America’s consumer regulator and more than 40 US states are suing Facebook, alleging the tech giant is illegally maintaining a monopoly through anticompetitive conduct including buying up smaller rivals.
The complainants are seeking to have Facebook deals like its acquisition of WhatsApp and Instagram unwound in a move that could radically change the social media market.
In its response to the complaint, the tech giant says it isn’t stifling competition or innovation, and defended its acquisitions, which were cleared by regulators at the time.
Facebook is the dominant social platform, claiming more than 3.21 billion users across its family of apps. The company is valued at more than US$800 billion and face few immediate threats beyond regulation and a forced breakup.
Facebook historically resisted any regulation, eventually arguing for the “right” regulation as pressure mounted over its market dominance and practices.
- Read more: Cover Story: Facebook May Learn The Hard Way That Regulators Have Broken Massive Technology Giants Before
FTC Sues Facebook for Illegal Monopolisation
On Wednesday US Regulator the Federal Trade Commission revealed it, along with 48 US states and territories, are suing Facebook for “legally maintaining its personal social networking monopoly through a years-long course of anticompetitive conduct”.
The regulators and lawmakers spent the last 18 months investigating Facebook, concluding the company has instituted a “systemic strategy” to remove threats to its monopoly, including its 2012 acquisition of rival Instagram for US$1 billion, its 2014 acquisition of the messaging app WhatsApp for US$22 billion, and the imposition of “anticompetitive conditions” on software developers.
The FTC is seeking a permanent injunction in the US Federal Court that could require Facebook to divest from both Instagram and WhatsApp, prohibit it from imposing anticompetiive conditions on developers and require the company to seek additional clearance for future acquisitions and mergers.
“Facebook’s actions to entrench and maintain its monopoly deny consumers the benefits of competition,” said Ian Conner, Director of the FTC’s Bureau of Competition. “Our aim is to roll back Facebook’s anticompetitive conduct and restore competition so that innovation and free competition can thrive.”
Squashing an ‘existential threat’
According to the FTC’s complaint, Facebook targeted potential competitive threats to its dominance. The regulator alleges Facebook executives, including founder and CEO Mark Zuckerberg, recognised the fast growing mobile application Instagram as an “existential threat to Facebook’s monopoly power”.
The FTC alleges Facebook initially tried to compete with Instagram before opting to buy up the rival, removing a competitor and making it more difficult for others to compete. The platform giant recognised a similar threat in WhatsApp and quickly removed the rival by buying it too, according to the complaint.
In a statement Facebook VP and general Counsel Jennifer Newstead said regulators are engaging in “revisionist history” and want a “do-over” after cleaning the acquisitions of Instagram and WhatsApp at the time.
“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 … Now the agency has announced that no sale will ever be final, no matter the resulting harm to consumers or the chilling effect on innovation.”
Facebook also imposed anti competitive conditions on third party software developers, according to the complaint. The tech giant made some of its APIs available to third party developers only on the condition they did not make competing functionalities or connected with other social networks, according to the FTC.
“The complaint alleges that Facebook has enforced these policies by cutting off API access to blunt perceived competitive threats from rival personal social networking services, mobile messaging apps, and other apps with social functionalities,” an FTC statement says.
“For example, in 2013, Twitter launched the app Vine, which allowed users to shoot and share short video segments. In response, according to the complaint, Facebook shut down the API that would have allowed Vine to access friends via Facebook.”