Facebook on Wednesday was slapped with two antitrust lawsuits, including one from the Federal Trade Commission ordering the social-media giant to divest Instagram and WhatsApp.
“The FTC is seeking a permanent injunction in federal court that could, among other things: require divestitures of assets, including Instagram and WhatsApp; prohibit Facebook from imposing anticompetitive conditions on software developers; and require Facebook to seek prior notice and approval for future mergers and acquisitions,” the FTC said
In addition, Facebook was also hit with a separate antitrust lawsuit from 48 state attorneys general, led by New York’s Letitia James.
The FTC had previously approved Facebook’s 2012 acquisition of Instagram for $1 billion; as well as the company’s $19 billion deal for the popular messaging service WhatsApp two years later.
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In its lawsuit, the FTC accuses Facebook of “illegally maintaining its personal social networking monopoly through a years-long course of anticompetitive conduct.”
“Personal social networking is central to the lives of millions of Americans,” said Ian Conner, Director of the FTC’s Bureau of Competition. “Facebook’s actions to entrench and maintain its monopoly deny consumers the benefits of competition. Our aim is to roll back Facebook’s anticompetitive conduct and restore competition so that innovation and free competition can thrive.”
Facebook’s stock price was down 1.3% soon after the FTC’s Wednesday announcement, hitting $279.57 per share.
In a press conference Wednesday, James said that Facebook “for nearly a decade has used its dominance and monopoly power to crush smaller rivals.” She continued: “By using its vast troves of data and money, Facebook has squashed or hindered what the company has perceived as potential threats.” James added that Facebook has “reduced choice for consumers” and “degraded privacy protections for Americans.”
She concluded: “No company should have such unchecked power.”
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In a statement, Facebook VP and general counsel Jennifer Newstead, slammed the two suits as “revisionist history. 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.”
After noting that the FTC had approved both acquisitions, Newstead added, “The government now wants a do-over, sending a chilling warning to American business that no sale is ever final. 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.”
Wednesday’s FTC lawsuit wasn’t completely unexpected; Big Technology’s Alex Kantrowitz and The New York Times reported last month the FTC was preparing to bring an antitrust suit against Facebook, with the lawsuit focused on Facebook’s major acquisitions and whether those moves helped the company build a social media monopoly. Overall, Facebook and CEO Mark Zuckerberg have faced increased scrutiny from Washington, D.C., in recent years, along with other Silicon Valley tech giants. For instance, the U.S. Justice Department filed an antitrust against “monopolist” Google in October, claiming the search giant has used “anticompetitive tactics” to maintain its dominance in search and advertising.
This isn’t the first battle between the FTC and Facebook, either. Last year, Facebook reached a record-setting $5 billion settlement with the FTC after it was investigated for several data privacy issues. Now, federal regulators are looking to see if Facebook built its digital empire — now valued at $796 billion — by using anti-competitive practices. A House Judiciary Committee recently noted Facebook “has tipped the market toward monopoly such that Facebook competes more vigorously among its own products — Facebook, Instagram, WhatsApp and Messenger — than with actual competitors.”
Still, the FTC will have a high bar to clear. Penn State antitrust professor John Lopatka told TheWrap previously there are “two necessary ingredients” that would be needed to take action against a company like Facebook: Not only does there have to be proof Facebook is a monopoly, but you’d also have to show Facebook extended its monopoly “through anti-competitive conduct.”
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“We can assume Facebook has monopoly power in the social media platform market, but that’s not enough,” Lopatka said. “You still have to prove it acquired or maintains that power through anti-competitive power, and I don’t know any reason to believe that’s the case.”
And as Kantrowitz pointed out on a recent episode of TheWrap’s Tech Talk, Facebook will most likely argue regulators approved their deals to begin with, so there shouldn’t be any issues.
” I think the No. 1 thing that’s going to be held against the FTC is they approved the acquisition,” Kantrowitz said.