The Ridiculous Instagram Case
As I noted last week, virtually everywhere we go and everything we do is subject to surveillance by government and private citizens. And the person they are looking at is actually us, not some random number linked to our computers.
Previously in this series: “The Coming Missteps on Big Tech: Antitrust Is More Interesting Than You Think, Part XI”
Internet privacy, by contrast, involves businesses following around HTTP cookies or similar data. The businesses — or, rather, computers owned by those businesses — don’t know those numbers are us. They’re just numbers.
Facebook (e.g.) might know that the computer embedded with certain cookies just bought a spatula, and Facebook (or, more likely, a business that buys information from Facebook) might try to sell a whisk to that computer. But it’s not us they know about: not our faces or our cars or our license numbers, who we’re with or what credit card we’re using.
Here, for example, is a cookie (from Wikipedia):
HTTP/1.0 200 OK Set-Cookie: LSID=DQAAAK…Eaem_vYg; Path=/accounts; Expires=Wed, 13 Jan 2021 22:23:01 GMT; Secure; HttpOnly Set-Cookie: HSID=AYQEVn…DKrdst; Domain=.foo.com; Path=/; Expires=Wed, 13 Jan 2021 22:23:01 GMT; HttpOnly Set-Cookie: SSID=Ap4P…GTEq; Domain=foo.com; Path=/; Expires=Wed, 13 Jan 2021 22:23:01 GMT; Secure; HttpOnly
To worry about this is, surely, to concern ourselves with Privacy Lite.
Compare the real privacy concerns we face on the Internet. Almost every week some company notifies us that its systems have been hacked and our names, email addresses, Social Security numbers and passwords are now owned by someone in Romania. Organizations from police departments to universities to hospitals have been subjected to ransomware attacks that have crippled their activities.
Literally as I was writing these words, Colonial Pipeline Co. reported that it had been the subject of a ransomware attack and had had to shut down its 5,500-mile pipeline running from the Gulf Coast refineries to the East Coast. That line carries 45 percent of all the gas and diesel fuel used on the East Coast, and the US Department of Transportation had to adopt emergency measures to try to keep the fuel flowing.
It’s true that cookies can be abused, but the actual instances of abuse are very rare. Sure, it’s spooky to know that when you buy or even browse on your computer another computer knows about it and can try to sell you stuff. But, folks, this is truly a First World problem.
The fact is that far too many complaints about Internet privacy seem wildly uninformed. The U.S. courts have, over many decades, created a thoughtful approach that balances an individual’s desire for privacy against society’s needs, but Internet privacy advocates seem not to have heard of any of this. That rule inquires whether, wherever an individual is and whatever he or she is doing, that individual had a “reasonable expectation of privacy.” (Mr. Justice Harlan’s words, concurring, in Katz v. US (1967)).
The courts have held that when we are outside driving around, or walking around inside Home Depot, we have no such reasonable expectation. Even our garbage isn’t private, courts have held. Privacy enthusiasts might wish it were otherwise, but it isn’t.
When we are virtually driving around or virtually shopping at Home Depot, what possible argument can we have that our privacy expectations should be higher? Big Tech, after all, isn’t watching us; it’s watching that cookie shown above.
Buying up the competition
Since big corporations were invented, they have been buying up smaller corporations. In fact, the make-or-buy decision is a core competence for C-suite executives. Yet, when a Big Tech firm buys a smaller firm, neo-Brandeisians go nuts.
The current cause célèbre is Facebook’s acquisition of Instagram (and, to a lesser extent, WhatsApp). Late last year the FTC and 46 publicity-seeking state attorneys general sued Facebook to force it to spin off the acquired companies. We’ll focus here just on the Instagram acquisition to keep it simple.
Notwithstanding that everyone and his little sister is piling into this litigation, there is so much wrong with it one hardly knows where to begin. Antitrust enforcement has always led a checkered life, but this might be a new low. Let’s count the ways this lawsuit goes bad:
- Facebook acquired Instagram in 2012. You don’t wait a decade, while the acquirer has spent billions of dollars growing its acquisition into a formidable company, to decide that you don’t like the acquisition. Whether or not there is a statute of limitations operating here, latches should certainly win the day.
- When Facebook announced the acquisition of Instagram, back during the Obama Administration, the FTC approved it. I’m not saying that a brain-dead bureaucracy can’t change its “mind,” but waiting ten years to do so isn’t likely to impress even the dumbest judge on the federal bench.
- It’s easy to look at Instagram now and see it as an alpha competitor in its space. But it wasn’t that way back in 2012. Back then, Instagram was a clunky, unappealing platform managed by a company that was bleeding cash and that hadall of 13 employees. Instagram desperately needed to be bought by a bigger company, and if Facebook hadn’t bought it, some other Big Tech company would have.
- The entire lawsuit seems to be based on an email Mark Zuckerberg once sent noting that if certain new startups “grow to a large scale they could be very disruptive to us.” Hello, what sort of CEO would Zuckerberg be if he wasn’t constantly attuned to competitive threats to his enterprise?
More broadly, the complaint about the Instagram acquisition profoundly misapprehends the nature of entrepreneurialism. The talents and skills required to start a promising company in your garage or dorm room are unrecognizably different from the talents and skills required to manage a large, global enterprise — and those talents and skills are almost never found in the same person.
Mark Zuckerberg is an exception, of course, but the founders of Instagram weren’t. If startup companies can’t be acquired when they lose traction and began to sink into the mud, thousands of high-potential businesses will never happen.
Predicting the outcome of any kind of litigation is hazardous at best, but you heard it here first: The FTC and 46 AGs will be laughed out of court. (I know you won’t believe this, but this essay was written one month before a federal judge dismissed these lawsuits out of hand.)