Facebook hit with antitrust suit from N.Y., 47 other states
FTC files similar case alleging tech giant stifled its competitors
New York Attorney General Letitia James and the attorneys general from 47 other states announced Wednesday they had filed a federal lawsuit against Facebook, alleging the social media giant illegally preyed on smaller rivals before they could grow large enough to compete with it.
The lawsuit seeks to have a federal court force Facebook to divest from Instagram and Whatsapp.
James said her office is leading the litigation and is joined by all but two states in the case. A separate lawsuit filed by the Federal Trade Commission mirrored the allegations made against Facebook, and James said the states and federal investigators collaborated on litigation.
The antitrust lawsuits filed against Facebook, and another filed in October against Google by the U.S. Department of Justice, mark the biggest anti-monopoly actions by government agencies since Microsoft faced similar accusations in the 1990s.
Facebook brought in more than $70 billion in revenue last year, including $18.5 billion in profit. It’s among the largest corporations in the world, making money by selling targeted advertising on its social media platforms based on detailed information it collects from its users.
The lawsuits focus particularly on Facebook’s purchase of Instagram in 2012 for about $1 billion and its purchase of Whatsapp in 2014 for $19 billion, which was more than other independent sources had valued the companies.
“Antitrust laws exist to protect consumers and promote innovation, not to punish successful businesses. 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,” wrote Jennifer Newstead, Facebook’s vice president and general counsel, in a statement provided to the Times Union.
James said Facebook threw money at Instagram and WhatsApp, a strategy she termed “buy or bury,” because they “each posed a unique and dire threat to Facebook’s monopoly” over social networking. In other cases, James said, Facebook invited app developers to work through its larger platform, but if those developers appeared like they might someday pose a threat to Facebook, it would quickly stomp out the smaller companies.
“They also sent a clear message to the industry: Don’t step on Facebook’s turf. Or as one industry executive put it, ‘You will face the wrath of Mark,’” she said, referring to Facebook’s founder, Mark Zuckerberg.
The result of decreased competition, James said, is that Facebook has been able to spy unchecked on its users and profit off their personal information. It has dampened innovation and creativity, she said, and boxed out the possibility of growth for many other smaller social networking businesses.
“Facebook has been spending its time surveilling its users’ personal information and profiting from it,” James said. “No company should have this much unchecked power over our personal information and our social interactions.”
The attorneys general and the FTC are each asking the courts to force Facebook to divest itself from Instagram and Whatsapp, to change the way it manages web developers on its platform and to be required to seek the government’s permission in the future to buy other companies.
“People and small businesses don’t choose to use Facebook’s free services and advertising because they have to, they use them because our apps and services deliver the most value. We are going to vigorously defend people’s ability to continue making that choice,” Newstead said.
The lawsuits announced Wednesday are part of a broader, bipartisan “moment of tech lash” against major technology corporations, said Alec Stapp, director of technology policy at the Progressive Policy Institute, a Washington think tank.
There’s also “animus toward Facebook in particular,” Stapp said, due to controversy over political speech on that platform in the last few years.
Facebook did have to ask for permission to acquire Whatsapp and Instagram, Stapp noted, and if they were wrong then, it would have made more sense for the FTC to study why they approved them so it doesn’t happen in future instances.
“People like to say Facebook has monopolized social networking, but if you just look around, look at your own phone, you’ll see that’s not the case,” he said, pointing to the rise of Tik Tok, a popular app to create and share short videos, as an example.