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Is Facebook a monopoly the government should break up?

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Chris Hughes, a co-founder of Facebook and co-chairman of the Economic Security Project, has recently written an impassioned plea in the New York Times calling for the government to break up Facebook. The piece is well worth reading for the light it sheds on the early days of the social media giant, as well as for the questions it raises regarding privacy and social media use in general, but brings more heat than light in its analysis of Facebook as a monopoly.

Hughes argues that, “For too long, lawmakers have marveled at Facebook’s explosive growth and overlooked their responsibility to ensure that Americans are protected and markets are competitive.” While there are genuine issues of concern with Facebook on privacy  and censorship on social media in general Hughes fails to make the case that Facebook is a monopoly which faces, “…no market-based accountability.” One reason for this is that Hughes gives no definition of monopoly within the piece, perhaps because most conventional definitions such as, “A monopoly is an enterprise that is the only seller of a good or service,” obviously do not apply. The piece itself highlights that there are many social media platforms owned by others which have billions of users such as YouTube, WeChat, TikTok, Reddit, Twitter, LinkedIn, and Snapchat.

His is a more idiosyncratic definition of monopoly, merely a large and successful firm which has a dominant market share,

It is worth half a trillion dollars and commands, by my estimate, more than 80 percent of the world’s social networking revenue. It is a powerful monopoly, eclipsing all its rivals and erasing competition from the social networking category… About 70 percent of American adults use social media, and a vast majority are on Facebook products.

Hughes is right to be concerned about competition as free, competitive, and open markets are essential to a flourishing society, but his argument seems to be that Facebook is a monopoly because it is the sole supplier of the extremely popular social media website… Facebook. Ludwig von Mises, in Human Action, noted this common misuse of the term monopoly way back in 1949,

A monopolist in this sense is an individual or a group of individuals, fully combining for joint action, who has the exclusive control of the supply of a definite commodity. If we define the term monopoly in this way, the domain of monopoly appears very vast. The products of the processing industries are more or less different from one another. Each factory turns out products different from those of the other plants. Each hotel has a monopoly on the sale of its services on the site of its premises. The professional services rendered by a physician or a lawyer are never perfectly equal to those rendered by any other physician or lawyer. Except for certain raw materials, foodstuffs, and other staple goods, monopoly is everywhere on the market.

However, the mere phenomenon of monopoly is without any significance and relevance for the operation of the market and the determination of prices. It does not give the monopolist any advantage in selling his products. Under copyright law every rhymester enjoys a monopoly in the sale of his poetry. But this does not influence the market. It may happen that no price whatever can be realized for his stuff and that his books can only be sold at their waste paper value.

Facebook has a monopoly on social media in the same sense that Toto has a monopoly on songs by holding the exclusive rights to ‘Africa.’

Chris Hughes’ real beef seems to be with the social cooperation under the division of labor itself. He only invokes economics to argue for a social media landscape more in keeping with his own preferences against those of consumers. Having divested himself, at considerable profit, from Facebook he relinquished his ability to shape its future directly and now appeals to government regulators to do so on his behalf. Facebook’s successes and failures, and both are legion, should be judged by its users who should carefully weigh both its competitors in the marketplace and the usefulness of social media itself.

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Dan Hugger Dan Hugger is Librarian and Research Associate at the Acton Institute.

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