Mandel Ngan/Pool via AP
Mark Zuckerberg testifies remotely during a House Judiciary subcommittee hearing on antitrust on Capitol Hill last week.
Last week, the House Antitrust Subcommittee exposed a tactic that Big Tech firms use to entrench their powerful market position, which the firms call “copy/acquire/kill.” The idea is that a technology giant will approach an upstart rival and give them two options: Either we buy you out, or we copy your technology and crush you because of our superior audience size.
It took about a week for one of the companies represented at the hearing to engage once again in exactly this strategy.
At issue is TikTok, the Chinese-owned short video app with 100 million U.S. users that’s the rage with all the kids. Amid (relatively though not entirely legitimate) concerns that the Chinese government’s ownership of TikTok could pose a national security risk, Donald Trump vowed first to ban the app from the U.S., and then downshifted to a forced sale within 45 days, where the government gets a cut of the proceeds. Some might call that a bribe, and some would be right.
Microsoft has vowed to continue talks with ByteDance, TikTok’s parent company, aimed at a sale by September 15. While there are reportedly other bidders, only a business as mammoth as Microsoft, which has been dancing around the social media space with ownership of Skype, LinkedIn, and the Xbox, could swallow the price tag. The deal could fetch as much as $30 billion.
TikTok is just about the only major non-Facebook property in social media with the scale and momentum to cut into its market share. Which is why Facebook, totally coincidentally, released a direct competitor to TikTok, called Reels, on Wednesday. The product, which comes bundled with Facebook product Instagram, allows users to cut together 15-second videos, using a pre-licensed music library. It unfurls in the Instagram app much as TikTok does, with the most popular videos being shown, rather than ones personalized in your Instagram feed.
This is theft, and in corporate America theft goes unpunished.
Instagram’s VP of product insisted that his team has been working on Reels “for over a year,” but that doesn’t pass the laugh test. The company is also trying to steal popular TikTok creators, luring them in with the promise of hundreds of thousands of dollars.
This is precisely what Congress questioned Facebook CEO Mark Zuckerberg about just last week: his company’s tendency to rip off rival apps and products to strengthen its market position. Facebook created a photo-editing app when it opened talks to buy Instagram; rather than fight a losing battle against a much larger network, Instagram agreed to be purchased. Then Facebook tried the same maneuver with Snapchat, releasing Instagram Stories; Snapchat refused to be bought and instead found itself unable to penetrate the Facebook empire’s market share. There have been Facebook clones of features of Pinterest and Zoom. This is actually the second TikTok-style app Facebook has launched; the first, Lasso, crashed and burned.
The game here is clear. Facebook has close to two billion users. If the company rolls out Reels to them, it’s likely they won’t be enticed to look elsewhere for their video-sharing needs. Instagram is many multiples as large as TikTok, and this move with Reels is an attempt to preserve its lead. The goal, in fact the stated goal from prior Zuckerberg emails about his strategy with respect to Instagram, is to go into “destroy mode” and cripple Facebook’s competition.
It is not legal, under Section 2 of the Sherman Antitrust Act, to “monopolize or attempt to monopolize” a market. I don’t know what else you would call copying your competition, and threatening them with continued destruction if they don’t submit to a merger, other than an attempt to monopolize a market. Facebook’s clones don’t always work, but the illegality begins with the attempt to monopolize, which is pretty apparent.
Sniffing that this isn’t covered under the “consumer welfare standard” by which antitrust law is now judged only shows what a perversion that standard makes of the actual law. A comedian in this 45-second video makes the point more sharply and compellingly than anyone in the antitrust establishment: This is theft, and in corporate America theft goes unpunished.
Facebook’s TikTok sabotage effort comes at a convenient time for the Zuckerberg empire. Even if the TikTok divestiture goes smoothly, the transition is likely to be bumpy. Untangling TikTok’s algorithm from its parent company will not be easy, as well as finding stateside engineers who can manage it. If a U.S. TikTok gets cut off from its global counterparts, it could suffer a data deficit that makes the app less addictive. And if TikTok can’t make a deal with Microsoft or anyone else and gets banned, that creates a huge hole. Enter Reels.
That said, Facebook has now loaded down Instagram with so many clones and attempts to kill the competition that it’s become a more confusing app to use, with too many places and ways to post. Complication could make users throw up their hands and undermine the whole project. It’s an example of how Big Tech is just too big to manage, so busy trying to damage rivals and maximize the user base that it becomes incoherent. It’s one thing when the CEOs don’t know what’s happening with their networks; it’s another if nobody can figure out how to use them or what the rules are.
The other interesting takeaway from the Reels/TikTok saga is that Facebook has no problem openly flaunting its power, despite Congress making very clear it understands what’s happening. That suggests Facebook doesn’t believe the government, and especially the antitrust enforcement agencies, will do anything about it. This level of corporate impunity is incredibly dangerous to democracy. It’s also just embarrassing that a corporation so clearly believes they have nothing to fear from breaking the law.
