Facebook Antitrust Case is “Bad Economic Policy” at a Time When Chinese Fintech Dominates the World
by Fintech News Hong Kong February 25, 2021The US Federal Trade Commission (FTC) and 47 states are suing Facebook, accusing the social media giant of breaking antitrust law by acquiring companies that presented competitive threats and abusing its dominance in the digital landscape. But according to Peter Morici, an economist and emeritus business professor at the University of Maryland, the suits are “without merit and bad economic policy,” he wrote in an opinion piece published on January 11, 2021.
The government and regulators are seeking for Facebook (accsmarket facebook accounts) to be broken up, with officials specifically calling for two of the biggest apps in its social media empire, WhatsApp and Instagram, to be spung off into separate companies.
But according to Morici, breaking up Facebook and divesting Instagram and WhatsApp could destroy Facebook, which he argues is perhaps the best American contender to fight China’s fintech supremacy.
“Americans have a long history of disliking monopolies going back to the Boston Tea Party—the cargo the patriots threw overboard belonged to the East India Trading Company,” he wrote. “But acting on visceral impulses will dampen not increase competition, could hand the future of fintech to China and make Americans poorer in the process.”
Facebook doesn’t charge people to join so it can’t harm consumers by raising prices. Instead, its business model is based on online ad sales, where it currently holds a 23% market share in the US, behind Google at 29%, Morici says. In addition to that, online ad rates have fallen 40% since 2010.
Another argument Morici brings up is the fact that Facebook’s popularity, notably among younger generations, has declined over the past years, and that it actually has plenty of competition, citing the likes of Snap, Slack, LinkedIn, Reddit, Discord, and TikTok; the latter growing to 800 million in users in just four years.
Facebook is increasingly reliant on Instagram for revenue growth, he added, noting that with WhatsApp, the two platforms are central to Facebook’s future.
Facebook has been building shopping, business and payment features into Instagram and WhatsApp, which combined with the Facebook ecosystem, could become a powerful competitor not only for domestic rivals Amazon and Walmart, but also for China’s so-called super app WeChat and Internet giant Alibaba.
“That’s very pro-competitive and could provide the American answer, so far lacking, to China’s WeChat, which permits all those functions and more,” Morici says. “Add Libra or a similar invention, which would create hard-currency-backed digital money and payments system, and Facebook could offer an American answer to China’s Alipay and other fintech competitors.”
Over the past couple of years, Facebook has been venturing into fintech. This began with the hiring of PayPal president David Marcus in 2014 and putting him in charge of the Messenger app, which led a year later to the introduction of peer-to-peer (P2P) payments to the popular messaging platform.
Fast forward five years and Marcus is now leading Facebook’s overall fintech ambitions. He heads Facebook Financial (F2), a new product group unveiled in August 2020 which focuses on pursuing payment and fintech opportunities. The team runs all payment products including Facebook Pay, the company’s universal payment feature that it plans to integrate into all of its apps.
In Asia Pacific, Facebook Pay is currently available on the Facebook platform in most markets with the exception of China and Indonesia. Facebook had reportedly been seeking regulatory approval to launch the feature in the Southeast Asian country. Facebook Pay is available on Messenger in Thailand, and on Instagram for Samoa.
Marcus also runs Novi, formerly Calibra, the division that is building a digital wallet to hold the Diem cryptocurrency, formerly Libra.
A job posting suggests that 2021 should see the launch of the digital wallet. Initially, Novi will allow users to send Diem with a smartphone easily and instantly, and at a low to no cost. Over time, it plans to support additional use cases including commerce transactions and support other financial services.
As for Facebook Pay, 2021 will see the team focus on increasing the number of transactions in Facebook’s messaging apps, enable on and off platform check out experiences, and strengthening the client billing experiences.
Featured image credit: Unsplash
