Dangerous Waters? Facebook's Link to Online Games Has Some Charging the Social Network Has Waded into Antitrust Territory

Daily Herald (Arlington Heights, IL), June 30, 2011 | Go to article overview

Dangerous Waters? Facebook's Link to Online Games Has Some Charging the Social Network Has Waded into Antitrust Territory


Byline: Jia Lynn Yang Washington Post

WASHINGTON The tech industry has become dominated these days by a few goliaths who have smoked their competitors.

Google runs the go-to-search engine, Apple is way ahead in the race to deliver movies and music to consumers, and Facebook has built the most popular social network by far in this country. With U.S. antitrust enforcers already examining Google and Apple for violations, some say that Facebook should also go under the microscope.

The nonpartisan group Consumer Watchdog sent a complaint to the Federal Trade Commission on Tuesday, claiming the company is abusing its power as a popular site for online games by requiring all game developers to exclusively use Facebooks virtual currency and then taking a 30 percent cut with every transaction.

"Its a digital shakedown," said Jeff Chester, executive director of the Center for Digital Democracy, who also has raised concerns with the FTC. Facebook is "using its powerful control of . . . a closed system that arguably rivals Google in power across the world to force everyone to use only its digital currency."

Games played between friends on Facebook have become enormously popular on the site, spawning a mini-economy of users who buy virtual goods with real money.

One popular game called FarmVille, for instance, invites users to buy supplies to build farms and grow crops. Business in this area is booming. The entire market for virtual goods in this country is expected to reach $2.1 billion over all in 2011, up 40 percent from last year, according to Inside Network, a research firm.

Developers of these games and Facebook have a symbiotic relationship. Part of Facebooks explosive popularity resulted from the sites willingness to allow outside developers to create games and other applications to work on Facebooks platform. When Facebook offers games that become hits, users are more likely to stay on the site longer, allowing Facebook to sell more ads.

Most of the games are free, but users pay for virtual items used in the games in a variety of ways, including third-party payment sites such as PayPal or by purchasing them directly from the games developers.

But starting July 1, all games on Facebooks site will have to use Facebook Credits, the sites virtual currency. Because each purchase will include a 30 percent fee, critics say this added cost is essentially a tax on developers who rely on Facebook for a vast majority of their business. …

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