Facebook faces anti-trust action brought by US government and 48 states

Federal regulators asked Wednesday for Facebook to be ordered to divest its Instagram and WhatsApp messaging services as the U.S. government and 48 states and districts accused the company of abusing its market power in social networking to crush smaller competitors.

Jasmine Le

lehang1997hanu@gmail.com December 10, 2020 | 08:51

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Facebook paid $1 billion US for Instagram, bolstering the social networking platform's portfolio a month before its stock went public. (Photo: Express and Star)

The lawsuit

According to News Max, the antitrust lawsuits were announced by the Federal Trade Commission and New York Attorney General Letitia James.

“It’s really critically important that we block this predatory acquisition of companies and that we restore confidence to the market,” James said during a press conference announcing the lawsuit.

In its lawsuit, the FTC is seeking the separation of the services from Facebook, saying Facebook has engaged in a “systematic strategy” to eliminate its competition, including by purchasing smaller up-and-coming rivals like Instagram in 2012 and WhatsApp in 2014. James echoed that in her press conference, saying Facebook "used its monopoly power to crush smaller rivals and snuff out competition, all at the expense of everyday users.”

New York State Attorney General Letitia James (Photo: AP)

Facebook is the world’s biggest social network with 2.7 billion users and a company with a market value of nearly $800 billion whose CEO Mark Zuckerberg is the world’s fifth-richest individual and the most public face of Big Tech swagger. Facebook did not have immediate comment.

James alleged Facebook had a practice of opening its site to third-party app developers, then abruptly cutting off developers that it saw as a threat. The lawsuit — which includes 46 states, Guam and the District of Columbia — accuses Facebook of anti-competitive conduct and using its market dominance to harvest consumer data and reap a fortune in advertising revenues.

Facebook faces anti trust action brought by US government and 48 states

(Photo: Captured)

'A real problem'

The action marks the second time this year that the U.S. government has targeted a seemingly untouchable tech behemoth. The U.S. Justice Department sued Google in October for abusing its dominance in online search and advertising — the government's most significant attempt to buttress competition since its historic case against Microsoft two decades ago. Amazon and Apple also have been under investigation in Congress and by federal authorities for alleged anticompetitive conduct, as reported by CBC.ca.

The Justice Department's suit against Google, announced just two weeks before election day, brought accusations of political motivation from some quarters. It was filed by a cabinet agency headed by an attorney general seen as a close ally of President Donald Trump, who has often publicly criticized Google.

The FTC, by contrast, is an independent regulatory agency whose five commissioners currently include three Republicans and two Democrats.

U.S. president-elect Joe Biden has said the breakup of Big Tech giants should be seriously considered. He has singled out Facebook's Zuckerberg for scorn, calling him "a real problem."

'Monopoly power'

Facebook paid $1 billion US for Instagram, bolstering the social networking platform's portfolio a month before its stock went public. At the time, the photo-sharing app had about 30 million users and wasn't producing any revenue. Zuckerberg vowed both companies would be run independently, but over the years the services have become increasingly integrated with users able to link accounts and share content across the platforms. Instagram now has more than 1 billion users worldwide. Facebook acquired WhatsApp, an encrypted messaging service, for $19 billion US.

But in the following years, the founders of both Instagram and WhatsApp left Facebook amid disagreements with Zuckerberg. Facebook has started to integrate Instagram and WhatsApp, most recently by linking the apps' chat functions with its Messenger service. Such integration could make it more difficult to break off the companies.

According to CBC.CA, in the following years, however, the founders of both Instagram and WhatsApp left Facebook amid disagreements with Zuckerberg. Facebook has started to integrate Instagram and WhatsApp, most recently by linking the apps' chat functions with its Messenger service. Such integration could make it more difficult to break off the companies.

NetChoice, a Washington trade association that includes Facebook as a member, quickly panned the lawsuits. The case for antitrust enforcement against Facebook "has never been weaker," NetChoice vice-president Carl Szabo said in a statement, pointing to newer social services such as TikTok and Snapchat as rivals that could "overtake" older platforms.

"These lawsuits mark an important turning point in the battle to rein in Big Tech monopolies and to reinvigorate antitrust enforcement," said Alex Harman, competition policy advocate for Public Citizen, a nonprofit consumer advocacy group.