Allowing Facebook to mint its own coin, the Libra, would turn it into the greatest anti-competitive trust case in history. It would make the early 20th century Morgans or Rockefellers seem downright competitive.
Even before it unveiled its vision for a global cryptocurrency this month, Facebook was already a near-monopoly
in social media, and part of a duopoly in its main markets. Together
with Google, it controls 82% of the digital advertising market.
In the past, Facebook has purchased
any company that threatened it, e.g. Instagram and WhatsApp. And, when
it spots a company that won’t sell itself or would be difficult to
purchase, it uses the “embrace, enhance and extinguish” technique.
Facebook saw Snap Inc. (maker of
Snapchat) contesting a small part of its franchise, so it embraced
Snap’s best features and integrated them into its app. Now, Facebook is
hoping to extinguish Snap as a competitor. Compare the stock performance
of Snap and Facebook, and you will probably place your bet on
Facebook.
But it is not simply Facebook’s business practices that are of concern.
Neither Facebook nor Google charges
for their consumer products, obscuring the fact that all-encompassing
consumer tracking is their real product. In many cases, their data is
better than what the KGB or CIA could have gathered 20 years ago. And
their data is certainly a lot cheaper, since it is voluntarily provided
and easily accessible.
We would not want our government agencies to have this sort of power, nor should we want it to be in the hands of corporations.
Facebook and Google have already
shown their political muscle. With their duopoly on digital marketing
advertising, these companies have transformed the nature of news. Only a
few news sites, such as The Wall Street Journal and The New York Times, can resist their gravitational pull and still attract direct advertisers as well as subscribers.
Most other publications must use
Google ads, which provide far less revenue to the outlet, slice and dice
their readership, and force newspapers to write clickbait. Ads to
readers are so well-placed because of the mountain of information that
can be inputted into their algorithms. The same holds true for news
content viewed on Facebook.
Now, with the Libra project, Facebook
wants to exponentially increase its monopolistic power by accessing
unparalleled information about our consumer purchasing habits. If
allowed to proceed with Libra, a company that knows your every mood and
virtually controls the news you see will also have access to the deepest
insights into your spending patterns.
Privacy threat
Of course, Facebook will speak
piously about privacy controls and its concern for the consumer, yet it
will still figure out a way to sell the data or others who buy the data
will figure it out for them.
Furthermore, with the richness of the
social media data Facebook consistently garners, even anonymized data
can be recalibrated to distill specific individual-related information
and preferences. Facebook, along with its other monopolist rent-seeking
cohorts, such as eBay, Uber and Mastercard, all say they won’t do that.
Quite frankly, there is zero reason
to believe such promises. Their culture is based strictly on brand
concerns and access to personal data. Additionally, hacks of social media are now so common that we are inured to them.
Consumers can have the benefit of a
digital payment mechanism without allowing Facebook to gain more power.
In the financial services sector, my institution, Signature Bank,
was the first to introduce a 24/7 blockchain-enabled payment system. As
one would expect, others, such as JPMorgan, are trying to follow suit
and will no doubt be competitors someday.
Banks and financial institutions are
limited in their access to, and transmission of, information, and for
good reason. If Facebook, on the other hand, establishes Libra, no other
competitor will have equal access to its data, and therefore, a chance
at the consumer payment market.
In this way, Libra is in keeping with Facebook’s monopolistic business style.
Further, the information monopoly
Facebook would possess will be similar to what the Chinese government
possesses but needs the Great Firewall to execute. Monopolistic forces
will produce the same result through different means.
Call to action
Action needs to be taken quickly to
stop Libra and break up Big Tech, not only for the welfare of consumers
but for the good of the nation.
The first step is to force Facebook to divest or spin off Instagram, WhatsApp, Instagram and Chainspace, the blockchain startup it acqui-hired early this year.
Facebook also must be mandated to
offer a parallel, ad-free, “no collection of information” site supported
by fee-based subscriptions. Over time, this would provide some
transparency as to the value of the consumer information currently being
gifted to Facebook.
Google should be forced to divest or
spin off YouTube, Double Click and other advertising entities, cloud
services and Android. Amazon similarly needs a radical breakup as it too
poses systemic threats to a transparent market. (Alexa is a prime
example of the private data Amazon gathers on users’ lifestyle and
personal habits.)
The breakup of these behemoths cannot
wait until after the 2020 election. Such action must be taken on a
bipartisan basis as soon as possible.
Even once stripped down, Facebook should remain separated from commerce due to privacy concerns. Congress, which has scheduled hearings on Libra for next month, is right to intervene.
Editor’s note: Have a reaction to the Facebook news? Email news@coindesk.com to pitch your opinion.
Standard Oil depicted as an Octopus in a 1904 political cartoon, image via Wikimedia Commons.
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