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It’s beyond clear that there are a number of possible Zuckerberg and Sandberg criminal offenses worth investigating.
Virtually the entire media world is picking through reams of internal Facebook research, writing stories about company insiders’ foreknowledge about harmful effects of social media, their willingness to relax terms of service for major accounts, and their inability to police content beyond U.S. borders. A company in a near-perpetual state of backlash for the last half-decade was so rattled by the pressure that it changed its name to Meta and decided to focus on building a second version of Second Life for the purpose of holding small-group business meetings.
But with substantially less fanfare, the American Economic Liberties Project laid out what we should all be focused on with Facebook: the growing set of allegations that it’s a transnational criminal enterprise that will continue to break the law unless its leadership is held accountable.
Notably, AELP’s letter to Biden administration regulators and law enforcement describing Facebook’s criminal activities, released on Friday, has almost nothing to do with what we’re commonly told about the dangers of social media. It’s not about mainstreaming hate or using its algorithm to present divisive material and rile up users. Rather, Facebook is just a garden-variety fraud scheme that breaks the law for its own self-enrichment. In other words, the mass moral panic whipped up by the media about social media speech, complete with demands for censorship, is precisely the wrong way to look at this institution.
The letter lists five distinct criminal actions taken by Facebook and its top officers Mark Zuckerberg and Sheryl Sandberg, none of which rely upon the trove of documents unearthed by former company data engineer Frances Haugen. In fact, we’ve known about these actions for some time.
For several years, advertisers have alleged that Facebook overestimated video views and user engagement on its social media sites. The company would count video ads watched for less than three seconds, which are clearly mistaken clicks, as a “video view,” overestimating the reach of video by up to 900 percent. And Facebook knew about this error without disclosing it to advertisers for more than a year, enabling higher ad sales rates and inducing a “pivot to video” among media companies, based on Facebook’s inflated claims.
Facebook is just a garden-variety fraud scheme that breaks the law for its own self-enrichment.
Facebook would also knowingly count duplicate and fake accounts in describing potential reach for advertisers. At one point, Facebook promised access to more teenagers on their site than existed in the United States at that time. These lies were called a “deliberate product decision” in an internal email from chief marketing officer Alex Schultz. Sandberg was also aware of the deception, and there are numerous quotes from other top executives showing foreknowledge. (As Matt Stoller notes, if the government was an advertiser on Facebook in this period, and it almost certainly was, it could file suit against Facebook under the False Claims Act for overbilling based on lies.)
I wrote about both of these examples in my 2020 book Monopolized. In both cases, the goal was to bilk advertisers for more money by inflating the potential customer base. It’s just fraud. And when companies fail to alert investors that they knew about a scheme to rip off business partners, they’re committing securities fraud. Facebook never disclosed these lies they were indisputably aware of, and even affirmatively declined to address the matter in a November 2017 earnings call. The Haugen documents reinforce this.
A court case brought by a pension fund in Rhode Island in August adds to the litany of alleged Facebook crimes. The litigation demonstrates that Mark Zuckerberg was aware of the data breach of 87 million users’ information to Cambridge Analytica at the time he told Congress that users have “complete control” over their own data. More important, after being made aware of the Cambridge Analytica situation in 2016 but before the breach was known to the public, Zuckerberg sold $10 billion in Facebook stock, in a series of transactions that should be investigated for insider trading.
Not mentioned in the AELP letter are the allegations made in state attorney general antitrust suits against Facebook of an ad market price-fixing scheme with Google. There’s been pretty robust reporting of this through various disclosures; the gist of it is that the two companies began using the same bidding and management system for online ads, with Google offering better ad rates and placement than Facebook, while Facebook agreed to not build its own competing adtech platform (which it had under way). The partnership, code-named Jedi Blue, cemented the online advertising duopoly between the two firms; it was signed off on by Sandberg personally. Price-fixing schemes are just about the only antitrust violations that lead to prison time.
On whether any of this will matter to the law enforcement officials empowered to put serial offenders in prison, nobody should be too optimistic.
You’ll notice that nowhere in these recitations of Facebook’s criminal actions is anything regarding giving teenagers body issues on Instagram or having Facebook be used as an organizing platform for the January 6 Capitol Riot. These are sideshows in relation to Facebook’s pretty well-demonstrated efforts to lie and cheat and rig markets for profit.
The truth is that hate speech and disinformation have traveled along whatever social distribution channel was available, from Pony Express to telegraph wires to email forwards, since the dawn of time. The Ku Klux Klan never needed Facebook, and neither did your proverbial crazy uncle armed with talking points from Ron Paul’s newsletter. Facebook added reach to these activities, but more importantly, it made them visible to elites who hadn’t noticed them previously. And because the media is both waking up to their lost grip on the public discourse and (justifiably) enraged about Facebook’s role in taking away their business model, they focus on this, call for booting people off the platform and other forms of corporate censorship, and generally throw themselves into hysterics.
The reason to be distressed about Facebook is not whether it allows angry conservatives to be angry in public, and to obtain the bad information they would have obtained in some other way. The reason to be distressed is its series of business practices that appear to flagrantly violate the law. Even if you’re looking at how Facebook relentlessly tracks people across the internet and violates their privacy, the danger there is in part the attention imperative that feeds people more and more provocative content, but in greater part the perverse ways this business model enables things like targeted harassment and racial and gender discrimination.
There are potential legal violations still occurring today, like the attempt to corner the market on virtual reality technologies. (Given the FTC’s new directive to presumptively block acquisitions by companies that engage in anti-competitive mergers, virtually every one of these Facebook purchases should be scrutinized and perhaps restricted.)
On whether any of this will matter to the law enforcement officials empowered to put serial offenders in prison, nobody should be too optimistic. Last week, the Justice Department introduced policy changes purporting to put individual criminal prosecutions at the forefront of its white-collar crime efforts, including requiring companies to list individuals involved in misconduct as a requirement for those companies getting credit for their cooperation, and weighting a company’s full record of past violations when determining punishment. Officials even announced a new FBI criminal fraud squad to investigate financial crimes.
But the announcement contrasts with a long history of backing off criminal prosecutions, from the financial crisis to today. We don’t have a culture of accountability in America, and attempts to build one should be met with skepticism absent real results. It’s beyond clear that there are a number of possible Zuckerberg and Sandberg criminal offenses worth investigating. But this is a company that paid the Federal Trade Commission $5 billion just to keep their CEO from being deposed. Until that structure of unaccountability is broken, and individual lawbreakers believe that they might face sanctions for their own ruthlessness, expecting any legitimate change is foolhardy.
And yet there is importance in recognizing what Facebook’s harms to society are all about. This is an enterprise that has capitalized on the lack of a rule of law to consolidate power, reap illegal profits, and engage in personal enrichment for its executives. Misinformation in the News Feed is a distraction. Criminal misconduct is the real issue, and only by putting that front and center can real pressure be created to force the Justice Department to live up to its name.
