George Hay

Charles Frank Reavis Sr. Professor of Law and Professor of Economics

George Hay, professor of law at Cornell University, an expert on antitrust and a former member of the U.S. Department of Justice’s Antitrust Division, says the states and FTC will face a strong legal defense from Facebook and that the desired goal of reducing Facebook’s dominance may not occur in a reasonable time, even with proposed remedies enacted.

Hay says:

“It was one of the least-well-kept secrets in antitrust history but today a coalition of states and the FTC sued Facebook for monopolization. The basis for the lawsuits is quite concise: First, that Facebook has a monopoly on social networking. Second, that Facebook helped to preserve its monopoly by acquiring Instagram and WhatsApp, who were seen by Facebook as potential competitors to Facebook’s core monopoly. And third, that Facebook provided open access to its platform for third party apps, but only if the app did not seek to compete against Facebook’s core functions.

“The remedies sought include a divestiture of Instagram and WhatsApp and the cessation of the restrictive terms placed on third party developers. There is a catch all provision for whatever relief is necessary but there is no specific call to break up Facebook.

“One of the challenges to the case is that both acquisitions were initially cleared by federal antitrust agencies. This does not prevent the current lawsuit but it should be assumed that Facebook will seek to obtain all the internal work product that lay behind the original decisions that the acquisitions did not pose a competitive problem. A related issue is exactly what Facebook would have to divest and whether they could simply recreate the same functionality within Facebook.

“The other challenge is whether simply eliminating the exclusivity positions will bring about much change to Facebook’s dominance in a reasonable time. Facebook’s dominance is in large part due to network effects – people want to use Facebook because everyone else does – and that is unlikely to be affected by the lawsuits and their proposed remedies in the immediate future. 

“The other thing to be aware of is that Facebook has been well aware of the potential for this antitrust challenge for some time. They have the resources to make this a formidable challenge for prosecutors and any follow-on private plaintiffs (of which there will be no shortage). The one thing that is certain is that the demand for antitrust lawyers and economists will increase. Whether the lawsuits will actually accomplish something is another story.”