TECH NEWS – The Federal Trade Commission (which we will shorten to FTC onwards) filed a lawsuit against Mark Zuckerberg‘s company, which – according to the FTC – engaged in a „years-long course of anticompetitive conduct.”
The lawsuit documents alleges that Facebook has „engaged in a systematic strategy” to keep its monopoly while also eliminating the competition. The FTC cites two acquisitions, namely Instagram‘s purchase in 2012 and WhatsApp‘s acquisition in 2014 respectively, as well as „the imposition of anti-competitive conditions on software developers.” The investigation was conducted in cooperation with the attorneys general of 46 states, plus the District of Columbia and Guam.
The lawsuit claims that Facebook initially tried to compete with Instagram when it first arrived on the scene „at a critical time in personal social networking competition.” However, Zuckerberg’s company thought it was easier to purchase the competition (which eerily reminds us of what Microsoft is doing nowadays…), which happened in April 2012 for 1 billion dollars. The FTC claims it neutralized the immediate threat, while it also made the competition’s situation much harder to compete. Then, in February 2014, Facebook pulled a similar move by buying WhatsApp for 14 billion dollars, when it was the „clear global ‘category leader’ in mobile messaging.”
Facebook also made other behind-the-scenes moves, the FTC claims. In 2013, it disabled the API that enabled Twitter’s Vine video app to access friends on Facebook. Perhaps this is why the lawsuit seeks „divestiture of assets, divestiture or reconstruction of businesses (including, but not limited to, Instagram and/or WhatsApp), and such other relief sufficient to restore the competition that would exist absent the conduct alleged in the Complaint.” In layman’s terms, the FTC wants to break up Facebook with the help of the court. „Personal social networking is central to the lives of millions of Americans. Facebook’s actions to entrench and maintain its monopoly deny consumers the benefits of competition. We aim to roll back Facebook’s anticompetitive conduct and restore competition so that innovation and free competition can thrive,” FTC Bureau of Competition director Ian Conner said.
Previously, Microsoft ran into a similar situation – a lawsuit against them in 1998 was filed for similar anti-competition moves, and the Redmond-based company lost the case. Initially, the court ruled that Microsoft has to be split into two (one of which responsible for Windows, the other one responsible for everything else), but they agreed to a settlement with the US government outside the court in 2001 to increase competition.
Jennifer Newstead, a vice president and general counsel of Facebook, wrote a lengthy response, in which she called the lawsuit revisionist history, as the FTC approved the Instagram acquisition in 2012, and the European Commission also didn’t block WhatsApp’s purchase in 2014. „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. No American antitrust enforcer has ever brought a case like this before, and for good reason. The FTC and states stood by for years while Facebook invested billions of dollars and millions of hours to make Instagram and WhatsApp into the apps that users enjoy today. And, notably, two FTC commissioners voted against the action that the FTC has taken today,” she wrote.
Newstead added that Facebook is „aware of the atmosphere in which the FTC is bringing this case,” including hard questions about its actions relating to „elections, harmful content, and privacy.” However, she doesn’t think these are antitrust issues: „Those hard challenges are best solved by updating the rules of the internet. Facebook as we know it today would not have been possible without US laws that encourage competition and innovation. We’ve been successful because we’ve made risky bets, invested, innovated and delivered value to people, advertisers and shareholders. We have operated and continue to operate in a highly competitive space. Our acquisitions have been good for competition, good for advertisers and good for people. We look forward to our day in court when we’re confident the evidence will show that Facebook, Instagram and WhatsApp belong together, competing on the merits with great products,” Newstead added.
The FTC’s lawsuit against Facebook also has a Q&A, but here’s a TLDR for you: until now, the FTC left Facebook’s expansion without comment, but now, they noticed the company is too big and wants to break down Zuckerberg’s work. However, it might be too late.
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