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US Government Files Suit Against Facebook Alleging It’s a Monopoly

3 min read
Dec 10, 2020
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It’s said that breaking up is hard to do, but that’s just what the U.S. government wants Facebook to do with WhatsApp and Instagram. That’s according to a lawsuit filed on Wednesday by the Federal Trade Commission, 46 states, and two territories. 

The lawsuit alleges that Facebook has engaged in anticompetitive business practices and used its power as a monopoly to stifle or eliminate competition. Along with that, the lawsuit claims that Facebook has been using an “unlawful scheme” that has resulted in less choice for consumers and rampant privacy violations for millions of U.S. citizens.

“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,” Letitia James, New York Attorney General, said at a press conference. “By using its vast troves of data and money, Facebook has squashed or hindered what the company perceived as potential threats.”

The lawsuit has a number of goals. It aims to prohibit Facebook from continuing its illegal behavior, to not let it make any significant acquisitions, and, possibly, to make it sell some of its major assets like WhatsApp and Instagram. In line with this, attorney generals from the 46 states and two territories want Facebook to gain approval from them for any acquisitions above $10 million.

“Our aim is to roll back Facebook’s anticompetitive conduct and restore competition so that innovation and free competition can thrive,” Director of the FTC’s Bureau of Competition Ian Conner said in a statement released to the press.

Of course, Facebook has a different take on the matter.

"Instagram and WhatsApp became the incredible products they are today because Facebook invested billions of dollars, and years of innovation and expertise, to develop new features and better experiences for the millions who enjoy those products," Facebook's Vice President and General Counsel Jennifer Newstead said in a statement responding to the lawsuit. "The most important fact in this case, which the Commission does not mention in its 53-page complaint, is that it cleared these acquisitions years ago. The government now wants a do-over, sending a chilling warning to American business that no sale is ever final."

While the lawsuit seeks to force Facebook to sell two of its primary assets, the potential for that happening is remote, according to several industry experts. Those experts have said that the most likely outcome is a hefty fine for the social media giant and enhanced scrutiny of future deals. They noted that the time for the government to stop a company from acquiring another is before they merge, and that, in this case, it could be impossible to separate Facebook from WhatsApp and Instagram because their assets are so intertwined.

 “Courts won’t buy this,” Colin Sebastian, an analyst with Robert W. Baird, said in a written note to clients. “Facebook has built up these services using its own technology and innovation, they are largely integrated on the back end, plus there is obviously intense competition from TikTok, Snap, Twitter, Pinterest, Discord, Parler, among others.”

Facebook bought both apps when they were quite young. It bought Instagram for $1 billion in 2012 and WhatsApp in 2014 for $19 billion.