(Bloomberg Opinion) -- In France, they call it taking mustard after dinner. In Germany, they talk about a child having already fallen in the well. In England, they speak of closing the stable door after the horse has bolted.
They all are good ways of describing how regulators have tended to deal with the world’s biggest tech firms. But when it comes to Facebook Inc.'s digital coin, Europe's antitrust watchdog seems to be intent on breaking with this previous inaction.
Bloomberg News reported on Tuesday that the European Commission is scrutinizing the two-month-old Libra project and the group backing it amid concern the currency will be detrimental to competition. This is a good sign the regulator will do something about it.
That’s welcome because antitrust authorities have, over the years, repeatedly failed to prevent the sort of practices which have cemented the dominance of Silicon Valley firms in their target markets. Regulators then struggle to rebalance the market after the fact.
Some past decisions look misguided in hindsight. The most obvious are Google’s $3.2 billion acquisition of DoubleClick in 2008, which cemented the search giant’s control over digital ads, and Facebook’s purchases of Instagram and WhatsApp – deals that made it the preeminent social network.
Facebook’s plan should give regulators plenty of reasons for concern. The organization administering the digital currency, the Libra Association, comprises 28 members so far, but the extent of Facebook’s leading role warrants closer examination.
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The motivation for many of the members seems at this stage to be a fear of missing out. After all, Facebook’s 2.4 billion monthly active users give it unparalleled scale. But that could also be construed as the Menlo Park, California-based firm abusing a dominant position: Members of the association might feel they can’t risk being left out, so have little choice but to take part.
The group includes most of the world’s biggest payments companies: Mastercard Inc., Visa Inc., Paypal Holdings Inc., Stripe Inc. and Vodafone Group Plc, whose M-Pesa mobile money transfer service is dominant in parts of Africa.
That means it could be seen as a horizontal agreement, according to Bloomberg Intelligence analyst Aitor Ortiz. Those kind of arrangements may be acceptable in certain cases if they benefit the end user, but are normally anti-competitive if they consolidate the influence of a discrete group at the expense of consumers or rivals.
Facebook has said that it won’t push ahead with Libra until it has secured all the necessary regulatory approvals. The European Commission’s message seems to be: Don’t push your luck. If the group fails to pay heed, it risks fines and punishments further down the line. That will make it harder to sign up new partners who are unwilling to expose themselves to such regulatory hazards.
One has to wonder whether the growing regulatory scrutiny the currency is attracting will make the project worth the effort for Facebook. For sure, the social networking giant needs to find a way to diversify its revenue away from advertising. But I’m unconvinced that Libra does that.
If anything, it will become another pillar of the advertising business by supplying valuable data on purchasing intent: every time you make a purchase using Facebook’s digital wallet, you give the company a better understanding of what you’re buying and why.
All this highlights the contradiction at the heart of Libra: if it is truly independent, what’s in it for Facebook? Regulators are right to press for an answer.
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Alex Webb is a Bloomberg Opinion columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.
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