Judge Derails the Antitrust Train

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A judge finally pressed the pro-regulation crowd on the weakest part of their assault on Big Tech: What’s your argument that these companies are even monopolies?

The question is enough to derail the antitrust train, maybe permanently for some targets. But it also might add urgency to new laws Congress is considering that would limit large Big Tech’s power over smaller rivals and partners.

First, the news: A federal judge dismissed antitrust lawsuits against Facebook filed by the U.S. government and 46 states and territories, saying they failed to make a coherent case that Facebook even has monopoly power over a clearly defined market:

“Such an unsupported assertion might (barely) suffice in a Section 2 case involving a more traditional goods market, in which the Court could reasonably infer that market share was measured by revenue, units sold, or some other typical metric. But this case involves no ordinary or intuitive market. Rather, [Personal Social Networking] services are free to use, and the exact metes and bounds of what even constitutes a PSN service — i.e., which features of a company’s mobile app or website are included in that definition and which are excluded — are hardly crystal clear.”

This is like an F on the first draft of a college English paper, and the good news for the government is they can revise the lawsuit and try again. The bad news might be that the paper’s entire underlying thesis is flawed, requiring rewrite not mere revision.

In my view, Facebook doesn’t have monopoly power in “Personal Social Networking services” at all. PSN isn’t really much of a market, partly because it’s free. If anything, Facebook has monopoly power in digital ads targeting real identities online. Google’s and Amazon’s ads target content and intent. Facebook’s uniquely target people, based on not only what they’re doing, but also who they know and who they are. Anyway, if I were trying to make an antitrust case against Facebook, that’s probably how I’d do it.

This also foreshadows problems with other antitrust arguments.

How do you argue Amazon has monopoly power in e-commerce when Walmart, Best Buy, Albertsons, Home Depot and Shopify are doing just fine? Or when Nike just turned in Q4 earnings with digital sales up 41%, a year and a half after cutting direct ties with Amazon?

How do you argue Apple has monopoly power in smartphones when it sells fewer of them than Samsung, and has a smaller mobile OS installed base than Android? How do you argue Apple has monopoly power in app stores when the Google Play Store does more downloads? (The latest legal approach is to claim Apple’s iPhone is a market unto itself — as if it’s impossible, not merely annoying, to switch to an Android phone. I have a feeling this judge would give that argument even more side-eye than the Facebook one.)

The government’s best hope, then, might be to make new law. There are bills in Congress now that would get around the whole monopoly issue by slapping competition limits on companies because they’re big, without having to prove they’re dominant.

In the end, those bills might not pass legal or free-market muster, either. But on Capitol Hill these days, do details like that really matter?

Coming up today on CNBC’s TechCheck, 11 a.m. ET / 8 a.m. PT …

Neeva Cofounder Sridhar Ramaswamy, cybersecurity expert Chris Krebs

While you were sleeping …

A Seoul court’s decision last week that effectively confirmed Netflix‘s obligation to pay network usage fees to mobile carriers suggests that the global video streaming giant might have to change its business strategy in South Korea, according to industry sources Monday. Korea Herald

Language learning edtech startup Duolingo filed an S-1 to go public. Growth doubled in 2020. Last valuation was $2.4 billion. About three years ago I interviewed cofounder and CEO Luis von Ahn for Fortt Knox about how his roots in Guatemala inspired him to create the company:

In the broader world …

U.S. Treasury yields edged higher on Tuesday morning, with investors focused on two key pieces of employment data that are due to be released this week. The yield on the benchmark 10-year Treasury note rose less than a basis point to 1.483% at 7:05 a.m. ET. The yield on the 30-year Treasury bond advanced to 2.099%. Yields move inversely to prices. CNBC

Walmart said Tuesday it will offer a less expensive version of insulin that could better fit into the budgets of millions of Americans who don’t have health insurance or struggle to pay for the lifesaving diabetes drug. CNBC

On the horizon …

6/30: Fortt Knox 1:1 with Signifyd CEO Raj Ramanand, 1:30 p.m. ET

I’m listening to …