Facebook’s Under Fire from Within at a Cost of $500 Million

2 | By Shah Gilani

Facebook may be facing the beginning of the end of its dominance of social media if one of the company’s founders and its former president have anything to say about it.

And, they’ve been saying a lot about it.

Here’s how Facebook’s being attacked by former insiders and what’s likely to happen…

A Facebook Founder and Former Executive Want to Break It Up

Facebook’s reach and power are phenomenal, along with the amount of money the company makes.

That’s a real problem for co-founder Chris Hughes, who launched the company in 2004, along with Mark Zuckerberg, Eduardo Saverin, and Dustin Moskovitz, while they were enrolled at Harvard University

Hughes, who is using some of the almost $500 million he made off Facebook to advocate for the breakup of the company, argues that billionaire founder and Facebook CEO, Mark Zuckerberg, who controls 60% of the company’s voting stock, needs to have his power over the company curbed and, more importantly, Facebook should be broken up on antitrust grounds.

While Hughes has been pushing his agenda for some time behind the scenes, his voice was heard loud and clear back in May when the New York Times published his op-ed piece openly calling for the break-up of the company.

Hughes wrote, “For too long, lawmakers have marveled at Facebook’s explosive growth and overlooked their responsibility to ensure Americans are protected and markets are competitive. It is time to break up Facebook.”

Claiming the company controls 58% of the social media market and garners 80% of global social media advertising revenue, Hughes says, “Because Facebook so dominates social networking, it faces no market-based accountability.”

When it comes to Facebook’s many misdeeds and fines it pays, including the $5 billion fine the FTC just hit the company with, Hughes wrote. “This means that every time Facebook messes up, we repeat an exhausting pattern: first outrage, then disappointment, and finally, resignation.”

He’s not alone or quiet in his criticism of Mr. Zuckerberg or calling for the break-up of the company.

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Using a 39-page slide presentation put together with the help of Scott Hemphill of New York University School of Law and Tim Wu of Columbia Law School, Hughes is often joined by Facebook’s former president, Sean Parker, lobbying members of Congress and regulators.

The “plain-vanilla” legal case the team makes is that under the 1890 Sherman Act companies are prohibited from making acquisitions if their main purpose of buying upstarts or established companies is to dominate the market by absorbing competitors.

Facebook’s acquisition of Instagram and WhatsApp clearly violate the tenor, if not the tenets of the antitrust law originally used to break up railroad cartels and the old Standard Oil company.

A lot of people who opt off Facebook end up on Instagram or WhatsApp, not even realizing that they are Facebook platforms.

And that’s the point Hughes makes while pushing his case. His “plain vanilla” solution to Facebook’s power is to have the company sell both Instagram and WhatsApp.

While there are a lot more changes he’s advocating, making Facebook divest itself of those two platforms is a frontal assault on the money-making machine that Facebook’s become.

Hughes and company have been making the rounds in Congress, meeting and lobbying, among others, Representative David N. Cicilline (D-RI) Chairman of the House Judiciary Subcommittee on Antitrust Law, and Senator Marsha Blackburn (R-TN), two staunch Facebook critics.

Given Facebook’s announcement last Wednesday it’s under investigation by the FTC on possible antitrust grounds, Hughes, Sean Parker, Robert McNamee, an early incubator investor, and other former senior Facebook executives campaigning on behalf of a cut-up Facebook are a serious problem for the tech darling.

This time Facebook’s Teflon might get ripped from its iron core, and the stock could take a hit.

So it seems that the time of Facebook could soon be coming to an end, while the advent of the fourth Industrial Revolution nips at its heels.

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Shah Gilani

2 Responses to Facebook’s Under Fire from Within at a Cost of $500 Million

  1. Alibaba says:

    If Hughes wants so bad to destroy the Facebook monopoly, why he doesn’t start a parallel company? He has the money, he has the knowledge. So?…

  2. Alan says:

    If people were to quit worshipping at the false god that is Facebook, quit using the thing, how long do you think that it would last? Not especially long, I suspect, though I could be wrong. By the way, one thing I find myself rather curious about is the following. It is very quick and easy to join Facebook. It seems however, endlessly difficult and complicated to depart. How come this?

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