46 States, FTC File Antitrust Charges Against Facebook

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Topline

Attorneys general from 46 states, along with the Federal Trade Commission filed separate antitrust lawsuits against Facebook Wednesday alleging the company engaged in anticompetitive behavior when it acquired two key competitors — Instagram and WhatsApp — in the last decade.

Key Facts

The states’ lawsuit, led by New York Attorney General Letitia James, alleges that Facebook’s purchase of social media platform Instagram in 2012 and messaging service WhatsApp in 2014 allowed Facebook to establish itself as the market leader while depriving users of privacy protections.

To tackle Facebook’s anti-competitive behavior the states and the FTC are calling for remedial action, such as forcing the company to potentially sell off Instagram or WhatsApp and requiring Facebook to get prior approval before future mergers and acquisitions.

The Federal Trade Commission, which worked with the attorneys general in probing Facebook, has also filed a case that accuses the social media giant of engaging “in a systematic strategy” through its acquisitions and “the imposition of anticompetitive conditions on software developers” to eliminate threats to its monopoly.

The antitrust suit is the most significant regulatory and legal challenge Facebook has ever faced.

46 states plus Washington D.C. and Guam joined the bipartisan lawsuit, leaving Alabama, Georgia, South Carolina and South Dakota as the only states that didn’t sign on.

Cheif Critic

In a statement, Facebook criticized the charges. “Years after the FTC cleared our acquisitions, the government now wants a do-over with no regard for the impact that precedent would have on the broader business community or the people who choose our products every day,” the company said. Facebook’s general counsel Jennifer Newstead called the lawsuits “revisionist history,” adding that “antitrust laws exist to protect consumers and promote innovation, not to punish successful businesses.” In a July congressional hearing, Facebook CEO Mark Zuckerberg also argued that the acquisition of Instagram and WhatsApp allowed both services to grow and succeed, bankrolled by Facebook’s investments.

Key Background

Internal emails from Zuckerberg revealed during a House antitrust subcommittee hearing in July showed that he viewed Instagram as a competitive threat to Facebook. “Instagram can hurt us meaningfully without becoming a huge business,” Zuckerberg wrote in 2012. A separate set of internal emails from January 2013 show that Zuckerberg and other company executives repeatedly viewed WhatsApp as a threat to Facebook and its own chat app, Facebook Messenger. Referring to WhatsApp and a couple of other messaging apps, Zuckerberg wrote: “Those companies are trying to build social networks and replace us.” He then informed his team that he had decided to block these apps from advertising on Facebook.

Tangent

In September, the company began rolling out a feature that allowed Facebook users to send direct messages to Instagram users and vice versa. This was the first step in the company’s grand plan to unify the messaging services across all of its platforms, including WhatsApp. Facebook’s attempts to integrate its services have caused alarm among lawmakers around the world as it may be harder to break up the company if its services are deeply integrated.

Further Reading

Read the states’ lawsuit here and the FTC complaint here.

Facebook Feared WhatsApp Threat Ahead of 2014 Purchase, Documents Show (Wall Street Journal)



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