As the business grew, Srinivasan argued, Facebook attempted to renege on its privacy commitments, but faced the discipline of a market it still did not have. not cornered. In 2007, he deployed Beacon, a product that allowed him to track user activity even when they weren’t on the site. Faced with a backlash – Beacon publicly reported your buying habits on friends’ NewsFeeds – the company shut down Beacon within a year. Zuckerberg called this an “error”. However, after rivals like MySpace left the scene, Facebook had less to fear. Today, its “pixel” follows users all over the Internet, just as Beacon did (but without the inconsiderate NewsFeed messages). According to Srinivasan, this was just one of the many ways Facebook rolled back privacy protection once it felt users couldn’t take their business elsewhere.
Srinivasan’s theory provided an elegant theoretical solution to the consumer damage puzzle, but left some empirical questions unanswered: Did Facebook really compete for users by providing better privacy protections? And did he really renege on those commitments afterwards simply because the company executives thought they could get away with it?
The case filed by state attorneys general provides new evidence to suggest that the answer to both questions is yes. He cites a 2008 internal report in which the company identifies strong privacy controls as one of the four pillars of “Facebook Secret Sauce”. According to the report, “Users will share more information if they have more control over who they share and how they share.”
The most telling insight comes from the summer of 2011, when the company was preparing to fend off the threat from Google’s rival platform, Google+. The complaint quotes an email in which Sheryl Sandberg, COO of Facebook, wrote: “For the first time, we have real competition and consumers have real choice… we will have to be better to win.” At the time, Facebook planned to remove the ability for users to decompose in photos. An unnamed executive suggested pumping the brakes. “If there was ever a time to AVOID controversy, it would be when the world compared our offerings to G +,” they wrote. Better, they suggested, to save such changes “until the direct comparisons with the competition start to fade.” It’s almost a smoking gun: proof that, as Srinivasan assumed, Facebook preserves user privacy when it fears competition and degrades privacy when it doesn’t.
States and the FTC make a number of other claims about the damage caused by Facebook’s monopoly practices, but they are relatively vague. Of course, Facebook’s tendency to gobble up potential competitors or cut them off from its development tools has likely reduced the level of innovation in the field, but who can say what social networking would look like in the counterfactual scenario? Privacy theory, on the other hand, has the merit of being concrete: Facebook has really backed down on privacy commitments as it has become more dominant, and that doesn’t seem to have been a coincidence. This does not mean that the government will therefore slip into litigation; antitrust law remains stacked in favor of big business, and the federal court system is full of judges who have been brainwashed into a narrow model of consumer protection. But the privacy argument will at least get its foot in the door of law enforcement. Facebook may not charge users a fee, but that doesn’t mean users haven’t paid a price.