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Facebook co-founder aids FTC in antitrust investigation

Facebook co-founder aids FTC in antitrust investigation


Hughes is helping regulators understand the company’s motivations

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Illustration by Alex Castro / The Verge

Facebook co-founder and outspoken critic Chris Hughes is working with regulators as they investigate whether the company should be broken up for violating antitrust rules. The Washington Post and New York Times both report that Hughes is assisting two prominent antitrust academics, and has met with the FTC to discuss its investigation into the social media company he helped found back in 2004.

Hughes involvement is significant even though he left the company more than a decade ago. He’s already made the argument for why Facebook should be broken up. Now he can provide investigators with a list of people to talk with in order to gain critical insight into the motivations behind key Facebook acquisitions. This insight could be essential to successfully making the antitrust argument to the FTC, alongside Scott Hemphill from New York University and Tim Wu of Columbia University.

“There is a direct connection between the conduct and the remedy — undo the acquisition”

According to The Washington Post, the two academics are attempting to make an argument for breaking up Facebook based on its acquisition of WhatsApp and Instagram. They argue that these acquisitions broke antitrust rules, because Facebook used them to stamp out competition and shore up its monopolistic position. If they can prove the acquisitions broke antitrust rules, then they can make a case for undoing the empire, similar to the breakup of Standard Oil in 1911. “There is a direct connection between the conduct and the remedy — undo the acquisition,” Hemphill said.

In order to make this argument however, investigators would need to prove that Facebook’s intention with the acquisitions was to stamp out future threats. This is why Hughes’ involvement could be so helpful; he can provide investigators with leads to former and current employees, as well as competitors, that could help investigators better understand what motivated the acquisitions. Facebook maintains that its acquisitions were “investments in innovation,” according to written testimony from one of its executives. 

According to an interview with Wu quoted by the Washington Post, the acquisitions were “plain-vanilla violation of antitrust law, just low-hanging fruit.” However one expert quoted by The New York Times suggested that it would be a harder antitrust case to prove. “This is not an easy case,” said a senior adviser at the consumer group Public Knowledge, Gene Kimmelman, who noted that the agency would also have to demonstrate economic harm as well as proving that Facebook intentionally bought competitors.

It is unclear whether the FTC will choose to pursue the line of investigation argued for by Hemphill and Wu. The NYT notes that the agency’s investigations tend to be conducted behind closed doors.

The Washington Post reports that Hughes got involved with the investigation after the two academics approached him after his “It’s time to break up FacebookNew York Times op-ed. In his piece, Hughes said that Facebook’s monopoly position has limited competition, stifled innovation, and has allowed the company to amass vast amounts of unchecked power. The three then began to pitch their argument for breaking up Facebook to lawmakers. According to redacted pitch slides seen by the NYT, Hughes is listed as the third member of the group.

News of Hughes’ involvement in the investigation comes just days after Facebook confirmed that the FTC is investigating the company for potential violations of US antitrust law. Separately, the Justice Department also announced a broad antitrust investigation into the actions of big tech companies including Facebook, Amazon, and Google.

Facebook declined to comment to either the New York Times on the Washington Post about the reports of Hughes’ involvement in the investigation. Hemphill and Wu confirmed that Hughes was involved in the investigation, but declined to comment to the Times as to the nature of his involvement.