SAN FRANCISCO — Facebook co-founder Chris Hughes has become one of the company’s biggest problems.
In recent weeks, Hughes, who left the social media giant in 2007 and cashed out his nearly $500 million worth of stock, has been making the rounds in the nation’s capital, visiting a dozen lawmakers and regulators at the Justice Department, the Federal Trade Commission and other agencies interested in examining whether Facebook has amassed too much power. He’s talked with the staff of the New York attorney general.
In some of those meetings, he and his collaborators have presented a 39-page slide deck that makes a point-by-point legal case for breaking up the social network, drawing on decades of antitrust law precedent.
The crux of the case, designed by two antitrust scholars: Facebook’s wealth and power and massive user base have pushed it into monopoly territory, and its acquisitions of rivals have squashed competition. More than 2.7 billion people use Facebook or its other platforms, which include Instagram and messaging service WhatsApp, at least once a month, Facebook said Wednesday.
“I hope that my speaking out provides cover to a lot of other folks, whether former employees or current ones, to express ambivalence or concern about what’s going on,” Hughes said in an interview Thursday. “And I think there’s a lot to be concerned about.”
Hughes, who helped develop the social media giant with Mark Zuckerberg in their Harvard University dorm, has become a critical weapon to trust-busters in a fight that keeps expanding in scope, threatening tech giants including Amazon, Apple and Google with potential new regulations or even a breakup. Just this week, the Justice Department said it was opening an expanded inquiry targeting “market-leading online platforms.” And on Wednesday, Facebook disclosed that it is facing an antitrust investigation by the FTC.
Hughes has become one of the most powerful in a new breed of antagonists to Facebook: a former executive who believes he created something that is now harmful to society.
Facebook declined to comment. Some of Hughes’s lobbying was first reported by the New York Times.
The growing momentum in Washington to more closely scrutinize the role of tech giants in consumers’ lives and the effect on competition — one of the few bipartisan issues emerging among lawmakers and candidates across the nation — has often been fueled by private complaints by small businesses and rivals that feel as though they’ve gotten a raw deal as the massive companies dominate their relative spaces.
Hughes is joined in public criticism of Facebook by former Facebook president Sean Parker, early investor Roger McNamee and other former senior executives.
Facebook has argued that it is not a monopoly and should not be broken up. Testifying before Congress in April 2018, Zuckerberg responded to a question about the competition his company faces by pointing out that the average American uses eight apps to communicate with friends. “It certainly doesn’t feel like that to me,” Zuckerberg said when Sen. Lindsey O. Graham (R-S.C.) asked whether Facebook is a monopoly.
Hughes started his campaign publicly. After leaving Facebook to volunteer for Barack Obama’s first presidential campaign, he worked for years in politics and nonprofit organizations, plus a four-year stint as owner of the New Republic. In 2016, he helped found a think tank focused on inequality, the subject of a book he wrote last year. The research prompted questions regarding the dangers of the concentration of corporate power.
“I had a very personal realization that I cannot speak to anything that has to do with antimonopoly work without wrestling with my own past,” he said. “The huge monopoly power is why I have the financial resources that I have.”
Hughes wrote a widely read New York Times op-ed published in May that argued that the company he helped found should be broken up.
The decision to publicly oppose Facebook in the op-ed was a difficult one, he said.
“I knew I would lose some friends over it. And that’s okay because some things are that important,” he said. “But it’s been nice on the other side of it, too, to have the argument out there, to speak my mind about what I think and believe.”
Nick Clegg, Facebook’s vice president for global affairs and communications, responded to the op-ed by writing his own several days later arguing that Facebook should not be dismantled. “What matters is not our size but rather the rights and interests of consumers, and our accountability to the governments and legislators who oversee commerce and communications.”
Soon after, Hughes was contacted by two prominent antitrust scholars, Scott Hemphill of New York University School of Law and Tim Wu of Columbia Law School. The two academics and longtime collaborators had been developing an argument for breaking up Facebook in the form of the slide presentation. To them, the purchase of Instagram and WhatsApp represented a “plain-vanilla violation of antitrust law, just low-hanging fruit,” Wu said in an interview. They began to pitch lawmakers and regulators together.
Academics and lawmakers who have worked with Hughes say he has helped explain the motivations and viewpoints of key players at Facebook, including Zuckerberg — although Hughes says he has no specific insider knowledge. They say Hughes can frame the business practices of present-day Silicon Valley in ways that jibe with largely untested antitrust laws that were written for major oil and rail companies decades ago.
After House lawmakers embarked on their broad antitrust investigation of Facebook and its fellow tech giants in June, one of the first people they consulted was Hughes, said Rep. David N. Cicilline (D-R.I.), chairman of the House Judiciary subcommittee on antitrust law. Hughes quietly paid a visit to members of the House’s top competition-focused panel earlier this month, meeting with lawmakers and their staff members to pitch many of the issues he raised in his op-ed.
Hughes presented his views as a former Facebook insider, something that lent credence to his arguments, Cicilline said. “It’s remarkable and significant to me and my colleagues that someone with such a role in creating the company has the capacity and courage, really, to say, ‘We have some challenges, some things to look at.’ ”
The case Hughes and academics lay out in their presentation centers on the Sherman Act, the government’s primary law for investigating and penalizing anticompetitive practices. Congress adopted the law in 1890 at a time of rapid consolidation in the United States that created oil and railroad giants the government later challenged as monopolies.
The law and its later updates prohibit acquiring another company with the main purpose of getting rid of a potential or actual competitor.
Facebook was doing just that when it acquired Instagram in 2012 and WhatsApp in 2014, the team argues. While Instagram was still tiny, Zuckerberg identified its explosive growth on mobile phones as the obvious antidote to Facebook’s largely desktop product. Mobile was considered a clear weakness for Facebook as the company headed into its initial public offering in 2012.
Hughes’s feedback shaped the scholars’ case, as he helped them understand how executives in Silicon Valley think about competition — it tends to be measured by viral growth rather than by size, said Hemphill, the New York University professor. At the time, the two professors were working on a roadshow, which they asked Hughes to join.
While Instagram was small, it was growing rapidly. “That must have been terrifying” for Facebook, Hemphill said. “It helps bring home the threat, the observability of the threat and the intensity of it.”
Motivation can be the determining factor when it comes to successfully bringing an antitrust case against a giant corporation, Hemphill said. For example, a 1995 memo from Bill Gates, then the chief executive of Microsoft, suggesting that rival Netscape was leading in an “Internet Tidal Wave” became a smoking gun in a case that suggested why the company was protecting its operating system.
Hughes, Hemphill and Wu also flag Facebook’s enormous balance sheet and user base, something that impressed House lawmakers when Hughes presented to them this month.
“The thing that stuck with me . . . was he focused on Facebook’s revenue as a true measure of its role in the marketplace,” Cicilline recalled. “Facebook captures over 80 percent of all global social media revenue and controls 58 percent of the U.S. social media market. That’s significant.”
Across the Capitol, Sen. Marsha Blackburn (R-Tenn.) sought out Hughes for a meeting earlier this month to talk privacy and competition. She recently created a special “task force” to study those issues and potentially endorse legislative solutions in the coming months.
Blackburn has pitched legislation for years that would limit how tech giants collect and monetize users’ data, a bill that Facebook long has opposed through its lobbying organizations. But she said Hughes was “very familiar” with it, and during her meeting, encouraged Blackburn in her efforts generally to “begin to put some guidelines and some guardrails in place.”
Lawmakers and regulators have also held meetings with other antitrust experts, according to those leaders, such as Barry Lynn from the Open Markets Institute, and Gene Kimmelman, a former top Justice Department antitrust official who until recently ran Public Knowledge, a public interest advocacy group that has lobbied for stronger competition enforcement against tech and telecom consolidation.
Hughes spoke to Public Knowledge in June after meeting Kimmelman at an event.
“I think he’s extremely interested in this as part of his broader philosophy,” Kimmelman said. “He’s very concerned with the concentration of wealth and power in society.”
Hughes has been donating to various 2020 Democratic presidential candidates and said he likes some of those who have been most outspoken regarding both breaking up big tech and promoting the middle class.
Regarding the increased regulatory scrutiny of big tech, he said developments have happened more quickly than he expected. “The $5 billion FTC fine, which I think Facebook and many others expected to be the end of the story, it seems like it’s not going to be. It seems like it was the closing of one chapter and the opening of another,” he added.
Hughes said that he has not heard from his longtime friend and co-founder Zuckerberg since publishing the op-ed.
Correction: Roger McNamee was an early investor in Facebook. An earlier version of this article gave an incorrect first name.