Antitrust regulators: Give Facebook a break

Antitrust regulators: Give Facebook a break

Summary: If Facebook wants to buy Instagram, just let it happen.

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Antitrust regulators: Give Facebook a breakYou'd think it would be simple: Facebook wants to buy Instagram, the parties agree on a price, Facebook writes a big fat check, Facebook owns Instagram, now you can follow Justin Beiber and apply special effects to photos of your cat, using both services, seamlessly, whether you're at your desk or on your phone.

Nothing is simple, however, when the antitrust regulators get involved.

Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR), any purchase over $68.2 million requires a detailed filing with the Federal Trade Commission (FTC) and Department of Justice (DOJ). This number gets adjusted each year relative to GDP.

In the case of Facebook's acquisition of Instagram, a $1 billion transaction, the FTC has now served Facebook with a "second request," in other words Facebook must now produce a mountain of documents that an army of government lawyers will review to make sure the purchase of Instagram didn't violate any antitrust laws.

I have to ask: Doesn't the US government have anything better to do?

Right now, as I look out my window onto 112th Street in South Harlem, I can see two dealers selling crack. It seems to me that every dollar spent investigating the Facebook-Instagram deal would be much better spent cleaning up my block and a thousand others like it around the country.

Yes, the administration of a civil society is complex and both street crime and corporate crime need to be addressed, but is anybody really going to be hurt by any permutation of the Facebook-Instagram acquisition? In the grand scheme of things, other than speculators, who cares who owns Instagram?

Antitrust laws exist, ostensibly, to encourage competition. Back in the day, this meant breaking up monopolies and preventing price fixing. Now, as is pretty much inevitable in the evolution of regulation, the antitrust laws are too complicated for anyone but antitrust experts to understand -- and even they don't agree much of the time.

Fundamentally, the notion that the government is going to be good at encouraging competitiveness in the marketplace through a "Bureau of Competition" is absurd. Rather, what happens is that these HSR filings and second requests, and possible resulting litigation, become large transaction costs that make the market less efficient and cost the taxpayers money.

And to what end? Facebook status updates and Instagram photo effects are not necessities of life like oil or milk. It doesn't really matter if there's competition in that business, whatever that business is. (The recent precipitous decline of Facebook's stock after its IPO indicates that I'm not the only one who can't figure this out).

A growing number of observers, myself included, argue that most antitrust regulation in the technology industry is pointless for two reasons:

First, because in a global technology economy there's always going to be so much competition there's no need for regulations to encourage competition.

As the brilliant Peter Drucker wrote, "Distance has been eliminated...every business must become globally competitive, even if it manufactures or sells only in a regional or local market. The competition is not local anymore -- in fact, it knows no boundaries."

Second, because change in the technology industry is so fast-paced that, by the time the government finishes wasting money on a multi-year antitrust trial, the entire technology landscape has changed so much that the original issues are irrelevant.

So, antitrust regulators: give Facebook a break. Go find something else to do. Or, just do nothing. As a taxpayer, I'd rather pay you to sit around, drink coffee, and update your Facebook status to say how great your coffee was, than pay you to mess up the economy.

Topic: Social Enterprise

Steven Shaw

About Steven Shaw

Steven Shaw used to be a litigation attorney at Cravath, Swaine &gMoore, a New York law firm, and is now the online community managergfor eGullet.org and the Director of New Media Studies at thegInternational Culinary Center.

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4 comments
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  • Dear Mr. Shaw,

    Stop being logical. You want to mess up the whole legal system???
    Shara8
  • Seriously

    Seriously? You think we need to waste MORE money on the "war on drugs" that was lost before it began? I don't disagree with you on this particular case, but the money Justice spends on anti-trust is nothing compared to what we waste every year trying to stop drug use.
    notsofast
  • Oh please ...

    The new laws actually kill competition.Does the word oligarchy ring a bell? The law should better protect smaller companies from big ones. Our lawmakers and officials just can't seem to say no to the greedy corps. We need to bust up Microsoft, Intel, Google and others. Today it isn't about growing a company. It is about boys comparing "theirs" to "yours". We have all become size conscious queens.

    What happened to companies collaborating on projects to their mutual benefit? Today you acquire what you don't have or can't do. This kills enovation and continued product improvement. Plus it doesn't save customers any money.
    vince7@...
  • OH PLEASE STEVE SHAW -- YOU ARE WRONG -- FACEBOOK SHOULD BE MADE TO COMPETE

    The FTC/SEC should absolutely block Facebook from buying one of its strongest competitors -- Instagram. Instagram is a photo based social network that now has 40,000,000 users. its one of the strongest competitors facebook has seen to date. Facebook has network effects. Without network effects Mark and Co. would have had strong competition a long time ago. Instagram is one of the few companies that found a hole in Facebook's armour through its early jump on mobile platforms. It would be a shame to simply watch Facebook buy away the competition. Do the right thing FTC/SEC and block the buyout. Make Facebook compete.
    condofranca