Facebook Violated Antitrust Laws, Say FTC and More than 40 States

The Federal Trade Commission and more than 40 states have accused Facebook of illegally crushing its competition by acquiring rivals. The action requests that the court undo these the deals, which ramps us the FTC’s fight against one of the world’s largest tech companies with a move that could realign the social media industry.

Separate Lawsuits Investigating Facebook Purchases

A group of federal and state regulators—both Republican and Democrat—have been investigating Facebook for more than a year-and-a-half. The contend in separate lawsuits that Facebook’s acquisitions—especially the $1 billion purchase of Instagram in 2012 and WhatsApp for $19 billion in 2014—wiped out the competition that could’ve eventually challenged the company’s dominance.

Since those transactions, Instagram and WhatsApp have soared in popularity, allowing Facebook to gain control over three of the world’s most popular social media and messaging apps. The applications have helped move Facebook from a company formed in a college dorm room 16 years ago to an internet powerhouse that’s valued at more than $800 billion.

Facebook FTC
Federal Trade Commission

The FTC and the states filed the lawsuit in the U.S. District Court for the District of Columbia. They emphasize the increasing bipartisan and international firestorm against Big Tech. Lawmakers and regulators have focused on the grip that Facebook, Google, Amazon, and Apple have on the country’s commerce, electronics, social networking, search and online advertising, which has transformed the nation’s economy.

Google Already Hit with Justice Department Lawsuit

The investigations already produced one lawsuit against Google. The Justice Department brought it earlier in 2020. That complaint alleges that Google illegally protected a monopoly.

However, the federal prosecutors in that case did not demand that Google sell off any of its business. Observers expect another suit against Google, by both Republican and Democratic officials, in the last few weeks of 2020.

Federal prosecutors argue that Facebook should break off Instagram and WhatsApp. They say that new restrictions should apply to the company on future deals. Those are some of the most severe penalties regulators can demand. For its part, Facebook announced that it would vigorously defend itself against the claims.

“For nearly a decade, Facebook has used its dominance and monopoly power to crush smaller rivals and snuff out competition, all at the expense of everyday users,” said Attorney General Letitia James of New York, a Democrat who led the multistate investigation into the company in parallel with the federal agency, which is overseen by a Republican.

The lawsuits against Facebook will trigger an extended legal battle, as the company has long denied any illegal anticompetitive behavior. In addition, Facebook has a large reserve to devote to its defense.

If the Justice Department is successful, the cases could remake the company, which has experienced only unbridled growth. Mark Zuckerberg, Facebook’s CEO, has described a breakup of the company as an “existential” threat.

Observers see the case as a measure for future mergers within the tech industry, which has continued throughout the pandemic. In fact, Facebook recently announced that it would acquire Kustomer, a customer relationship management start-up, for roughly $1 billion.

Facebook Says Federal Regulators Ignore History

“The most important fact in this case, which the commission does not mention in its 53-page complaint, is that it cleared these acquisitions years ago,” Jennifer Newstead, Facebook’s general counsel, said in a statement. “The government now wants a do-over, sending a chilling warning to American business that no sale is ever final.”

Facebook has also argued in the past that the market for social media remained competitive. It cites the skyrocketing growth of TikTok, the Chinese short-video sharing app. There is also new growth in Parler, a social media firm popular among conservatives. Facebook claims these popular apps support a lack of a Facebook monopoly on social networking.

However, the FTC argues that Zuckerberg “recognized Instagram as a vibrant and innovative personal social network and an existential threat to Facebook’s monopoly power.”

“Our aim,” said Ian Conner, who oversees antitrust enforcement at the agency, “is to roll back Facebook’s anticompetitive conduct and restore competition so that innovation and free competition can thrive.”

Facebook Rivals Provide Evidence of Anticompetitive Behavior

A number of Facebook rivals, such as Snap, have offered evidence of what they said was anticompetitive behavior. Facebook’s CEO Zuckerberg was interviewed for the federal investigation, and prosecutors gathered many of his communications to Facebook employees, investors, and the executives of the rivals he has acquired or attempted to buy.

The House judiciary committee held a hearing in July where Facebook’s Zuckerberg presented with the emails from around the time of the acquisition of Instagram and WhatsApp. The emails showed that Zuckerberg believed that the companies were competition and potentially a threat. He responded that the acquisitions haven’t reduced competition and that the emails were taken out of context.

The FTC and states argue that these purchases give Facebook data on users. This data feeds into its business of behavioral advertising, bolstering its monopoly.

“Facebook has coupled its acquisition strategy with exclusionary tactics that snuffed out competitive threats,” the states said in their suit, “and sent the message to technology firms that, in the words of one participant, if you stepped into Facebook’s turf or resisted pressure to sell, Zuckerberg would go into ‘destroy mode,’ subjecting your business to the ‘wrath of Mark.’”