The Vergecast - The FTC is suing Facebook to unwind its acquisitions of Instagram and WhatsApp

Episode Date: December 11, 2020

In a bonus episode of The Vergecast, Nilay Patel talks with Verge policy editor Russell Brandom, senior reporter Adi Robertson, and contributing editor Casey Newton about the FTC suing Facebook to unwind its acquisitions of Instagram and WhatsApp. Further reading: The FTC is suing Facebook to unwind its acquisitions of Instagram and WhatsApp The good and the bad in the government’s case against Facebook Facebook calls antitrust lawsuits ‘revisionist history’ Instagram would be better off without Facebook Learn more about your ad choices. Visit podcastchoices.com/adchoices

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dropping May 14th. Tap in with us. Hello, and welcome to an emergency second episode of the Vergecast this week. I am your friend Neil Appetal, and I'm joined by Addie Robertson. Hey. Russell Branden. Why, hello. And notable Verge trader Casey Newton.

How's it going, everybody? It's going great. It's going to have you back. So we're doing two episodes this week. There's another episode of the Vergecast in your feed right now. Dieter and I talk to Chris Welch, what Apple's in your head, phones, and then we did an interview with Qualcomm president, Cristiano Amman, which was really interesting for a variety of reasons you might be able to guess.

Mostly, we just asked him, what's he going to do about Apple? I don't know if he told us. But you can go listen to that. That's all in the feed. All the tech news is there. The reason I wanted to break them up is this is the week that the United States government, however you want to think about it, federal or state, is suing to break up Facebook. So there's one lawsuit led by New York attorney.

General Tish James and 47 other states, so 48 states total, are suing Facebook. They're asking for remedies for antitrust violations. And then the United States Federal Trade Commission also suing Facebook in a separate case and much more explicitly saying we think we should break up Facebook from Instagram and WhatsApp. So quite a lot to talk about there. So we thought we would do two episodes. So if you're interested in gadgets and stuff, go to the other episode.

Lower your expectations before you continue. It's just hard. It's always hard to mash these things up. And I want to give this one the space it deserves because I think our audience is interested in it. So let's start at the, by the way, the explanations are sky high for the three of you. Otherwise, we're going to break this up. Okay, let's start at the start. Russell, this has been coming for a long time. Yeah. The most immediate sort of reason you knew it was coming was in July, we had the big house antitrust hearing. And you know, you and Casey got the sort of early look at the, you know, the sort of early look at the, you know, the the documents of specifically the emails they got from Facebook about the Instagram acquisition. And it was clear, you know, not only was the House Antitrust Committee looking really closely at this, but also they, you know, they found some stuff. There were some emails. And now those emails of sort of Kevin Sistram asking his friend if Mark Zuckerberg was about to go into destroy mode are really, I think, at the center of these cases. What do you think led them? This timing is obviously notable.

It is the last days of the Trump administration, assuming the various ill-fated coup attempts become less sulfated. But it is the end of the Trump administration. What do you think pushed the cases to land now? It's tricky. I do think there's an aspect of, like, legacy sort of for the, for the FTC. Like, they want to get something good in on the way out the door. But also, I think, I don't know.

it's a lot of the people you talk to in this world are sort of like they actually waited too long. Like there's this sense of, oh, maybe it was rushed because they wanted to get it in before Biden. But they're actually like, no, like they should have filed this two years ago. Like, I mean, the Instagram acquisition, well, even the WhatsApp acquisition is five years old. And so, you know, why weren't we doing this a while ago? Yeah. And we'll talk about that in Facebook's response, which has a number of elements. but the core one is, will you approve these transactions?

How dare you disapprove of them now? That's really the heart of what Facebook has so far said in response. The other thing I'm interested in is the mechanics of the timeline and the mechanics of the two cases. So there was a big house antitrust investigation. We sat through a number of hearings. Case and I did report on the documents, particularly relating to the Instagram acquisition that came out in that investigation. And then there's coming out of that, the DOJ has. filed suit against Google, which is big and complex. And then in this specific instance,

you have the states doing one lawsuit and the FTC doing another. Why is that? Yeah, there isn't like a great reason. I think one thing you could also point to is back in June of last year, so like 18 months ago, there was a lot of reporting that the Department of Justice, which is currently suing Google, had sort of split up oversight of big tech. There were clearly these antitrust cases to be brought against big tech companies. There was clearly sort of desire and this growing legal literature around it. And the Department of Justice sort of took Google and Apple. I mean, again, they haven't done anything with Apple. And the FTC said, we're going to prioritize Facebook and Amazon. So that's why we're not seeing anything from the Department of Justice on Facebook.

is just this weird deal that they made that they wanted to split up their resources. And then I think the state attorneys general sort of sort of swiped in because they could, there was an opening there. But I mean, I think it's also a sign of how much, if you're a career prosecutor, you kind of want to get in on this because it's such a big deal. So there's, it's 48 attorneys general. It's only 46 states because Guam and D.C. are in the suit, but they're not states. What are the four that are, in it, Addie? It is South Dakota, South Carolina, Alabama, and Georgia. Well, Georgia is very, I think, very busy right now. They've got a lot going on. Have these states said why they're not

participating? I don't think we've heard a lot from them. I mean, I think it is weird because, like, how much work do you have to do as the 49th Attorney General joining this is weird? Yeah, so that's just some mechanics. Like, I think it's interesting to note, right? There was the big buildup to the congressional hearing. We have talked to the, committee staff. We've talked to Chairman Cicillini who ran that hearing. We've been in it. The hearing happened. And then I think, in Casey, I think you and I talked about this a bunch, like, well, what happens now? Like a bunch of nothing came out of Congress, as always. And now there's two gigantic lawsuits, one of which has two independent components. Although Tish James,

the Attorney General of New York, was like, we look forward to collaborating with the FTC, which made her sound more like a YouTuber than anything. It's really excited for that crossover. Addie, give me a sense of the arguments in the cases. Are they basically the same? So let's start with the FTC. What is their core argument? The core arguments are, and it's kind of the core arguments of both of them,

is that Facebook understood that specifically WhatsApp and Instagram were going to be big competitors and that it deliberately chose a strategy of let's go ahead and acquire them. rather than creating our own thing because we know that that's going to forestall their attempt to grow. And that if anybody else tries to compete, by the time they managed to spin something up, we're going to be ahead of them. So my response to this is, isn't that what businesses do? What makes this rise beyond the level of you bought some companies and we think now you're too powerful? So, yeah, the argument was that if these companies didn't sell to Facebook, that Facebook was just going to destroy them, that there is a quote, that Zuckerberg's going to go into destroy mode and, quote, subject your business to the

wrath of Mark. And so basically they're trying to argue that this is like a shakedown, that if you don't end up going to and selling your business, that Facebook's going to use, it's already at that point considerable power to shut you down. But shut you down means compete with you, right, using the full spectrum of Facebook resources. Is there, is there like a, besides you shouldn't, we shouldn't have let you buy Instagram. Is there a thing Facebook did that is the specific thing that was illegal? I mean, one of the things they're arguing about is that Facebook at one point cut off the API of Vine, that that's not the central, like, Vine is obviously gone. So it's not like a thing that they're explicitly discussing, but that at one point Facebook decided Vine's competing with them.

We're going to cut off the API that lets people move their friends list over to another service. and then Mark Zuckerberg says, go for it. Yeah, and this kind of gets into Facebook is very good at the network effect, right? It's valuable because of the graph of people on Facebook, and they can leverage that graph in different ways. So, Casey, I'm curious here to take on how Facebook has responded to this. Yesterday, I think everyone is tweeting about the cases, you mentioned that the two complaints make no mention of TikTok whatsoever, that there is competition in the universe for Facebook. So you're giving a sense of how Facebook.

Facebook is reacting to the lawsuits. Like, there is competition. So on what footing does Facebook find itself now? Yeah. So, I mean, they're leaning super hard into the idea that the government had its chance to prevent these murders from happening and it didn't. And to reach back eight years in time in the case of the Instagram acquisition and try to unwind it.

They're saying is deeply unfair and would have terrible ramifications for all American business, right? If you bought a company, but then that acquisition could be unwound any time, it could like send a chill through the ecosystem. I think all of that is like sort of overdramatic. You know, we only have five tech giants. There aren't that many, you know,

mega billion dollar acquisition. I think American business will survive this. And, you know, also when the FTC declined to bring an enforcement action, it did say that it could, you know, theoretically revisit it later. So I sort of set all of that aside. I think the competition issues

are much more serious, right? Like, you know, I wrote about, in platformer today, which you can find on the verge.com as well, about how, hey, I'm a verge contributor and I'm promoting my work on the verge, Eli. You know, we published a story on The Virgin a couple months ago where I had data from inside Facebook showing what happened when TikTok was banned in India. And do you know what happened?

Sharing on Instagram went through the roof because these things are directly competitive. Why do you think Facebook and Snapchat and Twitter are now all introducing short form video offerings, it's because TikTok is gaining steam in a hurry. So I think the government is just going to have a really hard time proving that Facebook's actions in 2012 and 2014 are hugely distorting the market for social networking right now. The way the government is trying to get around that is by very, very, very narrowly defining the definition of a social network to just be something that looks exactly like Facebook. Well, they're calling it a personal. network. Yeah, which I don't think they're going to get away with myself. Well, certainly,

Facebook isn't going to try to stop them. Addy, what do you think a personal network is? What's the definition the government's using here? I think of the exact definition, but basically a personal social network, the idea is that it's not simply a place where you share things. It's not simply a place where you consume content. It's not a place where you go like LinkedIn to connect with other people. the idea is that all your friends are there and you connect with them in some kind of semi-public way that's not purely private messaging like WhatsApp or whatever and that there's not anything that fills that niche and that a bunch of people are in are using that specific type of service which is like yes like case he said it's defining the category is Facebook Facebook is the only

Facebook and and also by the way it raises real implications for the case against the acquisition of WhatsApp, which by the government's own definition does not resemble Facebook. Like, what is anti-competitive about Facebook buying WhatsApp if you're going to say that messaging services aren't social networking? So I think we should take those in turn, right? Because Instagram is, to me, has always been the clearest case where there was a small company called, well, it's called Bourbon Labs, but there was Instagram, six people in a room making a thing that became a threat to Facebook.

Facebook sought coming, those emails from Mark that we saw. Very hilariously, he was like, I need to know if we're going to buy Instagram. We should do it. We should buy competitors. And then there was just a sequence where you could tell that the CFO of the company called Mark. And he emailed back, like, to be clear, I'm not suggesting we do crimes. That's in the story. You can go look at it.

It's very entertaining to me. But it's obvious that there was a sequence of events where Zuckerberg saw Instagram as a competitor. and move to either acquire it or quash it in some way, or at least threatened to quash it. But Instagram was small back then. And even when it was small, it drew the scrutiny. And the FTC said, this is fine, but we reserve the right to come back around. Now Instagram is big. It's one of the dominant networks.

It is getting worse by virtue of being part of Facebook. Like just the number of things that have been glommed into the Instagram interface, particularly after the founders left is nuts. They're tying the messaging infrastructure of Instagram and what's happened to Facebook together. Is Instagram, can you actually take it out of Facebook? Well, so they have known that this was coming and they have spent two years doing everything they can

to make it impossible so that when this moment arrived, they can present a 300-page document about all of the problems that disentangling these things is going to cause. You know, ultimately, I don't think that would stop the government from doing it. But, you know, Neel, I think your first point is an interesting one, which is one of the arguments against breaking these companies up is always that if you just give them enough time, they will fall flat on their face. And I don't know a lot of people who think the Instagram

experience in 2020 is better than it was in 2017, let's say. And so I used to be somebody that was like, break these companies up immediately. And now I'm just like, I don't know. Like, it sort of seems like the market is doing its work here. So, I mean, I do. want to push back. So this is, Ashley Carman wrote a whole piece about how, like, that Instagram would actually be better off without Facebook. And one of the things that popped up afterwards was, uh, actually Lena Kahn tweeted this. It was sort of testimony from the House judiciary. There's a former Instagram employee said, you know, it's not like building a skyscraper and then suddenly needing to knock down the building. Like they've made these changes to integrate them, but then you

you just roll back the changes. And it's sort of inherently easier to split these things apart. than it is to knit them together. The thing that would make it a problem to separate Instagram from Facebook is if you had all these Instagram users who are like, how dare you tell me I can't message my Facebook friends? But that's just like,

I don't think that's sort of what we see from Instagram users. So like I was very convinced by the piece and at this point I kind of, I just don't think it would actually be that hard. It would be expensive. It would cost the money. But like they would just sort of

do it. I also really don't think Mark Zuckerberg or Adam Asserie or any other Facebook executive going before a judge and being like, we're not smart enough to figure this out. We'll play. Right. Like these are the people who think they're the smartest people in the world. And they're like, well, this is too hard for us to figure out. Like I just don't, I don't buy that that argument works emotionally. Maybe there's some technical way it would work. But I, I just see a judge being like, you know, you tried to launch Libra. Like your last idea was we're going to run the world's currency. I think you can make your messaging services split apart.

The other big one to talk about is WhatsApp. That one is messier. There was a big Bloomberg piece this week about Facebook's attempts to begin monetizing WhatsApp more directly. It's never really made any money. Casey, I feel like you've spent more time considering WhatsApp as a product than I have. what is the current sort of state of WhatsApp, what's happening to it. I mean, that one just seems like you could just stick it over there.

The billions of happy WhatsApp users in the world would continue being happy and it would continue not making any money. Yeah, that's true. You know, it is also true that on any big scaled up communication service, commerce always happens. And so if you're Facebook and you spend 19 billion on it, eventually you do want to make your money back. And so you think, well, how can we just monetize the commerce that's, you know, already being transacted? here anyway. And so what they're doing with WhatsApp right now is just adding various features that make it easy to shop. They have like catalogs now for merchants. I think this week they added shopping carts. You can buy multiple things from a merchant at the same time. This is actually very similar

to what they're doing with Instagram. Instagram is becoming a sort of very visual influencer driven shopping mall. So that's kind of the state of affairs. You know, when you look at how little money that Facebook has made, I think you can make a good argument that the $19 billion that they spent, was just really the value of it not growing independently or being acquired by Google, which is the other company that was rooting really hard to acquire it. So I don't know. Yeah, I agree with you. It's sort of like a weird one because it's not super important in the United States,

but it's hugely important outside the United States. How successful have they been at tying the messaging services together? On the Instagram and messenger front very successfully, which you will know if on Thursday you found that you could not send messages on either. because after they tied them together, once they have outages, then the entire thing goes down. WhatsApp, when it was acquired, Facebook made special stipulations that it would not comminkle the data. It then went back on that in some ways, which is actually part of the complaints of both the FTC and the state's attorneys general. But for that and other reasons, it has remained a little bit more separate, at least on the user end, they're also doing a lot of stuff to unify everything on the back end.

and I'm a little bit less clear exactly what the state of affairs is there for WhatsApp. Do you want to hear the dark pattern that got me to upgrade my Instagram messaging? Yeah. I mean, I applaud them because they just hooked me.

And you said upgrade too, which I don't know if that was intentional, but you just said you upgraded it. Well, that was the, well, let me explain it to you. That's they tricked me. I opened my Instagram messages, which I did not want to merge

with my Facebook messages. And I got a splash screen that said, do you want to change your theme? you can make this look beautiful. And I was like, sure. And I hit it and said, messages upgraded. You can now message on Facebook. And I was like, that's not, I mean, just a classic, amazing dark pattern to get me to do something I had no desire to do.

I love it. Look, I said, I applaud them. Yeah. Whoever made that just hit their bonus for the year. Yeah, exactly. They got one. Addie, breakups are not the only remedies in the cases. Like, it's not the only thing the government and the states are asking for.

What are the other things? that are being requested to have happen here? Because there's a gradient of things, right? Right. I mean, the states, so like you said, the states and the FTC are slightly different in their treatment of like spinning off the services. So the states are, say, leaving open the potential for breakups. And, but they're just saying, look, the acquisition of what's up and Instagram,

it should be judged to be unlawful. And they're also basically, arguing a thing that Congress has argued, which is that there should just be much stricter regulations and, like, scrutiny of future acquisitions, which is sort of the big issue for Facebook going forward. That's the thing that I don't quite understand. I'm wondering if any of you have a clear sense of this. The states don't call for breakup.

They say you should rule these acquisitions were in violation of the Clayn Act. What happens then? Like, is it just Mark Zuckerberg gets a demerit? isn't the only option than to pursue a breakup or some other other remedy? Like, that's the piece of the puzzle I don't understand. I mean, they're saying that you could do something like restructure it. I'm not totally sure what they mean by that. Yeah, I also think, you know, on the side of half of the complaint is not just predatory acquisitions.

And this is true of both the FTC and the state attorneys general, but that they're sort of using the platform power inappropriately, right? Like you were cutting off Vines access. and this was starving competitors, right? And if you're trying to come up with a remedy for that, it does, you could, you start to get into this kind of like consent decree, Microsoft like DOJ case sort of thing, where you could just see a consent decree that ends up with much more regulation

of how Facebook is allowed to use its API. Yeah, and there's a long section of emails in one of the cases, in one of the complaints where Facebook engineers are like, how on earth are we going to manage API access in this way? We're just going to decide their competitor and turn off and break stuff, which is another set of emails from inside Facebook that is just damning to all hell. I mean, speaking of emails, that is like kind of one of the potential options is interoperability. Yeah.

Is that one of the, a lot of the complaints are like Facebook has these incredible network effects. It's really hard to move your photos. And one of the things that potentially you could see is a bunch of agency. look, we should try to make sure that networks have to be able to talk to each other more easily, which is a thing that is intriguing and also raises its own sort of can of worms of problems. Yeah, this goes into, I think, a very, like, base level, what should a government do to accomplish its goals question? So years ago, at South by Southwest, I talked to Elizabeth Warren about breaking up companies

like this. And she was like, look, we can, we can engineer. some technical solution where a group of lawyers watches everything Facebook does forever. And Facebook will figure out how to capture those lawyers and bribe them. And it'll be hard and they'll constantly argue about those decisions. Or we could just break them up. Isn't it just simpler and more effective and less corrupt, potentially corrupt, to just break them up?

I found that very convincing only in a sense that, yep, that seems simpler. But I do wonder if actually imposing interoperability saying we're going to monitor your acquisition behavior, making sure Facebook isn't aggressively moving to crush competitors, the way that it consent to agree with Microsoft created the conditions for Google to exist wouldn't also be effective if maybe a little less dramatic. The wrinkle there is also, though, that there are like tons of legislative options on the table with something like interoperability. Yeah, but, well, I mean, there would be if Congress were a functional legislative body.

Yeah. Okay. I worry, I do love the idea that Congress to be like, Facebook Messenger needs to talk to IMessage. Also, we understand what those words. That would be great. I want to take a really quick break, and I want to come back,

and I want to talk about what Facebook itself does next. Support for this show comes from Shopify. Starting something new isn't just hard. It can be really scary, too. So much work goes into this thing that you're not entirely sure, will even work. But here's a better thought. What if it did all work?

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Thank you so much. The nation's preeminent source of Facebook gossip. You can just get it for free. You don't have to pay Casey any money. That's the thing I'm going to. That's true. You don't have to. What's the vibe inside of Facebook right now?

The sense that I'm getting is they feel like this is extremely politically motivated, that this is maybe a parting shot from the Trump administration. It's not the only one, right? remember the Trump administration also just sued Facebook over visas in what I frankly just think is nationalist bullshit trying to get fewer foreign workers inside these companies. And so I think they think of this as on the same continuum, but they also know that there is broad bipartisan support for this. And I do think that worries them. You know, something I've observed about Facebook is that as they have gotten into various legal scrapes all around the world for many years now, they are. victorious in the courts more often than not. And so this kind of thing may not chill them to the bone

the way that the excited retweets in my timeline suggest they might. They feel pretty confident in their case. And again, me, as somebody who has said, hey, I think it would be cool if we broke up Facebook. Like, I'm looking at the government's case. And, you know, I'm not a lawyer, but it just doesn't seem to be a slam dunk narrative. So that's interesting because that's how I felt about the Google case, which Google has been fighting. a version of that case in Europe, which has stronger antitrust laws for a very long time. And Google is still a dominant player in Search and Mobile in Europe. Like, it just hasn't had any effect. And they, you know, and they've done some of the things and they've lost some of those cases

and made some of the changes of the product in order to allow for more competition. There's a browser ballot and a search engine ballot in Android in Europe now. Facebook, you're saying they've faced some of the stuff, but it hasn't been at that level. Yeah, it has not been at the of we're going to break up the company. But that's, I think, almost why they're confident that it will not get that far. Like, you know, I do assume that the Biden administration will continue on with this. But I also expect that the, you know, the, the Biden era FTC might be more open to compromise and cooperation than a Trump FTC would. You know, you sort of sketched out what I think is actually going to happen here, which is it will fall short of a breakup, but they will put

really stringent controls on any future M&A. And that itself will actually get us most of what we want, because again, TikTok is in the process of chilling. You know, you want to know what actually scares people inside Facebook. It's TikTok. I spent a summer listening to every all hands inside of Facebook. You know what they're worried about TikTok. It's not antitrust. I want to push back a little bit on the Biden claim just because, you know, there was this three to two vote in the FTC to take this action. And both the two votes against it were Republicans. So I, if you're like Facebook right now, I'm not sure that the Biden administration is going to is like the cavalry that's going to save you. Yeah. And to take me clear. It's not that I think that they're the cavalry. It's that I think

they will stop short of the most dramatic possible action that they could take. I think that, you know, it's like sort of in any negotiation you ask for way more than you expect to get in hopes of shifting the window like toward your position. And I think that they can reach a settlement with Facebook by saying, all right, all right, all right. You can keep Instagram and WhatsApp, but you have to agree to this really stringent pre-merger review for everything going forward. You have to participate, paid in these like compliance audits from time to time. And I really do think, again, it's like if what you want is competition in the marketplace, you're at this point, you're really hoping that Facebook doesn't get to acquire the next Instagram or the next WhatsApp

more than you are, I think, you know, that they lose control of Instagram. Well, two things about that. One, I would point out that Trump administration tried to ban TikTok. Did they? And they definitely just like lost interest in banning TikTok. But to point it, TikTok is a competitor. And then say it's also a national security threat. But then the Trump administration is seeking its revenge on us.

I'm not saying that you can often describe the Trump administration as having a coherent policy worldview. But that's just a lot of chaos, right? Yeah, I had a former, like, high-ranking Facebook official asked me yesterday whether they thought that Trump was trying to ban TikTok to improve the antitrust case against Facebook, which I was like, I wish I thought he was that clever. But no, I do not think that. But to your point about this is a negotiation, one, I don't. don't think a bunch of state attorneys general who are politically minded, who are seeking their next office, are coming at this, like they're buying a Toyota, right? Like, they want the big win. Second, in comparison to the Google case, which people love Google, they're not so

mad at it. That case is built on some extremely wonky ad tech shit, right? Dominance across ad markets and placement of results in mobile search. I just look at the Google case. I'm like, this is complicated and weird. It doesn't look like it's solving a problem people have right now, except for some conservatives think Google is biased against them. And the remedy is super unclear as well. The remedy is some set of controls or like,

we're going to prevent search from working in this way. And that just seems really hard. And it seems like not a political winner. The way that Facebook is bad, it's ruining our lives. The narrative about conservative bias is 10 times stronger for Facebook than

Google and the remedy is ultra easy to understand. We're going to make Instagram go over there. And that to me just seems like a much tighter package for any politician to go make hay on over and over. We saw it yesterday. Bernie Sanders, AOC, Elizabeth.

They're like, yep, here's the thing I've always wanted. Whereas with the Google case, they're like, it's true. Google has has become quite powerful. Yeah, I mean, I think it is a fair point. Like, where I definitely agree with you is that, like, people's just raw dislike of Facebook is incredibly powerful. And it is shared deeply by a weirdly bipartisan group of lawmakers during a very polarized time.

I guess I'm counting on some of that to peter out a little bit. But I could be totally wrong. You know, I mean, I'm wrong about a lot of stuff. But for whatever reason, you know. Subscribe to platformer. It's $100. Yeah, exactly. So to come find out what I'm wrong about, it'll be a joyous journey together.

You know, maybe what my doubt here reflects is just what a huge move this would be, right? Like, there would be very few precedents in American business history that we could point to that would make us believe that this would happen. But, you know, again, look around us, right? Like, unprecedented appears on the front page of the New York Times every day in regard to something that happened. You know, so maybe we are on our way there. I mean, I want to point out that there is still a broadly favorable opinion of Facebook. Like, we did our tech survey earlier this year. Facebook is definitely near the bottom of the pack, but it's still 70% of the respondents

have a favorable impression. Right. I think it's Twitter is the lowest one, right? Twitter is the lowest one. 61%. We should break up Twitter. Well, but you guys have to do the survey again now that they've released fleets. Talk about competition.

Zucks squaking in his boots. Russell, one thing I want to ask you about it, it's something mechanic. Kelly was talking to us about yesterday. When Cambridge Analytica happened, there was some pressure on the FTC to go take some action and do something to Facebook. And they ended up with a fine that frankly was somewhat embarrassing in how small it was compared to Facebook's revenue. What is the dynamic there, right? Is it just that the political calculus has changed? And now you can go after Facebook in a way that posts the Trump election going after Cambridge channel. Like that seemed in a different political valence than this current moment.

Yeah. Well, and I mean, I think to the FTC's credit, like it was $5 billion is a lot of money. It was the largest fine that they had that sort of ever levied against a tech company and one of the largest fines ever. And I think they thought that it would be seen as more than a slap on the wrist. And it just wasn't. And so I think there were sort of two political lessons from it. One, you know, if we get to the end of this and it's just a fine, it does not matter. or what the dollar amount is, that is a loss for the antitrust crew. And I think everyone is 100% on that page now. And that changes the calculus a lot. The other thing is, I think for the past, I mean, since, for the past 30 years, basically, if you're a center-right sort of FTC figure, you're worried about getting accused of being anti-business, right? That you're like, cracking down in an unfair way in your pro-regulation and sort of, you know, the standard kind of deregulatory argument. And I think the muscle memory of that made people think that it would work the same way with Facebook. And it just hasn't. Like, no one is saying that about this FTC effort,

even though they are going after one of the biggest companies in the world and saying, like, you have to just be three different companies now. Like, no one's saying this is big government at work. like we should let the market handle it. That is just not an argument in the discourse right now. Like, I think that was a lesson that the FTC had to learn. And I think what we see is that now they learned it. Well, Facebook is saying that. I just want to point out Facebook's argument is every business center in America

will no longer succeed, right? Because the price of success is revisionist history and you're going to come undo our success from eight years ago. The question is whether that's been taken up. And Mitt Romney is up at night sweating bullets. because he's like maybe Facebook's right. He's the last pro-business conservative. Everyone else is just like, no, they're biased against us.

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That's clod. dot AI slash vergecast and check out Claude Pro, which includes access to all the features mentioned in today's episode. Claude.a.ai slash vergecast. I can't have all three of you on without talking about 230,

which I've been instructed by our producers to always explain what it is. 230 is a lot that says internet platforms are not liable for what their users publish. It is very simple. You can just go read it yourself. Please, God, just go read it yourself. I implore you.

There's a lot of noise about 230 in the world right now. There's a defense authorization act that Trump is insistent, includes a repeal of 230, or he's going to veto it. It appears that Congress is going to pass it with veto-proof majorities. It's a big deal. At the same time, Eddie, I think I mentioned this every time you're on, Joe Biden's stated position on 230 is we should repeal it. And he actually said it again last week in an interview.

How does that play into these actions against Facebook? because the conservative bias argument really ladders into, we're going to take two 30 away from you unless you change your moderation system into the way that we want it to. It's not really about taking 230 away. But if you think that the game is to punish Facebook or it's too big, it's hard to see how you would both revile, you would take 230 away because Facebook is too powerful and you would go break them up. I don't, I don't quite see how those connect. But, Adi, I'm curious if you have a point of view. I mean, Biden's argument is interesting because it's basically the, opposite of Trump's, which is the problem with 230 is that it means Facebook doesn't have an

incentive to moderate. And that actually feels like it plays in kind of okay. Like one of his tech advisors wrote this piece earlier this week that was Section 230 harms our kids because it means these giant platforms are allowing horrible stuff. I mean, there were a lot of problems with it. But if the argument is Section 230 lets Facebook do bad things and also they're powerful and they're doing bad things because of that. Those two things don't necessarily feel like they're in conflict. It's we need to take 2.30 away from Facebook so that platforms will have an incentive to not let our kids see terrible things online.

And also Facebook's too big and we should break them up because they're also hurting our kids through dark patterns or advertising or whatever. Casey, what do you think? I mean, the two issues have run in parallel. If I had to give you the two big tech policy issues of the year, it's moderation and it's scale and size and competition antitrust. And it seems like there's a convergence right inside of Facebook. Yeah. Charlie Worsell is a really good piece Thursday in the New York Times about the Biden

administration's relationship with Facebook during the campaign. And this is a time when you would have assumed, like maybe it would have gotten a little better because they were just talking all the time. And instead it seems it just got much worse. And a lot of his top staffers just became convinced that Facebook was so tied to this posture of neutrality that it was always going to have a disproportionate advantage for Republicans who are going to use it to spread misinformation and, you know, various awful things. And so, you know, on one hand, it isn't as if we've gotten a real policy proposal for, from Joe Biden on how to

build a better internet, right? Like most of what he has said is just repeal it, you know, but on the other hand, do I think it will be a priority for him? Well, it sort of seems like it will be, right? Like there's there is a political desire to see this happen. I think on both sides. You know, I guess the question is whether you can find any common ground with Republicans. I just wonder if you break up the companies and you have multiple social platforms and they have different moderation standards. Doesn't that solve your 230 problem, right? That you're mad at how they moderate because you could just leave and go to another one that is more to your liking. It solves the conservative version of it, which is these companies are censoring us. It doesn't

solve the liberal version of it, which is these companies are allowing bad actors to put up horrible misinformation or to, again, I keep coming back to this op-ed about 230 because it was so, so bad. It was like, the problem with this is that YouTube allows videos of Peppa Pig with knives. And like, I can't convey how bizarre it was. It's like suggesting that you should be able to sue YouTube because it has child inappropriate videos. But that aside, the argument is more that there are these shadowy networks of people. who are trading horrible stuff and letting your kids see horrible stuff.

And that those things, they're not quite tied to like the size of a platform. Like a lot of the 230 arguments that come from the left are based on really small sites, like revenge porn sites. So I think it's much less of an issue. I do think there is, this is a place we sort of see a common, like an overlap from the antitrust case and the 230 case where like, so you were talking about the conservative of case against 230. But I think, I don't think having different platforms really solves it. Like, you can't just go to parlor and say, it's fine now because I'm on parlor, because what you immediately

see is parlor's a much smaller audience. And so the fact that you've had to leave Facebook and go to parlor means fewer people are hearing your ideas. Like, it's just, it's just straightforwardly true. And this goes back to what we see in the antitrust cases, which is that they say, look, anyone who's offering a directly competitive service to Facebook. Facebook doesn't let them have this API access. It can't spread as well through the platform. And then eventually it can't, you know, gain users and it dies. And so, you know, if I'm out here trying to, you know, share my peppa pig knife like artwork, you know, suddenly having, if I have to go to some weird forum and everyone is literally, like literally everyone in the world is on Facebook because that's where human beings,

go now. Like, I don't know. There is something weird about it. I don't know of making the, like having the government mandate standards or doing it through whatever weird process we're using to change 230 makes it better. But there is like a real algorithmic speech control issue kind of at the heart of it. And there's something that none of these platforms have really tried, which is just giving the users more control. Right. Like increase, this is the thing that I want to see people try is like let let me decide if I want to see politics in my feed if I want to see nudity in my feed if I want to see curse words you know maybe I even want to see hate speech in my feed give it all to me no that is what parlor you're just you're no there's a difference between

not moderating at all and allowing me to choose what I want from a platform yeah and that's you would you would build this kind of goes to APIs and interoperability you would you would allow a variety of clients to flourish those clients would have all kinds of different tools and they would all connect to some central system. Although that's pretty at odds with how people have been pressuring Facebook to moderate, which is the problem is that people are seeking out anti-vax groups or they're seeking out Q&on groups. And the thing we have to do is get those things off the platform altogether. Yeah, I think, I do think there's just a real, I can connect to the thing that we talk about all the time, which hilariously in this context is much more straightforward, which is net neutrality,

which either we're going to tell the ISPs exactly what to do. We're going to regulate them tightly and say, this is how you treat the bits, or we're going to find it a way to make much more broadband competition happen so that people can leave. And as soon as there's a little competition, all the ISPs do the right thing. We just see that pattern over and over again.

I think it's a little trickier with free speech on social platforms with network effects. But I just come back to that framework all the time of if we add more competition into the system, isn't it natural that all the people who work at Instagram at an independent Instagram will say, well, we're not going to be, make the same mistakes twice. We're going to build a user-facing moderation tool or we're going

to build client access that allows third parties to build kid-friendly Instagram. So we don't have to do it. And it's also not our responsibility. I have no idea, but is like a hypothetical that is much more interesting to me than Ted Cruz writing Facebook's content moderation policies. Okay. Last question. Casey, what happens next? Well, there, some of us were asking yesterday, is Facebook going to try to file a motion to dismiss this case? And that is apparently still being discussed. You know, as we're recording this, the suit has been live for, you know, barely 24 hours. So I think Facebook is still kind of considering its options.

But they've also laid out their case. So, you know, there has already been some like discovery that has happened. And I imagine this will now move into a secondary phase. You know, when I talk to the Google folks about like what, what they were expecting from their antitrust lawsuit. They sort of said, it'll take like maybe like 12, 12, 18 months to play out. And I'm expecting it'll be at least that long here.

Well, it's going to be a fun year. A fun year to subscribe to platformer. Cool URL. No, pitch your newsletter. It's very good. No, I write four times a week about big tech and democracy, these very issues. You can find it at platformer. news. One issue each week is free. And you can also find that issue on my my second favorite website.

I mean, frankly, they're co-equal favorite websites at this point because they're both a part of my soul. And that is the verge.com. Great. Casey is at Casey Newton on Twitter. Addy is at the Dexterarchy. Russell is at Russell Brandem. I'm at Reckless. We love hearing from you. Thank you to three of you for joining. I feel like we're going to gather this panel several times over the next 12 to 18 months to talk about this case and the Google case. Like I said, there's another episode of the Vergecast. I'm looking at our Zoom right now. Chris and Dieter are logging on right now.

We're going to do another episode and talk about some of the hardware and tech news that happened this week. So if you want, look in your podcast feed and listen to that. Other than that, we'll see you next week. Rock and roll.