REUTERS/Adam Hunger
Chris Hughes, co-founder of Facebook, in 2010
- Facebook co-founder Chris Hughes's proposal to break up the company faces serious legal and political hurdles, legal experts say.
- They say Hughes raised important issues of accountability that could be fixed by reforming Facebook's corporate governance structure, but it's unlikely to go far on its own.
- In a New York Times op-ed on Thursday, Hughes called for Facebook to be broken up into multiple public companies, and said that the company and CEO Mark Zuckerberg should be regulated more tightly.
- Visit Business Insider's homepage for more stories.
Facebook co-founder Chris Hughes' plea to break up the social media giant has created a stir, but legal experts say the proposal may be dead on arrival.
"It is time to break up Facebook," Hughes said in a New York Times op-ed. "We already have the tools we need to check the domination of Facebook. We just seem to have forgotten about them."
In his op-ed, Hughes argued that "Facebook should be separated into multiple companies," adding that the FTC and the Justice Department "should enforce antitrust laws by undoing the Instagram and WhatsApp acquisitions and banning future acquisitions for several years. The F.T.C. should have blocked these mergers, but it's not too late to act."
But Steven Davidoff Solomon of the UC Berkeley School of Law said the proposal faces serious hurdles on multiple fronts.
"There's the legal issues, and the political issues," Solomon told Business Insider. "There has to be the political will to push forward That's anyone's guess."
The legal issues may also be complicated and challenging, he said. Antitrust laws are meant to prevent or eliminate monopolistic behavior in business. But "being big is not a violation of antitrust rules," he said. "They have to make the case that Facebook is acting in an anticompetitive manner."
Legal hurdles in antitrust fight
However, Solomon noted that Facebook's ability to expand its reach by taking out rivals are limited. "If they try to buy Snap, they'll have significant problems."
Stephen Diamond of the Santa Clara University School of Law also didn't see Hughes' proposal going anywhere.
"Very unlikely," he told Business Insider.
He pointed to the current political climate: Hughes' affiliation as a senior adviser at the Roosevelt Institute, a liberal think tank, which he argued will probably not help him win key allies in the Trump Administration, should it come to an antitrust fight.
"No one would suggest that they are going to be advising the Department of Justice antitrust division anytime soon," he said. "You can only go so far if the president is Trump. At a minimum, you need to get a new president."
In pushing to break up Facebook, Hughes cited the government case against Microsoft filed 20 years ago. Microsoft was accused of using its dominant position to force consumers to use Internet Explorer. Even though the government failed to force Microsoft to break up, Hughes said, " that prosecution helped rein in Microsoft's ambitions to dominate the early web."
But Diamond said an antitrust battle against Facebook would be different. "It took a lot of effort to go after Microsoft," he said. For one thing, it was essentially a battle between Microsoft, a tech titan based in Washington State and other major tech players in Silicon Valley, including the browser pioneer Netscape and server-maker Sun Microsystems.
"Seattle versus Silicon Valley was a big deal," he said, while taking aim at a new Silicon Valley powerhouse like Facebook may not spur the same level of support within the industry.
Antitrust case not the only solution
Diamond agreed with Hughes' portrait of Facebook as a dangerous monopoly, echoing concerns about Facebook's enormous influence as the world's biggest social network with unparalleled access to consumer data.
"They have amassed this massive pool of data, potentially one of the most valuable assets in the world," he said. "Unless you split them up, they will continue to gobble up all this data and continue to fight for this dominant position."
But he said a big part of Facebook's problem was the enormous power CEO Mark Zuckerberg enjoys. That power is largely based on a system that weights certain shares over others giving Zuckerberg majority voting rights.
"Antitrust [action] is just one solution," Diamond said. "Reforming Facebook's corporate governance structure would also be helpful."
Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware, agreed, saying "the issue of accountability, or lack thereof" is also an important issue, given Zuckerberg's dominant position.
"There is nothing anyone can do about anything he does," he told Business Insider. "His economic interest is significantly below his voting interest. No matter what happens, the board will not fire him, because he'll fire them."