FTC and 46 states launch massive lawsuit against social media group for predatory and monopolistic behaviour that could force it to sell Instagram and WhatsApp.
The two claims filed on Wednesday December 9, one spearheaded by New York Attorney General Letitia James and the other by federal regulators, accuse Facebook of illegally acquiring its competitors in a ‘predatory’ manner in order to dominate the market.
According to New York Attorney General Letitia James,Facebook has used its dominance and monopoly power to crush smaller rivals, snuff out competition, all at the expense of everyday users.
Facebook targets competitors with a “buy or bury” approach: if they refuse to be bought out, Facebook tries to squeeze every bit of oxygen out of the room for these companies,’ her office said.
The Federal Trade Commission filed its own lawsuit, accusing Facebook of ‘squelching’ the threat from WhatsApp and Instagram – an attitude reflected in a 2008 email by Zuckerberg which said ‘it is better to buy than compete’.
Facebook boss Mark Zuckerberg and Twitter chief Jack Dorsey were both hauled in for a highly-politicised Senate hearing last month, and Donald Trump has feuded with both firms over alleged bias and the fact-checking of his posts.
The federal lawsuit comes just weeks before Trump leaves office to be replaced by Joe Biden, who was less combative about Big Tech during the campaign.
‘Antitrust laws exist to protect consumers and promote innovation, not to punish successful businesses,’ she said. ‘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.’
In 2009, Facebook made an ‘aggressive overture’ to FriendFeed, an aggregator which pulled together content from various social media sites. Fearing that Twitter was about to acquire the company, Facebook bought it out.
In 2010, Facebook bought a Malaysian company called Octazen which provided contact details for potential users.
Facebook was already licensing the company’s services, but when it turned out Twitter was doing the same, attention turned to how Facebook could ‘deprive rivals and potential rivals of this important resource’, the lawsuit claims.
A Facebook executive said that ‘an acquisition could be interesting if for a few million we could slow some competitors down for a quarter or so’. Once Facebook bought the firm, it ‘terminated all third-party access to Octazen’.
In April 2012, Facebook bought out Instagram for $1billion, allowing it to discontinue its own Facebook Camera app.
‘Rather than responding to the threat with innovative product development, Facebook simply eliminated Instagram through acquisition,’ the lawsuit charges.
Facebook faced a ‘unique threat’ to its monopoly from the rise of online messaging services which allowed people to avoid SMS charges and exchange better-quality pictures, the lawsuit says.
By 2013, WhatsApp had surpassed Facebook Messenger with 12.2billion messages sent on the platform every day.
When Facebook bought out WhatsApp for $19billion in 2014, there was said to be ‘shock and surprise’ among Facebook’s own staff at how much they had paid.
The lawsuits argue that the only rationale for the price of the deal was to eliminate a competitive threat, and accuses Facebook of breaking its promise to regulators that it would not combine user data across the two services.
The suit asks the court to restrain Facebook from making further acquisitions valued at or in excess of $10 million without advance notice to the plaintiff states.
It also asks the court for ‘any additional relief it determines is appropriate,’ including the divestiture or restructuring of ‘illegally acquired.