Dozens of state attorneys filed a no-confidence lawsuit against Facebook by the FTC this week and a month after the Justice Department went to court. Block visas from the start of financial data called plaid – The reason is that, just like Facebook, the credit card giant is trying to neutralize its growing competitors by increasing it. The FTC has also challenged two other recent proposed deals, One involving pharmaceuticals And Another DNA-sequencing technique, Which is alleged to cut off competition that does not yet exist.
That “legal revolution,” known as an anti-trust expert, is still being tested in court. But those who follow the issue say Facebook suits could pave the way for more challenges like this.
“The legal and political environment around distrust in Big Tech is very different now,” said John Newman, who spent three years as an antitrust lawyer in the Judiciary Department. At the time, “people there were claiming that consumers could not be harmed when the market was free and distrust did not apply.”
“It’s just a perfect 180,” Newman said. He is now an antitrust professor at the University of Miami School of Law.
First, the FTC and the states will have to convince a federal judge that Instagram and WhatsApp would be as successful today as if Facebook had never bought them, Said Kristen Limarzi, who spent 11 years as a DOJ anti-trust lawyer. Facebook has already disputed that argument.
“The FTC’s case has to be made more than just a regret,” Limarzi said. Who joined Gibson Dunn Law Company last year. “The merger should be evaluated on the basis of facts formed in 2012.”
Some legislators who supported the FTC’s Facebook claim also expressed the possibility of a 180-degree shift in its thinking towards the agency’s WhatsApp and Instagram deals.
“I’m delighted to see that our antitrust executives are finally taking the threats posed by Big Tech seriously,” Sen. Mike Lee (R-Utah) said in a statement Wednesday, referring to the FTC’s “delayed” lawsuit. He added, “At the same time, the FTC had previously cleared both Instagram and WhatsApp acquisitions, and now I hesitate to congratulate it for trying to clean up the mess on its own.”
The commission indicated earlier this year that it was taking a fresh look at tech industry transactions that it originally considered too small to ensure its investigation. In February, the FTC announced it had Facebook, Amazon, Apple Plus, Micro .ft and Google’s Parent Alphabet, As part of a study of startup acquisitions, seeking information about the value of a 10-year merger.
It was not immediately clear how much Biden’s administration would accept the changing zeitgeist. Two Democrats from the FTC, Commissioner Rohit Chopra and Rebecca Kelly Slaughter, both voted for the Facebook lawsuit this week, along with the agency’s Republican chair, Joseph Simmons, while two other Republican commissioners voted against it. Simmons is expected to leave the FTC next month with a 2-2 bias split.
The parallel universe of Instagram and WhatsApp
Facebook disputes the rationale behind the FTC’s case, maintaining that it was created. Thrives by investing significant funds and other resources in both Instagram and WhatsApp.
When Facebook bought Instagram for 1 billion, small company Facebook had a promising start of just 30 million users for 1 billion. WhatsApp, which Facebook bought in 2014 for about 21 21 billion, was a messaging app with a large following outside the US, until Facebook was unveiled and looking to expand into a new field.
“I think it’s really worth remembering that when we bought Instagram and WhatsApp, they were really small companies,” said Sher Fisher Sheryl Sandberg, Facebook’s chief rating officer. Said at the International Tamron Hall show on Friday. “There were 13 employees on Instagram, 13. WhatsApp had 55 employees. And so we bought them, we bought them a long time ago, we invested, we grew them, and now it’s really big. “
To counter this argument, the FTC and the states may try to show that if it were not for the social network some other company would have bought or invested in Instagram and WhatsApp. FTC complaint cites emails between CEO Mark Zuckerberg and others Facebook executives have expressed concern about Apple Pal, Google or Twitter using Instagram to gain a “foothold” in the social media market.
Munesh Patel, Acting Professor The University of California-Davis School of Law said such a strategy would avoid showing the FTC and states that either application would have been successful on its own.
Patel, an expert in antitrust, noted that the plaintiff’s case would still talk about a fictional world that does not exist. “But I’m sure any companies that are seeking to acquire WhatsApp and Instagram can testify.”
Facebook has also argued that the FTC’s claim represents an inappropriate “over-the-top” for the agency that previously looked at and cleared the two mergers.
“In addition to having an investigative history, this is not how antitrust laws work,” said Jennifer Newstead, the company’s general counsel. Said in a blog post Wednesday. “No American antitrust promoter has ever brought such a case before, and for good reason.”
That’s not entirely accurate, said Shail Susman, a local self-reliance legal partner for an advocacy group organization promoting small business.
“It’s unusual in the last 20 years,” Susman said of the FTC’s Facebook case. “It’s not inside the wheelhouse of run-f-mile FTC actions, but that doesn’t mean it’s unprecedented or will break new ground.”
Hard to break
Right now The way federal regulators address mergers, in which companies must notify the FTC and DOJ of deals above a certain size, exists. Only after 1976, Susman noted, was an associate of law firm Pearl Cohen in New York. Before that, regulators reviewed Merge and, if necessary, unwind them after the fact, he said.
The FTC is always keen to leave the possibility of challenging deals behind, even if it rarely does. In Its The 2012 letter closes its investigation on Instagram Shopping, The FTC said it has not found any violations at this time.
The FTC said the move would not be considered a determination not to be violated. “The Commission reserves the right to take further action as required by the public interest.”
Patel said two U.S. antitrust agencies have started challenging the merger which he initially fixed. In A paper to be published in the Wisconsin Law Review, Patel learned that the FTC or DOJA has challenged the four mergers they have already cleared since 2001. Involved in the most well-known case 2004 FTC Challenge of Illinois Hospital Merger It had been four years Previously.
If the FTC and the states succeed in convincing the court that the Instagram and WhatsApp deals are illegal, the hardest question may be what to do about them. Both lawsuits force Facebook to sell both Services. It’s not as easy as one might think, says Jay Hims, Payne’s antitrust partner. Labaton.
From 2014 to 2018, Hims served as a court-appointed monitor for help Uninstall the merger of BazaarVoice and PowerReviews, two leading software companies used by brands and retailers for leading online ratings and reviews. The companies merged in 2012 but the antitrust agencies were not notified because the deal was so small. The Justice Department then launched an investigation and claimed in 2013 to undo the deal.
“It’s not as easy as I think, perhaps, scholars and some judges think,” said Himmes, who also said. Helped monitor Microsoft compliance in 2001 Compromise that resolved its antitrust prosecution. “They think of it as a clean mechanism to restore competition. Theoretically it is, but managing it can be more challenging. “
Facebook has moved toward increasing integration between its flagship platform and Instagram and WhatsApp, with features set to roll out this year to allow users to communicate between Facebook Messenger and two other services. Which will also make them difficult to separate.
In the FTC case against Illinois Hospitals – Evanston Northwestern Healthcare Corp. Acquisition of Highland Park Hospital – The agency did not finally decide whether to open the deal due to difficulties. Instead, she agreed to a compromise Which will form a separate team for each hospital contract negotiation. That resolution did not end up working well and the FTC never used it again.
In his view, Hims said it could be more difficult to hire a tech company than a hospital with no physical assets and staff.
Hims said of Instagram and WhatsApp, “Brands still exist, but you don’t know what people don’t know. It will affect how easy or difficult it is to spin one of these. In part, the company’s success depends on people, strategic thinkers and marketers. “
UC Davis Patel said that even if a break-up is possible, it is not the best way to resolve the case in the end.
“Even if it is possible, a breakup may not be ideal because it is not a way to eliminate competitive advantage,” Patel said. If the FTC and the states show that Instagram and WhatsApp tsp’s deals were “bad because of vulnerabilities in customer privacy … it’s unclear to me whether the breakup solves the problem.”
But Susman took charge of two Supreme Court cases, including one 1990 Consensus, Called deviceists or break-ups, “the preferred remedy for illegal mergers.” And in the main no-confidence lawsuits against the monopolies, starting with Standard Oil and American tobacco in 1911, the old dissolved in the case of the Judiciary. In 1984 AT&T, breakups were the solution, Susman said.
“All these dusty, musty cases will be pulled sooner or later.” He said.
