Front Burner - Should we break up Facebook?

Episode Date: November 30, 2018

This week, lawmakers all over the world sat down to grill Facebook about privacy and fake news. Canada's reps were especially harsh on the tech giant and one MP posed a tough question: Is Facebook just way too big? Breaking up a major American company isn't common. But in the past - banks, telecom companies, and even an oil giant were broken up by the U.S. government. Could that happen with tech giants today? Tim Wu, professor at Columbia Law School and author of The Curse of Bigness, breaks it down.

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about hidden disabilities. Short Sighted, from CBC's Personally, available now. This is a CBC Podcast. Hi, I'm Jamie Poisson. This week, lawmakers from all over the world sat down at a long wooden table in London. MPs from Canada, Brazil, France, Singapore. I think this is the first time we can say that parliamentarians have gathered from this number of international jurisdictions. And at the head of the table sat a nameplate. It read Mark Zuckerberg.

These lawmakers, they'd come from around the world to grill the Facebook CEO about privacy and fake news. But Zuckerberg? He was a no-show. Facebook sent someone else from the company instead, a vice president. But the MPs, they still went ahead with the hearings. And Canada's reps? They were especially harsh on the tech giant.

And that sense of corporate social responsibility, particularly in light of the immense power and profit of Facebook, has been as empty as the chair beside you. One of those MPs was Charlie Angus, the new Democrat from Ontario. And he asked an especially tough question. Is Facebook just way too big? especially tough question. Is Facebook just way too big? Perhaps the simplest form of regulation would be to break Facebook up or treat it as a utility. Facebook has broken so much trust. To allow you to simply gobble up every form of competition is probably not in the public interest. So could we break up Facebook? Should we? And what exactly would that even accomplish?

You know, Facebook is not affected by $100 million fines, even billion dollar fines. But a breakup is serious. And it expresses the people's will that, you know, there's too much concentrated power and too few hands. That's today on FrontBurner. Hello, I'm Tim Wu, a professor at Columbia Law School and author of The Curse of Bigness, Antitrust in the New Gilded Age. Hi, Tim. I want to talk about this idea of Facebook being too big. But first, I'm hoping that we can talk about breaking up companies in the U.S. It used to happen a lot more often. Can you walk us through this? Like,

why did the U.S. break up companies in the past? Sure. So the United States was the pioneer of what are called the antitrust laws. At one point in U.S. history, it was routine for monopolies to be targeted for big breakups. Some people may remember AT&T being broken up a lot earlier. There were companies like Standard Oil and Cotton Monopoly and the Tobacco Monopoly broken up a lot earlier. And so, yeah, it's been a big idea in American history, and I think it's coming back when people are thinking about some of these tech giants. And what's the motivation behind breaking a company up?

Well, the idea is that excessive size and excessive concentration create what Louis Brandeis, the Supreme Court justice, called a curse of bigness. That monopolies tend to raise prices. That they tend to be economically and politically unaccountable, and that in the extreme, they can begin to exert an undue influence over politics, have too much power of their own, and can even throw the country into dangerous kinds of conditions through their political power. So it's a combination of political and economic factors that are usually understood to drive breakups. of political and economic factors that are usually understood to drive breakups.

It has been true, and correct me if I'm wrong, that fewer companies have been broken up in the last couple of decades. Why do you think that is? Oh, that's very true. The last big breakup in the United States was in the 80s. That was AT&T or the Bell Company. Almost a million people work for Bell at some 27,000 different locations across the country. Three out of four phones in the country are Bell. Bell assets are worth 12 times Fort Knox.

I mean, we're big. There has been a massive decline in enforcement of the antitrust, anti-monopoly laws. It's tied to a number of factors, including an ideological shift, you know, more pro-business kind of thinking. The result is that the economy right now is more concentrated in the United States and, frankly, globally as well than it has been, I think, since the early 20th century. There's been a big recent call for a return to the approaches that were taken during

the progressive era. Now that we've done this kind of antitrust 101, I'm hoping that we can move to Facebook. Give me a sense of like how big Facebook is. Well, I think Facebook has become a poster child for the curse of bigness, frankly. As you know, it has billions of users when it comes to advertising revenue online, shares a duopoly, at least in the United States, with Google. It has ownership of many of its main competitors, particularly Instagram, which is pictures, and WhatsApp, which is a global messaging service. And I think it has begun to show a certain impunity, resistance to regulation, which is, to me, a mark of a company that has grown too powerful.

Well, Senator, my position is not that there should be no regulation. You as a company welcome regulation? I think if it's the right regulation, then yes. You think the Europeans have it right? I think that they get things right. There's been calls in the United States repeatedly for some kind of punishment or something to be done about the various privacy abuses

and the manipulation by the Russian interests of Facebook, and they have managed repeatedly to sort of skirt any real consequence. And so it's showing, as I said, a lot of the classic signs of a firm that has become, I think, dangerously big. So you've talked about American companies that have been broken up, AT&T, Standard Oil. that have been broken up, AT&T, Standard Oil. And correct me if I'm wrong, but I've always thought that companies are broken up to drive down prices. So the company can't monopolize a price. And if you introduce competitors, then prices will come down. But Facebook is free. And so can we talk a little bit about why you might want to break it up. What kind of power does Facebook wield?

Competition itself is a check on power and is important for a number of reasons. One is, I think, a breakup accomplishes a reduction in political power. So the New York Times has really been doing a good job with their investigative journalism. They have shown how Facebook has managed to neutralize some of the congressional oversight, managed to get parts of the Democratic Party to talk down other parts of the Democratic Party.

So they show signs of a certain immunity to public will. I mean, the public, if you ask the American public and probably Canadian, do you want more privacy restrictions on Facebook? I think probably get 99 percent saying yes, the 1 percent being Facebook employees. But no one's able to accomplish it. And that suggests there's an undue political influence. Another challenger to Facebook, you know, say Instagram, once it's broken off, could say, hey, you know, we're like Facebook, but we're much better about privacy practices. We don't take money from the Russian state.

And so, you know, come over here. But right now there's nowhere to go because it's all owned by Facebook. A lot of people, when they think about Facebook and scandals attached to Facebook this year, will think of the Cambridge Analytica scandal. The social media giant says more than 600,000 Canadians may have had their data improperly shared. A portion of the 87 million users affected worldwide. The spread of fake news accounts. The platform says it deleted 652 pages, accounts and groups

linked to Iran and Russia. Are these problems, you think, happening because Facebook is too big? And would breaking up Facebook solve issues like Cambridge Analytica? I think these problems do result from Facebook both being too big, too oriented on continued growth, too exposed on multiple fronts. And it's just such an easy target that we've had scandal after scandal. You know, it's wanted to maximize its revenue. It has so many exposed faces for hacking. And it doesn't really take privacy seriously. It's a sort of recidivist and privacy violations.

They have things like the Cambridge Analytica scandal, which resulted in private information of so many people being stolen. And would it be fixed by breaking up? I don't think it would be perfect, but I think one giant entity is just way too vulnerable. The idea here is that Facebook, because it is so huge, is able to wield enormous political power and also enormous social power, right? Yeah, I think that's basically it. Can we just talk a little bit about how you might see this company breaking up, just so that people might be able to picture it?

see this company breaking up, just so that people might be able to picture it? Yeah, I think the most straightforward thing to do is to spin off Instagram and WhatsApp, which were two companies that Facebook, in my view, illegally acquired in the 2010s. You know, I was in government at the time, so it's partially our mistake or, you know, something we let happen that we shouldn't have let happen. So we allowed them to buy off their main competitors. And the easiest thing to do is just break those off. There's more than one thing accomplished by that. So one thing is now you have three separate companies that succeed. But the undertaking also, I think, is ultimately a democratic exercise

because it reminds Facebook who is ultimately in charge here. And we live in a time where, minds, Facebook, who is ultimately in charge here. We live in a time where, frankly, companies can be as powerful as government, can overwhelm government. I don't know, maybe Canada doesn't feel this, but the United States, there's often a feeling that a company has almost floated above regulation because they are so wealthy and they understand how to do it. The last check on that kind of private power, in my mind, is a breakup. You know, Facebook is not affected by $100 million fines, even billion-dollar fines. You know, those are like mosquito bites. But a breakup is serious, and it expresses the people's will that, you know, there's too much concentrated power and too few hands. And that's the importance of a breakup, I think. You know, there's too much concentrated power and too few hands.

And that's the importance of a breakup, I think. The idea here would be that Instagram and WhatsApp could provide alternatives for people because they're now competing for people to join their platform. So maybe I would rather join Instagram because they have better privacy policies than Facebook. Yes, exactly. Or they're smaller. Or, you know, someone else might come along as well. You know, right now people are afraid to enter that market because it just seems like, you know, suicide. But I could see a future, maybe Wikipedia enters the market with a non-profit alternative, no advertising. That would be nice. But right now it's a death zone. And so

I think to kind of loosen the market up. And, you know, it's not only economic. This is, as we said, these are our lives, these are our friends, this is our information. I haven't even touched on the fact that you have an entity here which has, you know, as much information about all of us that would make the KGB at its best feel kind of jealous. The idea that we need to weaken its power seems to me kind of fundamental to anyone who is wary of unchecked power in a democracy. Why does Facebook argue it shouldn't be broken up? Actually, it makes two arguments. So one is a normal argument that's like, you know, everything's fine and, you know, we don't hurt anybody.

I think that is wearing a little bit thin. Facebook is an idealistic and optimistic company. For most of our existence, we focused on all of the good that connecting people can do. But it's clear now that we didn't do enough to prevent these tools from being used for harm as well. The other argument is kind of more interesting, to me a little scarier. They say, well, if you hurt us, that's just going to make the Chinese government and the Chinese versions of Facebook more powerful. And in the competition for the rest of the world, it's America against China. And who do you want

to win? If we adopt a stance, which is, okay, we're going to, as a country, decide that we want to clip the wings of these companies. There are plenty of other companies out there that are willing, and they do not share the values that we have. I think you can bet that if the government here is worried about whether it's election interference or terrorism, I don't think Chinese companies are going to want to cooperate as much. So Facebook has been pleading with government lately to sort of make Facebook into the national champion of the United States. What do you make of that argument? I mean, I think it's counter to the way the West should think about things. You know, I'm very wary of a union between private power and public power. very wary of a union between private power and public power, I think can go wrong in ways that can be terrifying,

particularly in a country as powerful as the United States. When you think about the ways Facebook can help government achieve its objectives, it becomes very scary very quickly. I've seen arguments for just regulating Facebook, like not breaking it up, but just putting a bunch of rules on it. Why not do that? I'm not opposed to, for example, better privacy regulations, but the approach you described is characteristic of European approaches, somewhat popular in Canada as well.

You know, I give Charlie Angus a lot of credit at the hearing for raising breakups. The problem is Facebook. The problem is the unprecedented economic control of every form of social discourse and communication. I think regulation of really big companies tends to lead to their insulation from competition and make them the friend of the state forever. So I'm wary that what we're going to do is in some ways entrench Facebook, sort of make them the official social network of the Western world and maybe the whole world. And when you say, you know, it sort of entrenches them, is the idea that when you put a bunch of rules around something, it makes it even harder for new companies to enter

the market because now there are all these other rules or hoops that they have to jump through? Is that also part of the idea there? That's exactly right. So, you know, the best example is the telephone industry, which was extensively regulated, but then became completely impenetrable to competitors until AT&T in the United States was broken up in the 1980s. And companies are pretty clever about finding ways to use government to insulate themselves from any real competition. And I think it leads to stagnation over the long term. I believe in stronger privacy regulation, for sure. I just think there's some real danger of state-private cooperation that goes too far.

One of the reasons why we're talking today is because of Charlie Angus, who questioned this week during these hearings in the UK about whether or not Facebook should be broken up, or he essentially called for it. But really, like, this is an American company, and the real power lies in the U.S. So, like, how much support is there in the United States to break up Facebook? Like, could this possibly happen? I think it could happen. You know, it doesn't require a referendum. It requires action by the law enforcement officials. So, you know, I think it has popular support.

I think most people think that Facebook has just gotten a little too powerful, a little too scary, and seems to be getting away with too much. I mean, this is not the only scandal. You mentioned some of them. I do fear that the governments of the world will be too inclined to want to make friends and make peace with Facebook. I've dealt with Facebook and government. Their lobbyists are extremely friendly. They offer all kinds of help. You know, they'll say something like, you know, we have the faces of everybody on Earth. And so if you're looking for missing children or something, you know, why don't you come to us? Later, that could become if you're looking for criminals, you might want to catch come to us. You know, they have this, this very friendly kind of way about them. But I think down that path lies

grave dangers. It's very dangerous. You can see the temptation. I haven't even mentioned the temptation for the intelligence agencies, which would love to have a private spying organization that they don't have to pay for. So be wary if you care about human liberty in our times. I think that's a good place to leave it. Tim, thank you so much. A pleasure. Pleasure. Yesterday in the UK, a new rule around Facebook political ads kicked in. UK advertisers are now going to have to confirm their identity, location, and say who paid for the ad.

If you're into this topic, you should check out an episode we did earlier this week. It's about Russian election meddling and the Canadian election, and you can find it on our feed. That's it for today. FrontBurner comes to you from CBC News and CBC Podcasts. The show is produced by Chris Berube, Elaine Chao, and Shannon Higgins, with sound design by Derek Vanderwyk.

Our music is by Joseph Chabison of Boombox Sound. The executive producer of FrontBurner is Nick McCabe-Locos, and I'm your host, Jamie Poisson. Thanks for listening. spring is raging. A lesbian activist in Syria starts a blog. She names it Gay Girl in Damascus. Am I crazy? Maybe. As her profile grows, so does the danger. The object of the email was, please read this while sitting down. It's like a genie came out of the bottle and you can't put it back. Gay Girl Gone. Available now.