You are here

Google+’s Market Exit Spotlights Google + Facebook Cartel Market Allocation

Google and Facebook’s cartel dominance of social media, consumer data, digital advertising, and content/news discovery represents a quintessential unlevel playing field in the information/content economy.

The Google+Facebook cartel now controls most mass online info-flows to consumers, without the competitive or public accountability controls other companies face.

However, recent news of Google+ deciding to permanently not compete with Facebook going forward raises an important question:

Is Google+ jumping out of the proverbial privacy frying pan into the Google+Facebook antitrust fire?

Amidst considerable bipartisan congressional distrust about Google’s evasion of congressional accountability, Google announced it is closing its consumer Google+ social business over the next ten months because: “Google+ APIs and associated controls for consumers are challenging to develop and maintain,” … and because of “the very low usage of the consumer version of Google+.” 

Before this Alphabet-Google attempt to evade congressional oversight, and before its announcement that Google+ would be fully exiting the social marketplace, Google+ was on not on Congress’ or antitrust authorities’ radar – at all.

Now Alphabet-Google effectively has self-spotlighted what may be its single biggest antitrust vulnerability -- Google+Facebook’s evident cartel market allocation -- for its antitrust (and privacy) overseers.

Why is that?

First, this current Google+ exit from direct social market competition with Facebook is just the formal admission and completion of what Google set in motion in 2014.

April 24, 2014, Google defunded Google+ which then was Facebook’s #1 social competitor, commanding an estimated 750m Google+ accounts. June 30, 2014, Google announced it also was shutting down its Orkut social network that had an additional 300m users. It shut Orkut in September 2014.

The relevant Google+ question today is why did Google, with over a billion social users and the fastest-growing application in history, abruptly stop competing with Facebook in 2014?

In early December 2014, after Google quietly shut down Facebook’s only real direct social/social-advertising competitor Google+, Facebook “quietly” shut down Google’s only real direct search/search-advertising competitor, Facebook’s Graph Search offering powered by the Microsoft-Bing search engine and Microsoft-Yahoo’s DOJ-approved competitive search advertising platform.

Another relevant Google+ question today is why did Facebook “quietly” stop competing directly with Google in 2014 as well? Given that Google pays Apple an estimated $9-12b annually in near pure profit to offer Google search as default on its devices, Facebook has left billions of dollars a year in near pure profit on the table in precipitously shutting its Facebook-Bing search offering in 2014.

Yet another relevant Google+ question antitrust authorities should be asking -- when Google and Facebook are at the epicenter of most Internet platform unaccountability problems in the news – is why is Facebook’s only real potential direct competitor purposefully disabling its potential to compete with Facebook in the future?

Consider that today Google+ is the only real, integrated, direct potential commercial competitor to Facebook in social, photo-sharing, and messaging communications, and most importantly the advertising monetization capability at scale for those free services.

Google is uniquely capable to compete with Facebook with more users, publishers, advertisers, and developers; ~3x more revenues, ~2.5x more cash, many times larger global cloud infrastructure/data centers, and more potential integrated social sharing, photo-management, and messaging capabilities.

Simply, Google+ is the only actual and potential competitive substitute for Facebook.

Curious antitrust authorities and overseers should want to know Google’s pro-competitive reason why Alphabet-Google now does not ever want to compete directly with Facebook going forward?

Second, Google+ is the surprising and effective linchpin competitive and cartel development for both Google and Facebook, and the social media space overall since 2011.

One can’t understand Google and Facebook’s individual and joint-cartel antitrust risks without understanding the 2011 pro-competitive entry of Google+ and the 2014 anti-competitive cartel transformation of Google+Facebook from 2014-2018.

The reason that the fierce competition with Google in PC search and search advertising in 2013 from Facebook, Microsoft, Yahoo, and Apple, doesn’t exist in mobile search advertising today, and the reason competition and potential competition to Facebook in social advertising in early 2014 from Google+, Google’s Orkut, and WhatsApp, also doesn’t exist today, is that Google chose to defund Google+ in April 2014 and Facebook quietly reciprocated with disabling its outsourced Microsoft-Yahoo search/search-advertising capability later that year.

After fiercely competing directly in 2011-2013 they evidently made peace, effectively allocated markets, and decimated their remaining isolated competition.

Given the plethora of consumer and society harming problems swirling around Google and Facebook that Congress is concerned with, Congress should be asking if cartel behavior is part of the problem why consumer welfare evidently is being so ill-served.

Most importantly here, the evidence is overwhelming that the much-discussed antitrust concerns with Google and Facebook as single-firm monopolization cases also implicate evident Google+Facebook cartel risks: see here, here, here, here, here, here, here, here, here, here, and here.  

That’s important because the Supreme Court’s Trinko precedent calls cartels “the supreme evil of antitrust.

That’s doubly important because the DOJ Antitrust Division explains that “The fixing of prices, bids, output, and markets by cartels has no plausible efficiency justification; therefore, antitrust authorities properly regard cartel behavior as per se illegal or a "hard core" violation of the competition laws. [Bold added for emphasis.]

If Google+’s recently announced permanent exit from competing with Facebook, is considered a continuation of Google and Facebook’s near coincident 2014 decisions to reverse their respective business strategies to stop directly competing with each other, to apparently allocate markets like a cartel, DOJ antitrust authorities, would not have to make a Google-Facebook antitrust case under the narrow and tougher antitrust consumer welfare standard, because market allocation is viewed as “per se illegal” with “no plausible efficiency justification.”  

That real potential risk is not part of the conventional wisdom concerning the antitrust risk that Google and Facebook face.

Third, now that it is evident to Congress that Alphabet-Google has been evasive and misleading in its privacy and data security accountability in mishandling its Google+ data vulnerability, and that there are bipartisan calls for the FTC to reopen its 2013 closed antitrust investigation of Google, it should not be hard for Congress to connect these dots and ask if Google has been evasive and misleading about its Google+ defunding in 2014 and planned full market exit in 2019.

The FTC must be aware that Google’s current Google+ narrative is revisionist history and deceptive in misrepresenting its Google+ privacy track record, and in being silent about how Google+ didn’t allow users to opt-out of Google+’s forced integration of its different privacy policies, despite the fact that the  FTC’s Google-Buzz privacy settlement apparently prohibited it; that 36 State Attorney Generals’ strongly objected to it, and that the EU’s similarly objected to it at the time.

This is especially relevant now that the DOJ and FTC have signaled that privacy is a new antitrust risk for Google and Facebook.  

Conclusion:

Alphabet-Google’s mishandling of its disclosure of its Google+ data vulnerability, combined with a permanent end to Google’s consumer social competition with Facebook -- is a big Alphabet-Google “unforced error.”

Unlike Google search, an implicit Google+ decision to permanently stop competing directly with Facebook, does not implicate single-firm monopolization antitrust risk, it implicates cartel antitrust risk, which is per se illegal meaning it does not have to be proven under the normal, higher-bar of the antitrust consumer welfare standard. 

Given that ~75% of current “techlash” antitrust discussions revolve around Google and Facebook, and ~75% of those antitrust discussions revolve around the consumer welfare standard, conventional wisdom appears to have a big potential blind spot about Google+Facebook cartel enforcement risk.

Google-Facebook’s unchecked cartel control over consumer info-flows is an extraordinarily anticompetitive, and unlevel playing field.

Forewarned is forearmed.

***

Scott Cleland served as Deputy U.S. Coordinator for International Communications & Information Policy in the George H. W. Bush Administration. He is President of Precursor LLC, an Internet competition and policy consultancy for Fortune 500 companies, some of which are Internet platform competitors, and he is Chairman of NetCompetition, a pro-competition e-forum supported by broadband interests. Cleland has testified before the Senate and House antitrust subcommittees on Google. Eight different Congressional subcommittees have sought Cleland's expert testimony and when he worked as an investment analyst, Institutional Investor twice ranked him the #1 independent analyst in his field.

***

Precursor LLC Research on Asymmetric Accountability Harms:

Part 1:   The Internet Association Proves Extreme U.S. Internet Market Concentration [6-15-17]

Part 2:   Why US Antitrust Non-Enforcement Produces Online Winner-Take-All Platforms [6-22-17]

Part 3:   Why Aren’t Google Amazon & Facebook’s Winner-Take-All Networks Neutral? [7-11-17]

Part 4:   How the Google-Facebook Ad Cartel Harms Advertisers, Publishers & Consumers [7-20-17]

Part 5:   Why Amazon and Google Are Two Peas from the Same Monopolist Pod [7-25-17]

Part 6:   Google-Facebook Ad Cartel’s Collusion Crushing Competition Comprehensively [8-1-17]

Part 7:   How the Internet Cartel Won the Internet and The Internet Competition Myth [8-9-17]

Part 8:   Debunking Edge Competition Myth Predicate in FCC Title II Broadband Order [8-21-17]

Part 9:   The Power of Facebook, Google & Amazon Is an Issue for Left & Right; BuzzFeed Op-Ed[9-7-17]

Part 10: Google Amazon & Facebook’s Section 230 Immunity Destructive Double Standard [9-18-17]

Part 11: Online-Offline Asymmetric Regulation Is Winner-Take-All Government Policy [9-22-17] 

Part 12: CDA Section 230’s Asymmetric Accountability Produces Predictable Problems [10-3-17]

Part 13: Asymmetric Absurdity in Communications Law & Regulation [10-12-17]  

Part 14: Google’s Government Influence Nixed Competition for Winner-Take All Results[10-25-17]

Part 15: Google Amazon & Facebook are Standard Monopoly Distribution Networks [11-10-17]

Part 16: Net Neutrality’s Masters of Misdirection[11-28-17]

Part 17: America’s Antitrust Enforcement Credibility Crisis – White Paper [12-12-17]

Part 18: The U.S. Internet Isn’t a Free Market or Competitive It’s Industrial Policy [1-4-18]

Part 19: Remedy for the Government-Sanctioned Monopolies: Google Facebook & Amazon [1-17-18]

Part 20: America Needs a Consumer-First Internet Policy, Not Tech-First[1-24-18]

Part 21: How U.S. Internet Policy Sabotages America’s National Security [2-9-18]

Part 22: Google’s Chrome Ad Blocker Shows Why the Ungoverned Shouldn’t Govern Others [2-21-18]

Part 23: The Beginning of the End of America’s Bad “No Rules” Internet Policy [3-2-18]

Part 24: Unregulated Google Facebook Amazon Want Their Competitors Utility Regulated [3-7-18]

Part 25: US Internet Policy’s Anticompetitive Asymmetric Accountability - DOJ Filing [3-13-18]

Part 26: Congress Learns Sect 230 Is Linchpin of Internet Platform Unaccountability [3-22-18]

Part 27: Facebook Fiasco Is Exactly What US Internet Law Incents Protects & Produces [3-26-18]

Part 28: How Did Americans Lose Their Right to Privacy? [4-14-18]

Part 29: The Huge Hidden Public Costs (>$1.5T) of U.S. Internet Industrial Policy [4-15-18]

Part 30: Rejecting the Google School of No-Antitrust Fake Consumer WelfareStandard [4-20-18]

Part 31: Why New FTC Will Be a Responsibility Reckoning for Google Facebook Amazon [4-27-18]

Part 32: “How Did Google Get So Big?” Lax Bush & Obama FTC Antitrust Enforcement [5-23-18]

Part 33: Evident Internet Market Failure to Protect Consumer Welfare -- White Paper [5-31-18]

Part 34: What Happened Since FTC Secretly Shut 2012 Google-Android Antitrust Probe? [6-8-18]

Part 35: Buying WhatsApp Tipped Facebook to Monopoly; Why Didn’t FTC Probe Purchase? [6-19-18]

Part 36: The Sea Change Significance of Simons-FTC Privacy and Antitrust Hearings [6-27-18]

Part 37: New U.S. Privacy & Data Protection Law Is Inevitable Like a Pendulum Swing [7-9-18]

Part 38: Why a US v. Google-Android Antitrust Case Is Stronger than US v. Microsoft [7-16-18]

Part 39: Google-Android’s Deceptive Antitrust Defenses Presage a US v. Alphabet Suit [7-20-18]

Part 40: Case Study of Google Serial Over-collection of Private Data for FTC Hearings [7-30-18

Part 41: The Unfair and Deceptive Online-Offline PlayingField – FTC Hearing Filing [8-7-18]

Part 42: What Most Stunts FTC Antitrust and ConsumerProtection Law and Enforcement? [8-21-18]

 

Part 43: Why New U.S. Privacy Data Protection Law Wil Preempt State Privacy Laws [8-27-18]

 

Part 44: What’s the FTC Hearing before their Hearingson the Unlevel Playing Field? [9-6-18]

Part 45: Google Facebook & Amazon’s Anticompetitie Nontransparent Exchange of Ideas [9-12-18]

Part 46: The Unlevel Playing Field of Asymmetric Competition Expectations [9-17-18]

Part 47: How EU Amazon Antitrust Probe Spotlights Amazon as an Unlevel Playing Field [9-26-18]

 

Part 48: Google Facebook Amazon’s Non-Neutral, Neutrality Nonsense Harms Competition [10-2-18]

 

Part 49: FTC-DOJ Signal Privacy Is a New Antitrust Risk for Google Facebook [10-9-18]

 

Q&A One Pager Debunking Net Neutrality Myths