Class 18 Platforms and Networks Spring 2020 Platforms

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Class 18 Platforms and Networks Spring 2020 Platforms Today: Facebook Randal C. Picker James

Class 18 Platforms and Networks Spring 2020 Platforms Today: Facebook Randal C. Picker James Parker Hall Distinguished Service Professor of Law The Law School The University of Chicago Copyright © 2014 -20 Randal C. Picker. All Rights Reserved.

The Focus Today n Key Questions u. How should Facebook be regulated? u. Put

The Focus Today n Key Questions u. How should Facebook be regulated? u. Put the question of content regulation aside (think Sec. 230 and more) and focus on competition issues: What are those issues? Antitrust or common carrier/nondiscrimination reg? What of privacy? u. And how, if at all, should we limit data exchange? September 13, 2021 2

Supply and Demand P Price Theory Basics People maximize subject to constraints u Markets

Supply and Demand P Price Theory Basics People maximize subject to constraints u Markets clear u Full stop u September 13, 2021 Q 3

Apple: Cash (not data) Based (and Lots of It) September 13, 2021 4 Wall

Apple: Cash (not data) Based (and Lots of It) September 13, 2021 4 Wall Street Journal, Aug 3, 2018

Supply and Demand Again P Offline Life u Assumes that prices and quantities are

Supply and Demand Again P Offline Life u Assumes that prices and quantities are welldefined and salient, at least most of the time Online Life What happens if that isn’t true? u How does competition work if there are no (visible) prices? u What does priceless competition look like? u Q September 13, 2021 5

Deceptive Data Collection No Price Transparency FTC authority based on deception (typically, firm says

Deceptive Data Collection No Price Transparency FTC authority based on deception (typically, firm says one thing, does something else) u Quite contingent substitute for missing prices u Consumers could sell data (but moral hazard) u Regulation as the natural response u September 13, 2021 6 US FTC (5 Dec 2013)

Understanding Priceless Competition with Limited Capacity Apps compete on quality (choose the “best” app)

Understanding Priceless Competition with Limited Capacity Apps compete on quality (choose the “best” app) u By assumption, apps don’t compete on extent of data grabbed (not salient to consumer) u Data matters for how it shapes quality u Advertising matters but only for the way it shapes perceived quality u Pure quality competition: no price/quality tradeoffs u Positional competition and an app tournament u September 13, 2021 7

UK Users Share of Time Data Priceless Competition with Limited Capacity Limited number of

UK Users Share of Time Data Priceless Competition with Limited Capacity Limited number of apps/sites capture attention u You see the different business models of the GAFAM in these data u Google/FB attention based (and data based) u Apple (but see services) and Microsoft (but see Linked. In) much less so; Amazon is tricky (see pending EU investigation) u September 13, 2021 UK Digital Competition Expert 8 Panel Report (Mar 2019)

Old Free Media Markets Using Media Market Power Key question: How does a media

Old Free Media Markets Using Media Market Power Key question: How does a media firm with market power as to consumers use that power when content is free? u Show more ads! u Ads degrade the content and that raises the “price” paid by consumers u First U. S. radio ad in 1922 u Media firm with market power as to consumers will show more ads than would appear with competition u September 13, 2021 9 Radio News (Oct 1920)

Targeted Ads and Data The Promise of Data could reduce extent to which consumers

Targeted Ads and Data The Promise of Data could reduce extent to which consumers don’t like ads and boost the value to advertisers. Win win. u E. g. low-quality ad worth $1 to Adv, $-2 to consumer; high-quality ad worth $2 to Adv, $-1 consumer u In competition, cover costs of content with fewer ads and less disutility to consumer u Reality? How should we think about privacy as such? What about creepiness? u September 13, 2021 10

Facemash September 13, 2021 11 Harvard Crimson (19 Nov 2003)

Facemash September 13, 2021 11 Harvard Crimson (19 Nov 2003)

Facemash September 13, 2021 12 Harvard Crimson (19 Nov 2003)

Facemash September 13, 2021 12 Harvard Crimson (19 Nov 2003)

Facemash September 13, 2021 13 Harvard Crimson (19 Nov 2003)

Facemash September 13, 2021 13 Harvard Crimson (19 Nov 2003)

2005: News Corp My. Space Buy September 13, 2021 14 NYT (18 July 2005)

2005: News Corp My. Space Buy September 13, 2021 14 NYT (18 July 2005)

2004 The. Facebook Privacy Policy September 13, 2021 15 Internet Archive

2004 The. Facebook Privacy Policy September 13, 2021 15 Internet Archive

2004 Thefacebook Privacy Policy September 13, 2021 16 Internet Archive

2004 Thefacebook Privacy Policy September 13, 2021 16 Internet Archive

2004 Thefacebook Privacy Policy September 13, 2021 17 Internet Archive

2004 Thefacebook Privacy Policy September 13, 2021 17 Internet Archive

2004 Thefacebook Privacy Policy September 13, 2021 18 Internet Archive

2004 Thefacebook Privacy Policy September 13, 2021 18 Internet Archive

2007: Facebook as a Platform Managing Interconnection on Networks Key issue regarding competition on

2007: Facebook as a Platform Managing Interconnection on Networks Key issue regarding competition on networks is who controls the terms of interconnection to the network u True of physical networks (e. g. electricity grid) u True of data networks like Facebook (add API, get Cambridge Analytica? ) u Physical network interconnection usually regulated as natural monopoly. Data? u September 13, 2021 19 Facebook Newsroom, 24 May 2007

2011: Sale of My. Space September 13, 2021 20 NYT (29 June 2011)

2011: Sale of My. Space September 13, 2021 20 NYT (29 June 2011)

Facebook IPO September 13, 2021 21 Facebook S 1 (1 Feb 2012)

Facebook IPO September 13, 2021 21 Facebook S 1 (1 Feb 2012)

Facebook IPO: Key Metrics September 13, 2021 22 Facebook S 1 (1 Feb 2012)

Facebook IPO: Key Metrics September 13, 2021 22 Facebook S 1 (1 Feb 2012)

Facebook IPO: Growth in Use September 13, 2021 23 Facebook S 1 (1 Feb

Facebook IPO: Growth in Use September 13, 2021 23 Facebook S 1 (1 Feb 2012)

Facebook IPO: Core Mechanism September 13, 2021 24 Facebook S 1 (1 Feb 2012)

Facebook IPO: Core Mechanism September 13, 2021 24 Facebook S 1 (1 Feb 2012)

Facebook IPO: Financials September 13, 2021 25 Facebook S 1 (1 Feb 2012)

Facebook IPO: Financials September 13, 2021 25 Facebook S 1 (1 Feb 2012)

17 May 2012: Facebook IPO September 13, 2021 26 NYT(17 May 2012)

17 May 2012: Facebook IPO September 13, 2021 26 NYT(17 May 2012)

9 Apr 2012: FB Buys Instagram September 13, 2021 27 Facebook PR (9 Apr

9 Apr 2012: FB Buys Instagram September 13, 2021 27 Facebook PR (9 Apr 2012)

9 Apr 2012: FB Buys Instagram September 13, 2021 28 NYT (9 Apr 2012)

9 Apr 2012: FB Buys Instagram September 13, 2021 28 NYT (9 Apr 2012)

FTC Instagram Review September 13, 2021 29 22 Aug 2012

FTC Instagram Review September 13, 2021 29 22 Aug 2012

Feb 2014: FB Buys Whats. App for $16 B September 13, 2021 30 Facebook

Feb 2014: FB Buys Whats. App for $16 B September 13, 2021 30 Facebook PR (19 Feb 2014)

FTC Whats. App Review September 13, 2021 31 10 Apr 2014

FTC Whats. App Review September 13, 2021 31 10 Apr 2014

EU on FB/Whats. App: Not Close Competitors September 13, 2021 EU Press Release 32

EU on FB/Whats. App: Not Close Competitors September 13, 2021 EU Press Release 32 (3 Oct 2014)

FB and Whats. App Not Social Network Competitors September 13, 2021 EU Press Release

FB and Whats. App Not Social Network Competitors September 13, 2021 EU Press Release 33 (3 Oct 2014)

Data Concentration Not a Problem September 13, 2021 EU Press Release 34 (3 Oct

Data Concentration Not a Problem September 13, 2021 EU Press Release 34 (3 Oct 2014)

Privacy Outside of EU Competition Law September 13, 2021 EU Press Release 35 (3

Privacy Outside of EU Competition Law September 13, 2021 EU Press Release 35 (3 Oct 2014)

EU FB Fine re Whats. App September 13, 2021 36 EU PR (18 May

EU FB Fine re Whats. App September 13, 2021 36 EU PR (18 May 2017)

FB Negligent re Ability to Match FB/WA Datasets September 13, 2021 37 EU PR

FB Negligent re Ability to Match FB/WA Datasets September 13, 2021 37 EU PR (18 May 2017)

2019 FB Privacy September 13, 2021 38

2019 FB Privacy September 13, 2021 38

Targeted Ads? September 13, 2021 39 FB Ad Preferences (20 May 2019)

Targeted Ads? September 13, 2021 39 FB Ad Preferences (20 May 2019)

Business Facing Tools September 13, 2021 40 Facebook (20 May 2019)

Business Facing Tools September 13, 2021 40 Facebook (20 May 2019)

FB Embedding September 13, 2021 41 NYT (20 May 2019)

FB Embedding September 13, 2021 41 NYT (20 May 2019)

FB Pixel September 13, 2021 42 Facebook (20 May 2019)

FB Pixel September 13, 2021 42 Facebook (20 May 2019)

FB Pixel: Full scale surveillance? September 13, 2021 43 Facebook (20 May 2019)

FB Pixel: Full scale surveillance? September 13, 2021 43 Facebook (20 May 2019)

FB Pixel Mechanics September 13, 2021 44 Facebook (20 May 2019)

FB Pixel Mechanics September 13, 2021 44 Facebook (20 May 2019)

EU General Data Protection Regulation (GDPR) September 13, 2021 45 27 Apr 2016

EU General Data Protection Regulation (GDPR) September 13, 2021 45 27 Apr 2016

Sec. 222 Data Limits September 13, 2021 46 U. S. Telcom Act of 1996

Sec. 222 Data Limits September 13, 2021 46 U. S. Telcom Act of 1996

FTC Facebook Settlement September 13, 2021 47 29 Nov 2011

FTC Facebook Settlement September 13, 2021 47 29 Nov 2011

Legal Data Restrictions Short State of Data and Privacy Law Specific limits in U.

Legal Data Restrictions Short State of Data and Privacy Law Specific limits in U. S. federal law u U. S. FTC acts against FB and others based on failures to fulfill data promises u States are starting to act in face of internal split in U. S. u A patchwork of data/privacy regs in U. S. u GDPR as key EU framework u September 13, 2021 48 28 June 2018

Defining Different FB Data Sources September 13, 2021 German, Cartel Office 49 (7 Feb

Defining Different FB Data Sources September 13, 2021 German, Cartel Office 49 (7 Feb 2019)

Data Silos: User Consent Required to Combine FB Data Sources September 13, 2021 German,

Data Silos: User Consent Required to Combine FB Data Sources September 13, 2021 German, Cartel Office 50 (7 Feb 2019)

Data Silos: Internal Divestiture of FB Data Sources September 13, 2021 German, Cartel Office

Data Silos: Internal Divestiture of FB Data Sources September 13, 2021 German, Cartel Office 51 (7 Feb 2019)

Assessing Possible FB Remedies Data Division and Multiplication Won’t Necessarily Work The German Cartel

Assessing Possible FB Remedies Data Division and Multiplication Won’t Necessarily Work The German Cartel Office wants to divide FB/IG/WA data, while the UK Expert Group wants to multiply it u These are natural remedies with zero marginal cost objects like data u But Europe tried this with Microsoft in the 2000 s with little success (WMP and browser choice screen) u And query whether the Google Shopping remedy is making real progress either u Multiplication costs for ongoing data could be substantial; division will be a natural experiment (German FB v. 52 world FB) u September 13, 2021

Privacy Violation as Exploitative Abuse September 13, 2021 German, Cartel Office 53 (7 Feb

Privacy Violation as Exploitative Abuse September 13, 2021 German, Cartel Office 53 (7 Feb 2019)

Exploitative Business Terms Under GWB Framing Quite Different from EU Abusive data policy u

Exploitative Business Terms Under GWB Framing Quite Different from EU Abusive data policy u Can’t deny contractual autonomy if doing so impinges on protected constitutional rights u Assesses possible violation of GDPR data processing rules as German competition policy violation (cf. EC and Whats. App) u No effective consent to data merge or third-party collection given terms offered by FB (but also ok for FB alone) u September 13, 2021 German Cartel Office 54 (15 Feb 2019)

FB Wins German Appeal September 13, 2021 55 Wall Street Journal (26 Aug 2019)

FB Wins German Appeal September 13, 2021 55 Wall Street Journal (26 Aug 2019)

And Another Appeal? September 13, 2021 56 Wall Street Journal (26 Aug 2019)

And Another Appeal? September 13, 2021 56 Wall Street Journal (26 Aug 2019)

More FB Data Problems in Germany September 13, 2021 57 Politico (24 Jan 2020)

More FB Data Problems in Germany September 13, 2021 57 Politico (24 Jan 2020)

Regulating Data Exchanges September 13, 2021 58 Tech. Crunch (6 May 2020)

Regulating Data Exchanges September 13, 2021 58 Tech. Crunch (6 May 2020)

European Data Protection Board Consent Guidelines September 13, 2021 59 EDPB (4 May 2020)

European Data Protection Board Consent Guidelines September 13, 2021 59 EDPB (4 May 2020)

Freely Given Consent September 13, 2021 60 EDPB (4 May 2020)

Freely Given Consent September 13, 2021 60 EDPB (4 May 2020)

Banning Business Models September 13, 2021 61 EDPB (4 May 2020)

Banning Business Models September 13, 2021 61 EDPB (4 May 2020)

Don’t Conflate Consent and Contract September 13, 2021 62 EDPB (4 May 2020)

Don’t Conflate Consent and Contract September 13, 2021 62 EDPB (4 May 2020)

Data Gifts But Not Data Exchanges September 13, 2021 63 EDPB (4 May 2020)

Data Gifts But Not Data Exchanges September 13, 2021 63 EDPB (4 May 2020)

Banning Business Models: No Cookie Walls September 13, 2021 64 EDPB (4 May 2020)

Banning Business Models: No Cookie Walls September 13, 2021 64 EDPB (4 May 2020)

July 2019: FTC: $5 Billion FB Fine September 13, 2021 65 FTC (24 July

July 2019: FTC: $5 Billion FB Fine September 13, 2021 65 FTC (24 July 2019)

Privacy v. Competition September 13, 2021 66 Me on Twitter (24 July 2019)

Privacy v. Competition September 13, 2021 66 Me on Twitter (24 July 2019)

What is the Harm Here? September 13, 2021 67 Me on Twitter (24 July

What is the Harm Here? September 13, 2021 67 Me on Twitter (24 July 2019)

Yesterday: New FB Content Oversight Board September 13, 2021 68 Facebook (6 May 2019)

Yesterday: New FB Content Oversight Board September 13, 2021 68 Facebook (6 May 2019)