When a dominant firm buys its a nascent challenger, alarm bells are supposed to ring. Yet both American and European regulators found themselves unable to find anything wrong with the takeover. The American analysis remains secret, but we have the United Kingdom’s report. Its analysis, such as it was, went as follows: Facebook did not have an important photo-taking app, meaning that Facebook was not competing with Instagram for consumers. Instagram did not have advertising revenue, so it did not compete with Facebook either. Hence, the report was able to reach the extraordinary conclusion that Facebook and Instagram were not competitors.
Internet companies used to grow big and die—fast. But now a few of them are huge and entrenched, because regulators didn't foresee their dominance.
In this extract from The Curse of Bigness: Antitrust in the New Gilded Age (Columbia Global Reports), Tim Wu explains how today’s monopolies were able to avoid regulation. He give the particular example of Facebook and Instagram: