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Tuesday, Jan 26, 2021

Facebook hit with 2 massive antitrust lawsuits from the FTC and 46 states seeking to spin off Instagram and WhatsApp

Facebook hit with 2 massive antitrust lawsuits from the FTC and 46 states seeking to spin off Instagram and WhatsApp

The two lawsuits revolve around Facebook's acquisitions of Instagram and WhatsApp and could have massive implications for the tech giant.
Facebook just got hit with two big antitrust lawsuits.

The suits were filed on Wednesday by the Federal Trade Commission and 48 state attorneys general. Both revolve around Facebook's acquisitions of the photo-sharing app Instagram and the encrypted messaging app WhatsApp.

The lawsuits allege that Facebook used a strategy of neutralizing competitors before they could threaten the company's dominance of the social-media market. The suits call out Facebook's decisions to buy rather than compete with Instagram and WhatsApp, and they allege it imposed "anticompetitive conditions" on software developers.

Both complaints seek relief if the lawsuits are successful, including a court injunction that would require Facebook's "divestiture of assets" in Instagram and WhatsApp. Additionally, Facebook could be required to get approval from the government before any mergers or acquisitions in the future.

Facebook obtained regulatory approval when it bought Instagram in 2012 and WhatsApp in 2014, but lawmakers have recently scrutinized the acquisitions.

The coalition of attorneys general, led by New York Attorney General Letitia James, began an investigation into Facebook in September 2019, and the FTC subsequently joined. Attorneys general from 46 states as well as Washington, DC, and Guam have signed on to the lawsuit. The only states whose attorneys general have not signed on are Alabama, Georgia, South Carolina, and South Dakota.

Facebook said on Wednesday that it was reviewing the complaints and would 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 said.

Facebook was also part of a broad House Judiciary Committee antitrust investigation this year that looked into the tech giant's acquisitions of smaller companies. Officials are closing in on establishing regulation in the tech world, a move that's become heavily politicized as Republicans and Democrats spar over Section 230 protections.

Emails from 2012 released as part of that investigation revealed Facebook CEO Mark Zuckerberg's thinking about acquiring Instagram at the time. Zuckerberg, who deemed Instagram a "threat" to Facebook, reasoned that buying the photo-sharing app would be a way to "neutralize" its success.

"One way of looking at this is that what we're really buying is time. Even if some new competitors springs up, buying Instagram, Path, Foursquare, etc now will give us a year or more to integrate their dynamics before anyone can get close to their scale again," Zuckerberg said in the email.

Rep. David Cicilline, who led the House investigation, said that Facebook's acquisitions of Instagram and WhatsApp were "classic monopoly behavior" and that he thought the company should be broken up.

At an antitrust hearing in July, congressional lawmakers grilled Zuckerberg about what motivated the company to acquire Instagram and WhatsApp, popular platforms that would have been competitors had Facebook not purchased them.

Zuckerberg said he viewed Instagram as "a competitor and a complement to our services."

This isn't the first time Facebook has faced off against the FTC. The agency fined Facebook $5 billion in July 2019 over its handling of the Cambridge Analytica data breach.

The lawsuit against Facebook is the second major piece of legal action this year aimed at big tech, following a Department of Justice lawsuit filed against Google in October.
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