Mark Zuckerberg’s mentor handed the feds an argument that could be used to break up Facebook

January 22, 2019
Marcus Baram

Over the weekend, The Social Network screenwriter Aaron Sorkin teased that he’d like to direct a sequel to his much-praised movie about the origins of Facebook. Well, given all that has happened in the last nine years, it wouldn’t be too hard to find material—including a new twist with plenty of Shakespearean drama.

One of Mark Zuckerberg’s mentors and early investors in Facebook, Roger McNamee, has become a fierce critic of the company and unloads both barrels in his upcoming book, Zucked. He describes his embarrassment and shame at seeing a company he once believed in become an out-of-control behemoth and how Zuckerberg and Facebook COO Sheryl Sandberg ignored his repeated warnings that the platform could be used to spread misinformation and foment hatred around the world.

McNamee, a cofounder of venture capital firm Elevation Partners, also says that he recently went to the Federal Trade Commission and the Justice Department’s Antitrust Division to discuss his hypothesis for how to test whether Facebook or other internet companies are in violation of federal antitrust law. His theory, in a nutshell:

The hypothesis that came to mind was this: Consumers are giving up more value in data than they receive in services. This appears to be true both in the moment and over time, even if consumers are neither aware of it nor troubled by it. If the hypothesis is valid, the price of internet platform services to users has been rising for more than a decade. In the context of anticompetitive behavior against suppliers, advertisers, and competitors, the Chicago School would find that situation to be in violation of its antitrust philosophy. Does it matter that users are not complaining about the “price” of their data? Possibly, but not necessarily. Antitrust is a tool of economic policy designed to balance the interests of multiple constituencies, of which users are one. In the Microsoft antitrust case, for example, the Department of Justice acted to limit anticompetitive behavior, without any pressure from users.

Officials at both agencies “expressed an openness to the hypothesis and encouraged me to develop it further,” McNamee writes. “They asked that I engage with economists to create a formula that could be tested with data.” And indeed, the FTC seems to be serious in their scrutiny of Facebook—last week, it was reported that the agency is considering a “record-setting” fine against the company for failing to protect user data.

McNamee says that he’s met with seven professors (five economists, a political scientist, and a law professor) who have all expressed interest in his hypothesis. “At this writing, the hard work has begun to create a model that represents the value transfer in the markets created by internet platforms, where one side is a barter transaction with no currency.” Similar theories have been proposed by Yale’s Nathan Newman, Columbia law professor Tim Wu, and Columbia Law School academic fellow Lina Khan.

McNamee did not return calls for comment.

Stay tuned . . .