The US Federal Trade Commission and 48 state governments have filed antitrust lawsuits against Facebook, claiming that the tech giant has used “illegal monopoly power” to kill competition and undermine personal privacy. The Facebook antitrust lawsuits are asking the courts to force Facebook to sell Instagram (which it bought in 2012) and WhatsApp (bought in 2014).
It’s a big moment that comes off the back of the ongoing antitrust investigations into ‘big tech’.
What is ‘anti-trust’? Do we have an Australian equivalent?
US antitrust laws are those that prevent companies from becoming monopolies, and ensure that healthy competition, innovation and the rights of consumers are protected.
In Australia we have similar provisions in the Competition and Consumer Act. The Australian Competition and Consumer Commission (ACCC) can prohibit or allow large competitor buyouts here in the same way that the FTC does in the U.S.
Why is the FTC Worried About FB?
They are concerned about FB’s “buy or bury” approach – IG was a competitor to FB, and WhatsApp a competitor to FB Messenger, so the company bought both. If FB keeps buying competitors that start to gain traction, consumer never get the chance to ‘opt out’ of the company.
NY Attorney General Letitia James, one of states filing a suit, summarised the anti-competitive stance in this statement: “For nearly a decade, Facebook has used its dominance and monopoly power to crush smaller rivals and snuff out competition, all at the expense of everyday users. No company should have this much unchecked power over our personal interaction and social interactions. That’s why we are taking action today.”
The Facebook antitrust lawsuit filed by the FTC argues that the purchase of IG and WhatsApp was illegal… even though they approved it at the time.
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
Are the lawsuits likely to be successful?
People are looking to the 1984 break up of American phone company AT&T – they owned the entire phone system and infrastructure until they faced a similar, successful antitrust lawsuit. The breakup of AT&T created the multiple phone service provider market, and allowed the innovation that led to the modern Internet.
A similar lawsuit was brought against Google in Oct this year, with more expected to come their way.
But it’s genuinely hard to say how this lawsuit will go.
What are Facebook and the Zuck saying?
Facebook are, of course, going to fight hard against these lawsuits. The main point they are making in defense – the FTC reviewed the purchase of Instagram in 2012, and allowed the deal to go ahead. The WhatsApp deal was OK’d by the European Commission*.
FB lawyers say that it’s unfair for the FTC to revoke the purchases now, when they had their chance at the time. They believe that
General counsel Jennifer Newstead said: “The government now wants a do-over, sending a chilling warning to American business that no sale is ever final.”
*FWIW the EC also fined FB in 2017 for providing misleading information about the takeover. Approvals don’t necessarily mean that everything was above board.
But FTC says it can and has previously revisited decisions when illegal activity has come to the surface after a deal has been approved.
Related Posts
What happens next?
The cases will tried in the Federal District Court, but this process will undoubtedly drag on for years. Don’t expect a resolution anytime soon.
In the short term, these lawsuits show how the U.S Government is planning to handle big tech companies going forward. It’s an indication that Facebook, Google, Amazon, and Apple have likely already crossed the line of being ‘too big’ for the Government’s liking, and will not longer be able to grow unchecked.