Facebook is facing legal action over its acquisition of WhatsApp and Instagram, with the Federal Trade Commission (FTC) and multiple U.S. states bringing antitrust actions against the social media giants. The FTC’s action aims to “unwind” the company’s acquisitions of WhatsApp and Instagram—basically, to sell the companies as independent entities.
As Reuters reports, Facebook is being accused of using a “buy or bury” strategy to maintain dominance over its competitors, with New York Attorney General Letitia James saying that Facebook’s strategy involves buying out potential rivals early:
“For nearly a decade, Facebook has used its dominance and monopoly power to crush smaller rivals and snuff out competition. Facebook used vast amounts of money to acquire potential rivals before they could threaten the company’s dominance.”– New York Attorney General Letitia James (via The Verge)
The aim is to “restore competition”
The FTC’s lawsuit specifically requests the court to force Facebook to sell Instagram and WhatsApp, all in the name of restoring competition. The main issue stems from Facebook’s alleged strategy of buying out rivals who come up with competing products—before they actually scale enough to threaten the social media giants.
Critics point to emails from Facebook CEO Mark Zuckerberg which allegedly evidenced this anti-competitive behaviour, as reported by The Verge:
“One way of looking at this is that what we’re really buying is time. Even if some new competitors springs up, buying Instagram, Path, Foursquare, etc now will give us a year or more to integrate their dynamics before anyone can get close to their scale again. Within that time, if we incorporate the social mechanics they were using, those new products won’t get much traction since we’ll already have their mechanics deployed at scale.”
More damning is Zuckerberg’s next email in the thread, which seemingly reveals the Facebook’s CEO recognition of his mistake above:
“I didn’t mean to imply that we’d be buying them to prevent them from competing with us in any way.”
In case you missed it, Facebook bought over Instagram in 2011 for a mouthwatering fee of USD 1 billion (~RM4.06 billion). This, rather than the acquisition of WhatsApp for USD 19 billion (~RM17 billion), appears to be the main area of contention for lawmakers. Meanwhile, another issue to consider is whether Facebook’s strategy has affected the benefits for users on the respective platforms—such as the decision to share user data between WhatsApp and Facebook.
Facebook, for their part, have argued that the WhatsApp and Instagram deals were cleared by regulatory agencies at the time of the acquisitions:
In any case, this isn’t the first time that a member of Big Tech has been subject to antitrust legal action. Recently, the U.S. Department of Justice sued Google for alleged search engine monopolisation, calling the company’s conduct “illegal under traditional antitrust principles”. For now, we’ll have to wait and see how the U.S. courts handle the Facebook lawsuits.