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Inside the Federal Trade Commission's Facebook probe

A low-key conflict inside the Federal Trade Commission has strengthened the likelihood the agency will toughen its stance with Facebook.

The big picture: As the Federal Trade Commission struggles to adapt its antitrust rules for the era of Big Tech, two units of the agency have squared off over how to apply older, price-based competition standards to a market full of free products.

Why it matters: The FTC is pursuing an antitrust probe into Facebook and other investigations, including a review of 10 years of tech firms' acquisitions. If the agency wants to unwind deals or take other strong action, it will need a strong legal theory demonstrating harm to consumers and markets.

Driving the news:

  • FTC officials are considering taking sworn testimony from Facebook CEO Mark Zuckerberg and COO Sheryl Sandberg as part of their inquiry, the Wall Street Journal reported Friday. Zuckerberg is set to testify July 27 before a House antitrust subcommittee along with the CEOs of Apple, Amazon and Google.
  • The FTC Facebook investigation, which FTC leaders had once predicted would conclude by the November election, looks likely to extend into the new year and new administration, according to a New York Times report.

What's happening: The internal conflict at the FTC emerged between the agency's Bureau of Competition, which is leading the Facebook inquiry, and the agency's Office of Policy Planning, which was originally tasked with developing guidelines for FTC antitrust reviews of tech firms last fall.

  • That effort has been complicated by tensions between the two units on the best approach, a person familiar with the process told Axios.

What we're hearing: The Bureau of Competition has now taken the lead on crafting the guidelines, a second person said, looking to clarify the framework for what constitutes anti-competitive harms to address tech companies' business models, many of which are built around making their services free for consumers to use.

Between the lines: The more clearly those guidelines provide a basis to take antitrust action against such free services, the easier it will be for the FTC to go after Facebook, if it chooses to.

  • The Office of Policy Planning appeared to view antitrust through a more conventional lens, in which the chief gauge for whether a company's market power has led to harm is whether prices have risen for consumers.
  • One antitrust lawyer familiar with the workings of the FTC said the Office of Policy Planning “would not want to move the needle much” with antitrust guidelines, and is generally reluctant to consider new definitions for anticompetitive behavior.

Between the lines: "The policy people live in a world where there is a one-size-fits all formula," a person familiar with the back-and-forth said. "They want it to be less messy, but the enforcers recognize that antitrust is inherently messy because it's fact-based."

Details: An early draft of the guidelines obtained by Axios reveals the tension.

  • Edits to the document by the competition arm pare back language trumpeting the economic benefits platforms can create, as well as language that could limit the commission's ability to bring cases on a variety of conduct, according to a person familiar with the process.
  • The draft also includes several examples of platform conduct that could lead to FTC analysis, including a leading online shopping platform banning manufacturers from selling their products at lower prices elsewhere. (Amazon faced criticism over this.)
  • In that example, the FTC notes in its analysis that the commission would look at how manufacturers are affected and whether those effects are passed on to consumers, as well as the impact on competing online platforms.

Yes, but: The draft is still undergoing revisions as it works its way through the agency's process.

Context: The guidelines follow a series of antitrust hearings the agency held in 2018 and 2019. FTC spokesperson Cathy MacFarlane noted that the commission's various branches "collaborate closely" on policy output, including the Bureau of Competition, the Bureau of Economics, and the Office of Policy Planning.

  • "The Commission is considering a variety of outputs from the recent hearings on 'Competition and Consumer Protection in the 21st Century,' including a potential guidance document dealing with the application of the antitrust laws to platform businesses," MacFarlane said in a statement.

What's next: It's unclear when the agency will release a final version, but it's possible the FTC's guidelines for applying antitrust laws to online platforms could arrive around the same time as the Justice Department attempts to apply those laws in the form of an antitrust lawsuit against Google.

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