In 2012 Facebook bought Instagram for $1 billion, and two years later it acquired WhatsApp for $19 billion. Despite initial mockery for what many perceived to be outlandish amounts for startups with zero revenue, these deals turned out to be some of the most important strategic decisions Facebook ever made. The company prevented future competitors (as well as another tech giant from buying them), gained access to massive amounts of additional user data, and – maybe most importantly – it created fallback solutions in case the original Facebook would lose its appeal to people. The positive psychological effect of this cannot be underestimated, because it allowed for entire different forms of risk taking. Instagram and WhatsApp became Facebook’s psychological “safety net”.
WhatsApp and Instagram play a critical role in how the company Facebook got into today’s dominant position. Through at least one (but often two or even all) of these services, the company is entrenched in the daily life of billions of people. At times Facebook already appears too big to fail, considering that the vast number of cases of serious missteps and data scandals that the company has been involved in over the past years haven’t diminished the company’s societal role at all, nor significantly impacted its financial performance. Many people simply feel that they cannot leave Facebook (or WhatsApp, or Instagram).
Today even some market-friendly observers acknowledge that the competition authorities shouldn’t have given green light for the acquisitions of Instagram and WhatsApp. But at their time, the evaluation of whether an acquisition would threaten competition was made solely based on the financial numbers. And since WhatsApp and Instagram didn’t make any money, the regulators didn’t see any major problems.
Now everybody is wiser, and there is widespread understanding that in today’s digital economy, the perspective of antitrust has to change and to adjust to new circumstances and phenomenon.
Facebook’s announced launch of Libra, a “simple global currency and financial infrastructure that can empower billions of people”, is in an important way another WhatsApp moment: It is again Facebook making a move without precedent which doesn’t show any measurable signs of potential anti-competitiveness right now, but which risks massively increasing the company’s entrenchment in the future, making it invincible possibly for decades to come.
Libra is not an acquisition but a joint financial project with about two dozen other tech & payment firms, venture capitalists and some non-profits (presumably to make it look friendlier), so the tools regulators have at their disposal and the entities that could be involved are different ones. Also, I am not a regulation and antitrust expert. My argument therefore is not a legal one. It’s a reminder of how the regulators twice missed putting brakes on Facebook’s expansion when they should have done it, and how Libra likely can turn out to be another watershed moment for Facebook, with far reaching-consequences if not prevented.
My stance is straight forward: Facebook should not be allowed to run, lead or play a significant role in any kind of undertaking which involves the creation of an alternative currency which extends beyond one of its own services, or any other undertaking which will, in the long run, make it harder for consumers to choose alternatives to critical services provided by Facebook or its subsidiaries. And looking at the level of ambition of Libra as well as Facebook’s massive reach, nobody should believe that the goal would be anything else than total domination of the global payments market.
Facebook is already very powerful, featuring multiple layers of lock-in effects. Therefore, for this company, an extreme level of regulatory scrutiny is justified. Because there is such a thing as too big, too powerful. Particularly in the age of algorithms and surveillance capitalism. A lot is at stake. Too much to take this lightly or to let oneself be lured by the appeal of “crypto”.
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