The Morning Dispatch: What’s Next for Facebook

Happy Thursday! We are somehow already in the seventh month of 2021. How is this possible?

Quick Hits: Today’s Top Stories

• The House of Representatives voted almost entirely along party lines to form a select committee to investigate the January 6 riots at the U.S. Capitol. Two Republicans—Reps. Liz Cheney and Adam Kinzinger—voted in favor.

• The NCAA on Wednesday announced the reversal of its longstanding policy preventing student athletes from profiting off their names, images, and likenesses. The new rules go into effect today.

• The New York Times reports that a grand jury in Manhattan has indicted the Trump Organization and its chief financial officer in connection to a tax investigation. The indictment is expected to be unsealed later today.

• The official death toll in the Surfside, Florida, condominium collapse had risen to 18 as of Wednesday evening, and approximately 145 people remain unaccounted for as the rescue mission continues into its seventh day.

• The Pennsylvania Supreme Court on Tuesday overturned Bill Cosby’s 2018 indecent assault conviction on the grounds that prosecutors had violated his rights against self-incrimination. The decision allowed the comedian to walk free after serving three years of his three-to-10-year sentence for drugging and assaulting Andrea Constand in 2004. A total of 60 women have come forward with similar allegations.

• Donald Rumsfeld, secretary of defense under former presidents Gerald Ford and George W. Bush, died Wednesday at the age of 88.

• Mississippi State beat defending national champion Vanderbilt 9-0 in Game 3 of the 2021 College World Series last night, landing the Bulldogs their first national championship in any team sport. 

• The United States confirmed 12,834 new cases of COVID-19 yesterday per the Johns Hopkins University COVID-19 Dashboard, with 2.8 percent of the 462,334 tests reported coming back positive. An additional 262 deaths were attributed to the virus on Wednesday, bringing the pandemic’s American death toll to 604,698. According to the Centers for Disease Control, 11,948 Americans are currently hospitalized with COVID-19. Meanwhile, 1,368,679 COVID-19 vaccine doses were administered yesterday, with 180,674,739 Americans having now received at least one dose.

Facebook Skates Free—For Now 

Bashing Big Tech is in vogue these days across the political spectrum. But proponents of actually reining in the country’s most successful technology companies hit a wall earlier this week when a federal judge dismissed a pair of antitrust lawsuits brought against Facebook late last year by the Federal Trade Commission (FTC) and 46 state attorneys general. 

(Reminder: The Dispatch is a participant in Facebook’s fact-checking program.)

“The FTC has failed to plead enough facts to plausibly establish … that Facebook has monopoly power in the market for Personal Social Networking (PSN) Services,” U.S. District Judge James Boasberg wrote in his opinion, released before a trial in the cases had begun. “PSN 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. In this unusual context, the FTC’s inability to offer any indication of the metric(s) or method(s) it used to calculate Facebook’s market share renders its vague ‘60%-plus’ assertion too speculative and conclusory to go forward.”

Boasberg—nominated to his post by former President Barack Obama in 2010 and confirmed unanimously by the Senate the following year—granted the FTC 30 days to file an amended lawsuit, but dismissed the state AGs’ case entirely because it pertained to the acquisitions of Instagram and WhatsApp that were made nearly a decade ago.

Facebook—whose market cap surged past $1 trillion for the first time following the news—took a victory lap, claiming the decision showcased the “defects” of the FTC’s argument against the company. “We compete fairly every day to earn people’s time and attention and will continue to deliver great products for the people and businesses that use our services,” its statement read.

The ruling was not unexpected given American antitrust law’s adherence to the consumer welfare standard, which promotes a more hands-off approach to competition policy as long as a company’s market power does not harm consumers in the form of higher prices or lower output. Because Facebook’s main product is free (though critics often argue you “pay” for it with your personal data), proving consumers are harmed by its dominant market share in “personal social networking”—if you can even prove it has a dominant market share—is exceedingly difficult. 

Herbert Hovenkamp—a professor at the University of Pennsylvania’s Carey Law School and one of the country’s preeminent antitrust law experts—told The Dispatch the FTC’s original complaint was “pretty weak” when it came to defining Facebook’s market power. “Nobody really knows what a social networking service ought to look like, and the ones that are out there are all very different from each other,” he said. “So market definition is a difficult problem.”

“What the judge actually ruled makes perfect sense, given the weight of legal precedent,” added Paul Matzko, a Cato Institute scholar focusing on technology and innovation. “The consumer welfare standard is not some novel invention pushed through by Mark Zuckerberg cackling in a smoke-filled room somewhere. This has been the standard for over half a century now.”

As we noted earlier this month, however, a growing, bipartisan group of lawmakers is working to change that standard—and this week’s ruling likely strengthened its resolve. “This decision underscores the dire need to modernize our antitrust laws to address anticompetitive mergers and abusive conduct in the digital economy,” Democratic Reps. David Cicilline and Jerrold Nadler wrote, touting the “historic package of bipartisan legislation” that won approval in the Judiciary Committee last week.

“Today’s development in the FTC’s case against Facebook shows that antitrust reform is urgently needed,” added GOP Rep. Ken Buck,  a cosponsor of the aforementioned legislation. “Congress needs to provide additional tools and resources to our antitrust enforcers to go after Big Tech companies engaging in anti-competitive conduct.”

Hovenkamp sees the suite of proposed changes as a mixed bag, arguing beefed up merger and acquisition assessment will result in better outcomes, but that legislation preventing platform operators from participating in the platform would be a “disaster.”

“These are standards that we don’t impose on anybody else; I think they misunderstand how markets work,” he told The Dispatch. “If you read that one bill literally, it would require, if Amazon wants to sell some common product, it’s going to have to sell everybody else’s product as well, or else get out of that market altogether. … Amazon will not be able to comply with that statute except [by] exiting from these markets.”

The lawmakers, however, are fairly out of step with public opinion. The popularity of social media giants like Facebook and Twitter has tanked, but other Big Tech companies remain broadly popular with the American public. Apple, Amazon, Microsoft, Alphabet (Google), and Netflix all appeared among the Top 10 on Fortune’s Most Admired Companies list this year, and an April 2021 Axios Harris Poll found Amazon to have the 10th-best brand reputation in the country, followed by Apple at No. 16. (Twitter and Facebook came in at No. 93 and No. 98, respectively.)

Facebook’s torpedoing popularity in the United States—particularly among younger people—is another reason aggressive antitrust action is misguided, Matzko argued. “Going after Facebook in 2021 is a bit like worrying about MySpace in 2008,” he said. “You can make the argument for, if you change your political priors and just assume that because a company is big it’s bad for consumers ipso facto—but even with that prior, that only makes sense like four years ago, five years ago, not now. Facebook’s on the down slope.”

Ultimately, lawmakers of both political parties have decided—for different reasons—that specific Big Tech companies need to be taken down a peg and are crafting legislation to do so. Hovenkamp said it’s an approach that will cause “a lot of harm.” 

“What they do here is they don’t single out individuals, but they define the market criteria in such a way that the big platforms are about the only ones who qualify,” he told The Dispatch. “I think it’s going to make the economy less competitive—which is not to say there aren’t some bad things that the big platforms are doing, there are. But this is just way too aggressive an approach.”

Republicans Get the Partisan January 6 Commission They Opted For

When Senate Republicans—at the urging of Minority Leader Mitch McConnell—moved several weeks ago to filibuster the creation of a bipartisan, independent commission to investigate the events surrounding January 6, they did not doom an investigation into that day—they ensured that when an investigation did occur, it would not be bipartisan or independent.

Nearly one month after the bill establishing that commission failed to advance, the House on Wednesday voted 222-190 to create its own select committee tasked with “investigat[ing] and report[ing] upon the facts, circumstances, and causes relating to the January 6, 2021, domestic terrorist attack upon the United States Capitol Complex.” Although 10 House Republicans voted to impeach former President Donald Trump in January and 35 voted to establish the commission back in May, just two—Reps. Liz Cheney and Adam Kinzinger—signed onto Pelosi’s select committee yesterday.

“I’m heartbroken that we don’t have the bipartisan commission,” Pelosi said in a floor speech. “We yielded on every point: The [numbers], the process for subpoenas, the timing—and further yielded on the Senate side on timing again, as well as clarification on staffing. … Hopefully, [a bipartisan commission] could still happen, but in the meantime, we will have a select committee.”

Pelosi’s first stab at creating a  9/11-style commission to investigate January 6 was overtly partisan, a fact that made Republicans who favored a commission skeptical of her motivations and Republicans inclined to oppose  it even more determined to block those efforts. But the final bill that the House voted on was not a partisan proposal. The top two members on the House Homeland Security Committee—Rep. Bennie Thompson, a Democrat, and Rep. John Katko, a Republican—had hammered out a proposal that was truly bipartisan. From a TMD last month:

“[It] would feature 10 members: Five appointed by Pelosi and Senate Majority Leader Chuck Schumer, and five appointed by McConnell and House Minority Leader Kevin McCarthy. The commission would have subpoena powers to compel witness testimony, but those powers could only be exerted when the commission’s Democratic chair and Republican vice chair agreed, or if a majority of the panel (again requiring at least one Republican to side with Democrats, or vice versa) voted for it. To avoid investigations dragging into election season, the commission would be required by law to submit its final report to Congress and President Biden by the end of this year.

The House’s new select committee abides by a whole different set of rules. Pelosi will appoint 13 members to the committee (five “in consultation” with Minority Leader Kevin McCarthy), and designate one as the chair, who is authorized to subpoena witnesses without any Republican input. The select committee also has no end date, meaning it could (and likely will) drag into election season.

Katko—who voted to impeach Trump back in January—couldn’t get on board. “I led the charge to create a January 6th commission that would be external, independent, bipartisan, and equitable in membership and subpoena power. The select committee proposed by Speaker Pelosi is literally the exact opposite of that,” he said yesterday. “It would be a turbo-charged partisan exercise, not an honest fact-finding body that the American people and Capitol Police deserve.”

Rep. Anthony Gonzalez—who also voted for impeachment—opposed the select committee as well. “I was in favor of the bipartisan, independent commission that wouldn’t be run by politicians,” he told The Dispatch yesterday. “I am not going to support the Pelosi bill. Just candidly, I don’t trust her—at all—to do anything. Especially get to the bottom of something in a non-partisan way.”

“Frankly the failure, in my opinion, is with Senate Republicans for not supporting the independent, bipartisan commission,” Gonzalez continued. “The choice—which people didn’t seem to get—wasn’t between a commission or no commission. The choice was between a bipartisan, independent commission—which is the one I supported—or a Pelosi commission.”

Cheney and Kinzinger were the only Republicans to come to a different conclusion. “It is right to be wary of an overtly partisan inquiry,” Cheney said. “But Congress is obligated to conduct a full investigation of the most serious attack on our Capitol since 1814. Our nation, and the families of the brave law enforcement officers who were injured defending us or died following the attack, deserve answers. I believe this select committee is our only remaining option. I will vote to support it.”

Pelosi has thus far kept mum on who she will appoint to the committee, other than having an aide leak to reporters that she is considering a Republican as one of her eight choices. McCarthy has been similarly coy in public, simply telling reporters “it seems pretty political to me” when asked if he plans to cooperate at all with the probe. But sources tell The Dispatch that behind the scenes he’s made clear he expects House Republicans to oppose the committee’s efforts and reject any prospective invitations to participate in its work.

Worth Your Time

• Writing in The Week, Damon Linker breaks down a study published by the Survey Center on American Life last week that contained a notable and depressing finding.: The number of Americans who report having no close friends has skyrocketed since 1990, from 3 to 15 percent of men and from 2 to 10 percent of women. Moving so much of our lives online, Linker writes, has changed the way many of us form relationships: “People sharing similar interests, hobbies, quirks, and obsessions can easily find each other online and enjoy a digital facsimile of friendship with others. These virtual communities are more like collective groups of topic-specific pen pals than real-world friendships.” This is bad news for each of us personally, but also for the function of society and politics at large: “A nation of increasingly lonely, friendless citizens given outlets to find collective, communal fulfillment online will be a nation spawning a range of radical political factions, groups, or movements defined by and drawing the bulk of their cohesion from their loathing of other factions, groups, or movements.” 

• The Atlantic’s Tim Alberta is always worth reading, but his latest profile is a particular triumph. It tells the story of Michigan state Sen. Ed McBroom, the rock-ribbed Republican who chairs the state’s Oversight Committee and, who in recent months has spent significant time enthusiastically investigating whether claims of 2020 voter fraud in the state have any validity. His ultimate conclusion—that the allegations in question are demonstrably false, and that those who continue to push them do so for nefarious reasons—have made him a personal target of former President Trump and those who continue to carry water for his claims of election fraud. What comes through most is his dismay: “It’s been very discouraging, and very sad, to have people I know who have supported me, and always said they respected me and found me to be honest, who suddenly don’t trust me because of what some guy told them on the internet.”

Presented Without Comment

Also Presented Without Comment

Toeing the Company Line

• Scott Lincicome’s latest Capitolism(🔒) tackles a policy area that’s suddenly having a bipartisan moment: antitrust enforcement. Scott offers several reasons for why the antitrust train ought to slow down a bit—from the market’s own ability to break down supposed monopolies to the threat of enforcement abuse and state-sanctioned anti-competitive behavior.

• Yesterday’s episode of The Dispatch Podcast breaks down New York City’s election fiasco, Vice President Kamala Harris’ recent visit to the U.S.-Mexico border, the latest on infrastructure negotiations, and recent reporting on Bill Barr and the last days of the Trump administration.

• The NCAA voted Wednesday to allow athletes to profit from their name, image, and likeness. Price explains what that means—and how the patchwork of state laws and interim NCAA policy is bound to create some confusion.

• Sure, we all cringe when a celebrity grovels to appease China, and pretend to be horrified when countries apologize for offending the Chinese Communist Party. Do you know what else we do? We buy Chinese products and invest in Chinese companies. Danielle Pletka lays out how individuals, governments, and allied nations can push back on Chinese aggression.

Let Us Know

The Big Tech/antitrust debates are, in many ways, representative of some of the United States’ biggest political divides. Do you believe the size of today’s top tech companies—Facebook, Google, Apple, Amazon—is a problem? If so, do you believe it’s a problem that the federal government or the market is best equipped to address?

Reporting by Declan Garvey (@declanpgarvey), Andrew Egger (@EggerDC), Charlotte Lawson (@charlotteUVA), Ryan Brown (@RyanP_Brown), Harvest Prude (@HarvestPrude), Tripp Grebe (@tripper_grebe), Emma Rogers (@emw_96), Price St. Clair (@PriceStClair1), Jonathan Chew (@JonathanChew19), and Steve Hayes (@stephenfhayes).