Ex Post Facto lawsuits make poor public policy

When Facebook was worried about competition from Instagram and WhatsApp, they purchased both companies. Now, a lawsuit by state attorneys general threatens to punish Facebook for those acquisitions and other “monopolistic” practices. But here is the problem: Both sales were approved by the Federal Trade Commission. If Facebook loses this lawsuit, it will constitute a significant bait and switch.

In fact, Facebook’s claim of monopoly is weaker today than it was even two months ago, because of the rise of competitors like Gab, MeWe and Parler. The latter two social networks boasted significantly increased downloads from the Apple App Store and the Google Play Store after the election because of conservative users’ frustration with moderation policies of Facebook and Twitter. (See here and here and here.)

When our founders wrote the Constitution, they put a provision to ban “ex post facto” laws – meaning that you cannot make something illegal and then punish someone for doing it while it was still legal. That was a feature of tyranny and the founders were well aware of how that could be abused. Facebook losing this lawsuit would not technically be an “ex post facto” law, but it would functionally be the same thing.

So if we accept the premise that Facebook has engaged in anti-competitive practices, what is the best way to go forward? The solution is to reform the Federal Trade Commission to more closely watch and be more skeptical of large acquisitions. The answer is not to approve acquisitions and then reverse the decision. The economy needs stability and clear rules, so making the regulatory process unpredictable is a terrible idea and creates a dangerous precedent for future cases.

I am skeptical of the premise, however. Unlike internet service providers, Facebook is not a utility. One can use the Internet without ever setting up a Facebook account. The only thing that makes Facebook a “monopoly” is that so many people use it. But a monopoly can be fragile for an Internet service. In the spring of 2006, MySpace was the dominant social network. In 2002, Hotmail, AOL and Yahoo were the most popular e-mail services. Many people worried that Internet Explorer would have a monopoly in the 1990’s. How has that worked out for any of them? The best solution is to allow the market to work.