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WASHINGTON: Facebook could be forced to sell its prized WhatsApp and Instagram assets after the US Federal Trade Commission and nearly every US state filed lawsuits against the social media company, saying it used one. “buy or bury” strategy to capture rivals and stay smaller. competitors at bay.
With the filing of the twin lawsuits on Wednesday (Dec. 9), Facebook becomes the second major technology company to face a major legal challenge this year after the US Department of Justice sued Alphabet’s Google. Inc in October, accusing the $ 1 trillion company of using market power to defend itself against rivals.
The lawsuits highlight the growing bipartisan consensus to hold big tech accountable for their business practices and mark a rare moment of agreement between the Trump administration and Democrats, some of whom have advocated splitting both Google and Facebook.
Wednesday’s complaints accuse Facebook of buying up rivals, specifically targeting its previous acquisitions of the $ 1 billion photo-sharing app Instagram in 2012 and the $ 19 billion messaging app WhatsApp in 2014.
Federal and state regulators said the acquisitions should be rolled back, a move likely to set off a lengthy legal challenge as the deals were approved years earlier by the FTC.
“For nearly a decade, Facebook has used its dominance and monopoly power to crush smaller rivals, stamp out competition, all at the expense of everyday users,” said New York Attorney General Letitia James on behalf of the 46-state coalition, Washington. DC and Guam. Alabama, Georgia, South Carolina and South Dakota were not involved in the lawsuit.
James said the company acquired rivals before they could threaten the company’s dominance.
Facebook General Counsel Jennifer Newstead called the lawsuits “revisionist history” and said antitrust laws do not exist to punish “successful companies.”
He said WhatsApp and Instagram have succeeded after Facebook invested billions of dollars in growing the apps.
“The government now wants a new version, sending a chilling warning to American businesses that no sale is final,” Newstead said.
Newstead also raised questions about the alleged damage caused by Facebook, arguing that consumers benefited from its decision to make WhatsApp free, and rivals such as YouTube, Twitter, and WeChat did “well” without access to its development platform. .
PROTRACTED FIGHT
Facebook CEO Mark Zuckerberg told employees in July that Facebook would “go to the canvas” to fight a legal challenge to break up the company, calling it an “existential” threat, according to audio from internal meetings of the company. company published by The Verge.
Although remedies for the breakup are rare, some antitrust experts said the case was unusually strong given Zuckerberg’s damning statements drawn from Facebook’s own documents, such as a 2008 email saying “better to shop than compete.” .
Other experts like Seth Bloom of Bloom Strategic Counsel said the FTC’s complaint was “significantly weaker” than the Justice Department’s lawsuit against Google.
“We are talking about acquisitions that are six or eight years old and it will be difficult for a court to order divestitures from many years ago,” Bloom said.
Investors echoed similar concerns.
“I don’t know if the FTC or the Justice Department will be successful in breaking up Facebook. I suppose this will drag on in court while FB defends itself,” said Daniel Morgan, portfolio manager at Synovus Trust in Atlanta, Georgia. .
The lawsuits are the largest antitrust cases in a generation, comparable to the lawsuit against Microsoft Corp in 1998. The federal government finally settled that case, but years of court fighting and extended scrutiny kept the company from frustrating competitors and breaking down. credited with having cleared the way. for the explosive growth of the Internet.
Last month, Facebook said it was buying customer service startup Kustomer, in an acquisition that the Wall Street Journal said valued Kustomer at $ 1 billion.
Facebook also bought Giphy, a popular website for creating and sharing animated images, or GIFs, in May. That acquisition has already attracted scrutiny from the UK competition body.
Facebook shares fell as much as 3 percent after the news before cutting losses to close 1.9 percent.
