The US government and 48 states have filed parallel lawsuits against Facebook, accusing the social media giant of anti-competitive conduct by abusing its market power to create a monopoly and crushing smaller competitors.
The twin antitrust lawsuits, alleges that the social media giant has abused its dominance in the digital marketplace and engaged in anticompetitive behavior.
Soon after the Federal Trade Commission (FTC) and 48 state attorney generals on Wednesday sued the company, Facebook’s shares dropped significantly at the stock exchanges.
The bipartisan coalition led by New York attorney general Letitia James alleged that Facebook has engaged in a systematic strategy to eliminate threats to its monopoly. This includes its 2012 acquisition of up-and-coming rival Instagram, its 2014 acquisition of the mobile messaging app WhatsApp and the imposition of anti-competitive conditions on software developers.
The parallel lawsuits, months in the making, represent an unprecedented challenge to one of Silicon Valley’s most powerful corporations. The complaints zero in on Facebook’s acquisition and control over Instagram and WhatsApp, two key services in its social media empire. Facebook announced in 2012 that it was buying Instagram for $1 billion; two years later, it announced a $19 billion acquisition of WhatsApp.
The suits come roughly 14 months after New York Attorney General Letitia James announced that her office was leading a group of attorneys general in investigating Facebook for potential anticompetitive practices. More than 40 attorneys general ultimately signed onto Wednesday’s complaint. The FTC, meanwhile, has been conducting its own antitrust investigation of Facebook since June 2019.
The Federal Trade Commission, in particular, is seeking a permanent injunction in federal court that could, among other things, require the company to divest assets, including Instagram and WhatsApp, effectively breaking up Facebook as we know it. The states are also calling for the company to be broken up, if necessary.
According to the federal complaint, this course of conduct by Facebook harms competition, leaves consumers with few choices for personal social networking, and deprives advertisers of the benefits of competition.
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. The aim is said to force a roll back Facebook’s anti-competitive conduct and restore competition so that innovation and free competition can thrive.
The FTC complaint alleged that Facebook undertook a years-long effort to maintain its monopoly through anti-competitive acquisitions and actions that target potential and nascent rivals.
Today’s enforcement action aims to restore competition to this important industry and provide a foundation for future competitors to grow and innovate without the threat of being crushed by Facebook. The Commission’s requested relief includes unwinding Facebook’s prior acquisitions of Instagram and WhatsApp, and barring Facebook from engaging in additional anti-competitive practices that have helped it dominate the personal social networking market.
Facebook is the world’s dominant personal social networking service and has monopoly power in a market for personal social networking services. This unmatched position has provided Facebook with staggering profits. Last year alone, Facebook generated revenues of over USD 70 billion and profits of more than USD 18.5 billion.
