Why is the government suing Facebook? FTC Antitrust lawsuit
On Wednesday, dozens of US states and the US federal government sued Facebook in a double antitrust lawsuit, alleging that the giant social network abused its digital dominance and is pursuing an anti-competitive course of action..
The Federal Trade Commission, in particular, is seeking a permanent injunction in federal court, which may, among other things, require the company to sell its assets, including Instagram and WhatsApp. In addition, calls are heard in the public space if necessary to split the company..
«Personal social media is central to the lives of millions of Americans, said Ian Conner, Director of the Competition Bureau of the Federal Trade Commission (FTC). “Facebook’s actions to strengthen and maintain its monopoly deprive consumers of the competitive advantage. Our goal is to move away from Facebook’s anti-competitive behavior and restore competition so that innovation and free competition can flourish».
Parallel lawsuits that have been going on for months represent an unprecedented challenge for one of the most powerful corporations in Silicon Valley. Facebook’s claims are mainly focused on acquiring and controlling Instagram and WhatsApp, two key building blocks of its empire. In 2012, Facebook announced that it was buying Instagram for $ 1 billion, two years later it announced the acquisition of WhatsApp for $ 19 billion..
The lawsuits were filed about 14 months after the New York attorney general Laetitia james announced that her office is leading a group of attorneys general investigating Facebook for potential anti-competitive actions. In the end, more than 40 attorneys general signed the complaint on Wednesday. Meanwhile, the FTC has been conducting its own antitrust investigation against Facebook since June 2019..
«For nearly a decade, Facebook has used its dominance and monopoly power to crush smaller competitors and crush competition, James said at a news conference on Wednesday. – Using its massive amounts of data and money, Facebook suppressed or discouraged what the company saw as potential threats».
Government lawsuit requires court order requiring Facebook to notify government officials of any future acquisitions of $ 10 million or more.
«The most important fact in this case, which the Commission does not mention in its 53-page complaint, is that it authorized these acquisitions many years ago, said Jennifer Newsted, VP and General Counsel, Facebook. – The government now wants to redistribute, sending a blood-curdling warning to American businesses that no sale will ever be final».
«People and small businesses choose to use Facebook’s free services and ads, not because they need it, but because our apps and services deliver the most value, Newsted added. – We will vigorously defend the ability of people to continue to make these choices».
While regulators may not have objected to the WhatsApp and Instagram deals at the time, antitrust regulators have every right to change their minds in light of the new evidence, said William Kovacic, former chairman of the FTC..
«There is nothing in US merger law to suggest that an agency’s decision not to challenge a proposed deal protects it from further consideration.», – he said.
To a large extent, Facebook is focusing on the companies it acquired to build a huge audience that, according to its financial statements, now has more than 3 billion users. This dominance has raised questions from some legal experts, including US lawmakers, about whether the Facebook CEO intended Mark Zuckerberg neutralize competitive threats by absorbing them.
As Washington’s pressure on Facebook intensified, the company prepared for defensive action. Facebook has moved on to tightly integrate its applications on a technical level. This solution, which has been suggested by some critics, is a strategy to thwart any potential division. The social network has hired a staff of lawyers with experience in antitrust and litigation. The company also revised its message, focusing on the thesis that Facebook welcomes regulation, but too harsh measures could give other countries, such as China, a competitive advantage in the fast-growing tech sector..
The lawsuit makes Facebook the second global technology company to be sued by US government antitrust officials this year. In October, the Justice Department and 11 states filed a lawsuit against Google, claiming that the search engine had suppressed competition in order to maintain its influence on the Internet and in the advertising market. Google named this lawsuit "deeply mistaken" and stated that consumers are using the Google platform because they want to, not because they have to. The last major antitrust case was the landmark U.S. government lawsuit against Microsoft in the late 1990s and early 2000s..
Facebook and Google aren’t the only tech companies of political concern. Increasingly, U.S. officials are scrutinizing the entire tech sector for potential anti-competitive behavior, focusing on the four big firms that now touch every corner of our lives. The study ranged from Apple’s control over the iOS app ecosystem to Amazon’s relationship with independent sellers on its e-commerce platform..
In Facebook’s case, government officials will need to prove in court that the company’s alleged misconduct resulted in real, measurable harm to consumers or competition, said Hal Singer, economist and antitrust law expert at the Institute for Public Policy, George Washington University.
«It doesn’t have to be a price effect; it might be some kind of privacy issue, ”Singer said. – But you have to show causation».
Facebook’s alleged misconduct resulted in consumer harm, according to a government lawsuit. The complaint alleges that internet users today have less choice among social media platforms and less experience, while the tech industry has been hit by «reduced investment in potentially competing services».
In another critical accusation, government officials said that Facebook opened its platform to third-party app developers to engage them in the company’s business and then cut them off from their services as soon as it saw them as a competitive threat..
Singer said that if Facebook was ultimately found to be in breach of the law, the company could try to prevent a split, arguing that its services are too tightly integrated to be decoupled. But, he said, the courts must determine whether this is a compelling argument..
As the case with Microsoft has shown, antitrust lawsuits can take years to resolve. But in the end, they can have a huge impact. Experts believe Microsoft’s lawsuit, which was eventually settled, paved the way for Google’s success.
Likewise, a court order to shut down Facebook or impose certain behavioral restrictions can have a broad impact on what new startups can emerge and what products consumers will see on the market..