Real Beef Over Virtual Goods
Facebook has updated its developer terms of service following an antitrust complaint to the Federal Trade Commission.
The company now lets Facebook-game developers charge a lower price for virtual goods when their game runs on other platforms, such as MySpace, Yahoo!, or another website. Previously, Facebook's terms of service required that the same prices be charged on competing platforms.
According to the consumer watchdog known as Consumer Watchdog, the earlier rules were anti-competitive. Facebook is the largest social network on the planet with an audience of 750 million.
Consumer Watchdog complained to the FTC on June 28, and the terms of service were updated three days later. According to Consumer Watchdog, Facebook was violating section 1 and section 2 of the Sherman act, and section 5 of the Federal Trade Commission Act.
It was the Sherman Act that 19 US states and the Department of Justice threw at Microsoft in the 1990s, claiming it had abused its dominant position in PC operating systems to restrain competition in browsers. Microsoft is now an investor in Facebook and a search partner.
Facebook's terms of service change has failed to satisfy Consumer Watchdog, which has also asked that the FTC prevent Facebook from forcing developers into using its "Credits" currency system as the sole means of paying for virtual goods and services across the platform. Consumer Watchdog is peeved that Facebook charges developers a 30-per-cent service fee for using Credits.
"Facebook Credits," the complaint reads, "will make it far more difficult, if not cost prohibitive, for smaller game developers to compete inside the Facebook platform against larger developers. The effect of these terms is to create a barrier to competition between social game developers, and between potential competitors to Facebook-social networks or websites operating as a platform for games."
Also, the group wants the US regulator to probe the five-year agreement  signed in May 2010 between Facebook and Zynga, maker of agri-crowd-pleaser Farmville, and other similar agreements between Facebook and game developers.
Facebook and Zynga had been at loggerheads  before the deal over the Credits setup.
Terms of the agreement were not revealed, but Facebook said that Zynga  would expand the use of Credits to more titles. Zynga had been talking about setting up its own portal for its online games. Zynga claims more than 270 million monthly active gamers on Facebook, so creating its own site could have seen Zynga take significant traffic away from Zuckerberg.
Responding to Facebook's rules tweak, Consumer Watchdog director John Simpson said in a statement that the social-network giant continued to use its monopoly position to maintain an onerous burden on developers that would be passed on to consumers in the form of higher prices.
"Facebook tweaked its terms when its worst policies were highlighted; now there is nothing to stop them from changing them when the heat's off. We call on the FTC to formally block Facebook's predatory policies," Simpson said.
You can read the full complaint and request to the FTC here (PDF) .