Breaking Up Facebook May Not Accomplish Much

April 20, 2020  Robert Gmeiner

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Facebook has had its share of scandals involving security and user privacy.  It is a large company, not only because of its platform of the same name, but also on account of its other business lines such as Instagram and WhatsApp.  Some presidential candidates, notably Elizabeth Warren and Bernie Sanders, what to use antitrust law to break up Facebook.  Even Facebook co-founder Chris Hughes has argued that Facebook should be broken up.  Hughes specifically wants to divest Facebook of both Instagram and WhatsApp.

Facebook has its problems and it has made some major missteps involving user privacy.  There are alternatives to Facebook for social media, but to connect with others on Facebook services, one must use Facebook, thus restricting some consumer choice.  Real problems do need real solutions, but antitrust law is not a good solution for either problem – large size or privacy and security.

Breaking up Facebook under antitrust law will not magically make the poor handling of user data stop.  There is not even a proximate theoretical link between the size of the company and the choice to misuse user data.  Other large companies such as Google and Amazon have not been embroiled in major scandals like Facebook.  If Facebook’s bad choices for user privacy were made in its quest for size and domination, breaking it up could actually exacerbate the problem as some remnant of the breakup again strives for expansion.

Breaking up Facebook also may not affect the consumer choice issue for very long.  There will be short term improvement.  People use Facebook’s services (Facebook platform, Instagram, WhatsApp, etc.) for two reasons – 1) they do what consumers want, and 2) many other people use them.  There is a network effect and, even if Facebook does some things that people don’t like, the size of the network is still a reason to use its services.  Expansion and consolidation to take advantage of network effects can be expected if Facebook is broken up.  The same problem will re-emerge.

Lastly, breaking up companies has implications for private property.  Instances of material harm to users are hard to find, let alone quantify, despite Facebook’s countless embarrassments in recent years.  A breakup stands to benefit Facebook’s competitors more than its users.  If a competitor assumes the new dominant position, the result will be the same for consumers, but a government taking of earned market position from one firm to give it to another.