U.S., states claim Facebook illegally crushed competition
Company’s purchases of Instagram, WhatsApp at center of lawsuits
WASHINGTON >> The Federal Trade Commission and more than 40 states accused Facebook on Wednesday of becoming a social media monopoly by buying up its rivals to illegally squash competition, and said the deals that turned the social network into a behemoth should be unwound.
Federal and state regulators, who have been investigating the company for over 18 months, said in separate
lawsuits that Facebook’s purchases, especially Instagram for $ 1 billion in 2012 and WhatsApp for $19 billion two
years later, eliminated competition that could have one day challenged the company’s
dominance.
Since those deals, Instagram and WhatsApp have skyrocketed in popularity, giving Facebook control over three of the world’s most popular social media and messaging apps. The applications have helped catapult Facebook from a company started in a college dorm room 16 years ago to an internet powerhouse valued at more than $800 billion.
The prosecutors called for Facebook to break off Instagram and WhatsApp and for new restrictions on future deals, in what amounted to some of the most severe penalties regulators can demand.
“For nearly a decade, Facebook has used its dominance and monopoly power to crush smaller rivals and snuff out compe
tition, all at the expense of everyday users,” said Attorney General Letitia James of New York, who led the multistate investigation into the company in parallel with the federal agency.
The lawsuits, filed in the U. S. District Court of the District of Columbia, underscore the growing bipartisan and international tsunami against Big Tech. Lawmakers and regulators have zeroed in on the grip that Facebook, Google, Amazon and Apple maintain on commerce, electronics, social networking, search and online advertising, remaking the nation’s economy. President Donald Trump has argued repeatedly that the tech giants have too much power and influence, and allies of President- elect Joe Biden make similar complaints.
The investigations already led to a lawsuit against Google, brought by the Justice Department two months ago, that ac
cuses the search giant of illegally protecting a monopoly. Prosecutors in that case, though, stopped short of demanding that Google break off any parts of its business. At least one more suit against Google, by both Republican and Democratic officials, is expected by the end of the year. In Europe, regulators are proposing tougher laws against the industry and have issued billions of dollars in penalties for the violation of competition laws.
T he lawsuits against Facebook are expected to set off a long legal battle. The company has long denied any illegal anti- competitive behavior and is expected to use its deep well of money to defend itself. Few major antitrust cases have centered on mergers approved years earlier. The FTC signed off on Facebook’s deals for Instagram and WhatsApp during Barack Obama’s administration.
If the prosecutors succeed, the cases could remake the company, which has experienced only unfettered growth. Mark Zuckerberg, Facebook’s chief executive, has described a breakup of the company as an “existential” threat. The company’s stock fell 2%, to $277.70 a share, after the lawsuits were announced.
The case is also being widely watched as a gauge for future mergers within the technolog y industry, which have continued to boom during the pandemic. Last month, Facebook said it was buying Kustomer, a customer relationship management startup, for close to $1 billion.
Facebook did not immediately respond to a request for comment, but it has argued in the past that the market for social media remained competitive. The skyrocketing growth of TikTok, the Chinese shortvideo sharing app, and new
growth in Parler, a social media firm popular among conservatives, shows that Facebook doesn’t have a lock on social networking, the company has said.
The suit against Facebook shows how important the company has become for how Americans connect to one another. Its namesake product swelled to hundreds of millions of users in just a few short years. But by 2011, the landscape began to change as mobile phones came equipped with capable cameras and posting photos to social networks grew increasingly popular.
That led to the rise of a competitive threat to Facebook: Instagram. The photo-sharing site, founded in 2010, saw early explosive growth as a company that was native to the smartphone, perfectly timed for mass adoption as waves of consumers gravitated away from desktop devices and toward the mobile computers in their pockets.
The FTC said it found that Zuckerberg “recognized Instagram as a vibrant and innovative personal social network and an existential threat to Facebook’ s monopoly power.”
But instead of continuing to compete with its own photo-sharing project, Zuckerberg chose to buy its rival instead. The company repeated the practice with WhatsApp, which was a viable competitor to its own messaging system.
‘ The agency also alleges that Facebook maintained its dominance by threatening to cut off third-party software developers from plugging into the social network if they made competing products.
The state suit was signed by attorneys general from 46 states and the District of Columbia and Guam. Georgia, South Dakota, Alabama and South Carolina did not join the case.