforcers need to be highly sensitive to the elimination of “mavericks” — firms like Instagram poised to pose an existential challenge to the incumbent.

[Tim Wu is the Julius Silver professor of law, science and technology at Columbia University]


The case for breaking up Facebook and Instagram