The calls for breaking up big tech have been raised for a while now, primarily citing their towering influence, how they’re outgrowing regulatory checks, and simultaneously killing the competition. The concerns have gathered steam lately, with multiple senate calls grilling CEOs of these giants over past questionable practices. Today, the US FTC (Federal Trade Commission) took a huge step in exercising its regulatory control over these giants by suing Facebook. Yes, the US FTC is suing Facebook alongside a coalition of over 40 other states for engaging in anti-competitive practices to maintain its monopoly.
In particular, the US FTC is targeting three previous Facebook activities – the acquisition of Instagram, purchasing WhatsApp, and imposing limitations on developers – as a prime example of its unethical approach to choke the competition. Among the solutions the FTC seeks from its lawsuit, the biggest one is undoing Facebook’s acquisition of both Instagram and WhatsApp. What this essentially means is a divestiture should happen and that Instragam and WhatsApp be spun off into separate companies.
Watch this message from FTC’s Bureau of Competition Director Ian Conner re: FTC’s lawsuit against Facebook for illegal monopolization: 12/12 pic.twitter.com/Cj57ACvIGJ— FTC (@FTC) December 9, 2020
Additionally, the US FTC seeks injunctive relief from the court that will prevent Facebook from engaging in similar anti-competitive practices. The regulatory agency notes that the anti-trust case has been built upon an investigation carried out by FTC staff in cooperation with the Attorneys General of 46 states, the District of Columbia, and Guam following approval from FTC Commissioners.
“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 regulatory body said in a statement. “Facebook has used its monopoly power to crush smaller rivals and snuff out competition, all at the expense of everyday users,” New York Attorney General Letitia James said in a statement.
Facebook has been accused of neutralizing the competition in its very early stages and eliminating more rivals from scaling up by acquiring them. The prime examples cited for this monopolistic strategy are Facebook’s $1 billion Instagram acquisition in 2012 to gain control over the photo-sharing space of social media, and the $19 billion purchase of Whats/App to reign supreme in the field of instant messaging before WhatsApp could become a threat to Facebook itself.
The FTC lawsuit also cites how Facebook imposes anti-competitive limitations on developers by cutting off access to key interconnection points between their products and Facebook itself. This is in reference to the Facebook-Twitter rivalry back in 2013, when Facebook allegedly cut off API access for Twitter-owned Vine, preventing it from using the ‘find friends via Facebook’ feature.
Facebook backfires at US FTC
Facebook has criticized the twin lawsuits and alleges that after initially giving their nods to the Instagram and WhatsApp deals, the FTC now has a change of heart and that its decision to sue the social media giant will set a wrong business precedent. Facebook goes on to claim that when the matter goes to court, evidence will prove that the company competed on the grounds of merits.
We're reviewing the complaints & will have more to say soon. Years after the FTC cleared our acquisitions, the government now wants a do-over with no regard for the impact that precedent would have on the broader business community or the people who choose our products every day.— Facebook Newsroom (@fbnewsroom) December 9, 2020
“Now, many years later, with seemingly no regard for settled law or the consequences to innovation and investment, the agency is saying it got it wrong and wants a do-over. In addition to being revisionist history, this is simply not how the antitrust laws are supposed to work,” it said in a statement. In fact, Facebook is questioning the regulatory body’s review process itself, expressing surprise over how acquisitions that were approved after lengthy brainstorming are suddenly a subject of antitrust review again.
In its defense, the US FTC notes that the regulatory body can legally challenge transactions that have been closed. “Yes, the FTC can—and often does—challenge consummated transactions when they violate the law,” the agency said on its FAQ page regarding the lawsuit. The US FTC goes on to add that it is not merely challenging the acquisitions, but a multi-year course of conduct in which Facebook has monopolized the personal social network market.