Facebook Finally Meets a Regulator With Bite
Facebook Finally Meets a Regulator With Bite
(Bloomberg Opinion) -- In France, they call it taking
mustard after dinner. In Germany, they talk about a child having already fallen
in the well. In England, they speak of closing the stable door after the horse
has bolted.
They all are good ways of describing how regulators have tended
to deal with the world’s biggest tech firms. But when it comes to Facebook
Inc.'s digital coin, Europe's antitrust watchdog seems to be intent on breaking
with this previous inaction.
Bloomberg News reported on Tuesday that the European Commission
is scrutinizing the two-month-old Libra project and the group backing it
amid concern the currency will be detrimental to competition. This is a good
sign the regulator will do something about it.
That’s welcome because antitrust authorities have, over the
years, repeatedly failed to prevent the sort of practices which have cemented
the dominance of Silicon Valley firms in their target markets. Regulators then
struggle to rebalance the market after the fact.
Some past decisions look misguided in hindsight. The most
obvious are Google’s $3.2 billion acquisition of DoubleClick in 2008, which
cemented the search giant’s control over digital ads, and Facebook’s purchases
of Instagram and WhatsApp – deals that made it the preeminent social
network.
Facebook’s plan should give regulators plenty of reasons for
concern. The organization administering the digital currency, the Libra
Association, comprises 28 members so far, but the extent of Facebook’s leading
role warrants closer examination.
QuicktakeWhy Everybody (Almost) Hates Facebook’s Digital Coin
The motivation for many of the members seems at this stage to be
a fear of missing out. After all, Facebook’s 2.4 billion monthly active users
give it unparalleled scale. But that could also be construed as the Menlo Park,
California-based firm abusing a dominant position: Members of the association
might feel they can’t risk being left out, so have little choice but to take
part.
The group includes most of the world’s biggest payments
companies: Mastercard Inc., Visa Inc., Paypal Holdings Inc., Stripe Inc. and
Vodafone Group Plc, whose M-Pesa mobile money transfer service is dominant in
parts of Africa.
That means it could be seen as a horizontal agreement, according
to Bloomberg Intelligence analyst Aitor Ortiz. Those kind of arrangements may
be acceptable in certain cases if they benefit the end user, but are normally
anti-competitive if they consolidate the influence of a discrete group at the
expense of consumers or rivals.
Facebook has said that it won’t push ahead with Libra until it
has secured all the necessary regulatory approvals. The European Commission’s
message seems to be: Don’t push your luck. If the group fails to pay heed,
it risks fines and punishments further down the line. That will make it harder
to sign up new partners who are unwilling to expose themselves to such
regulatory hazards.
One has to wonder whether the growing regulatory scrutiny the
currency is attracting will make the project worth the effort for Facebook. For
sure, the social networking giant needs to find a way to diversify its revenue
away from advertising. But I’m unconvinced that Libra does that.
If anything, it will become another pillar of the advertising business
by supplying valuable data on purchasing intent: every time you make a purchase
using Facebook’s digital wallet, you give the company a better understanding of
what you’re buying and why.
All this highlights the contradiction at the heart of Libra: if
it is truly independent, what’s in it for Facebook? Regulators are right to
press for an answer.
To contact the author of this story: Alex Webb at
awebb25@bloomberg.net
To contact the editor responsible for this story: Edward Evans
at eevans3@bloomberg.net
This column does not necessarily reflect the opinion of the
editorial board or Bloomberg LP and its owners.
Alex Webb is a Bloomberg Opinion columnist covering Europe's
technology, media and communications industries. He previously covered Apple
and other technology companies for Bloomberg News in San Francisco.
©2019 Bloomberg L.P.
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