Antitrust lawsuit could force Facebook to sell WhatsApp and Instagram

10 Dec 2020275 Views

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The US Federal Trade Commission is suing Facebook, alleging the company is illegally maintaining a social networking monopoly.

Following a lengthy investigation into four of the biggest tech companies in the world, the US Federal Trade Commission (FTC), along with more than 40 attorneys general, is suing Facebook for alleged anticompetitive conduct and illegal monopolisation.

The complaint alleges that Facebook has engaged in a systematic strategy to eliminate threats to its monopoly, including the acquisitions of Instagram and WhatsApp and the imposition of anticompetitive conditions on software developers.

The FTC stated: “This course of conduct harms competition, leaves consumers with few choices for personal social networking, and deprives advertisers of the benefits of competition.”

The lawsuit calls for a permanent injunction that could force Facebook to sell a number of its assets, including WhatsApp and Instagram, and prohibit future mergers and acquisitions without prior approval.

The news follows a 16-month investigation by the US Congress and subsequent publication of a report examining the practices and possible antitrust violations of Facebook, Apple, Google and Amazon.

The authors of the report said investigations had “found evidence of monopolisation and monopoly power”. For Facebook in particular, the report stated that the social media giant’s various products, such as WhatsApp and Instagram, compete with each other rather than “actual competitors”.

The report also stated that Facebook enjoys monopoly power in the areas of online advertising and social networking by engaging in “killer acquisitions” where a company buys out a competitor to kill off the latter’s product.

‘Substantial harm to competition’

Facebook acquired Instagram in April 2012 for $1bn. The FTC complaint alleges that Facebook initially tried to compete with Instagram before ultimately deciding to buy the photo-sharing app instead.

Similarly, Facebook bought messaging app WhatsApp almost two years later. According to the FTC, both of these actions neutralised the threat posed by these two apps to Facebook.

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In documents submitted to the court, the complaint said: “Facebook has, for many years, continued to engage in a course of anticompetitive conduct with the aim of suppressing, neutralising and deterring serious competitive threats.”

It added that the company cannot justify its “substantial harm to competition” with any business justifications or pro-competitive benefits “that could not be achieved through other means”.

Along with the divestiture of assets and the requirement for approval in future acquisitions, the FTC is also requesting that Facebook be required to file periodic compliance reports with the FTC.

“Facebook’s actions to entrench and maintain its monopoly deny consumers the benefits of competition,” said Ian Conner, director of the FTC’s Bureau of Competition. “Our aim is to roll back Facebook’s anticompetitive conduct and restore competition so that innovation and free competition can thrive.”

‘No company should have this much unchecked power’
– LETITIA JAMES

In a statement following the filing, New York Attorney General Letitia James said: “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.

“No company should have this much unchecked power over our personal interaction and social interactions. That’s why we are taking action today.”

In response, Facebook described the lawsuit as “revisionist history”, saying that the FTC previously approved its acquisitions of Instagram and WhatsApp and now “wants a do-over”.

“Antitrust laws exist to protect consumers and promote innovation, not to punish successful businesses,” Jennifer Newstead, vice-president and general counsel of Facebook wrote in a blog post.

“Instagram and WhatsApp became the incredible products they are today because Facebook invested billions of dollars, and years of innovation and expertise, to develop new features and better experiences for the millions who enjoy those products.”

The complaint against Facebook follows another lawsuit against Big Tech. In October, the US Justice Department filed an antitrust lawsuit against Google, alleging that the tech giant is actively working to maintain a monopoly when it comes to search engines and online advertising.

Jenny is the Deputy Editor of Siliconrepublic.com

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