August 3, 2021

DCTRS

Damascus Center for Theoretical and Civil Rights Studies

Facebook accused of antitrust violations by U.S. and states

In a sweeping condemnation of the world’s biggest social network and the power it has amassed, federal regulators have sued Facebook Inc. and are seeking to break the company — which includes Instagram and WhatsApp — into pieces.

Groundbreaking antitrust lawsuits announced Wednesday by the Federal Trade Commission and four dozen states and districts accuse Facebook of engaging in monopolistic practices to snuff out rivals and stifle competition.

If the suits are successful, Facebook could be forced to divest its photo-sharing app Instagram, which it acquired in 2012 for $1 billion, and messaging service WhatsApp, which it acquired two years later for $19 billion. Those services have become increasingly integrated into Facebook and each other, which could make disentangling them difficult.

“Years after the FTC cleared our acquisitions, the government now wants a do-over with no regard for the impact that precedent would have on the broader business community or the people who choose our products every day,” Facebook said in a statement Wednesday afternoon. The Menlo Park, Calif., company, with 2.7 billion users worldwide, said it was reviewing the complaints and would have “more to say soon.”

New York Atty. Gen. Letitia James said in a news conference that it is “critically important that we block this predatory acquisition of companies and that we restore confidence to the market.”

She alleged Facebook had a practice of opening its site to third-party app developers, then abruptly cutting off developers that it saw as a threat. The lawsuit — joined by 46 states including California as well as Guam and the District of Columbia — accuses Facebook of anti-competitive conduct and using its market dominance to harvest consumer data and reap a fortune in advertising revenues.

James said the coalition worked collaboratively with the FTC but noted the attorneys general conducted their investigation separately.

Lawmakers who have been vocal on the need to regulate big tech platforms quickly spoke out in support of the lawsuits and against Facebook.

“Facebook is a monopoly. Its abuse of its dominance harms competition, innovation and other businesses,” Rep. David Cicilline (D-R.I.), chairman of the House Antitrust Subcommittee, said on Twitter. “In the absence of competition and accountability, Facebook has harmed people’s privacy and allowed disinformation to flourish on its platform, threatening our democracy.”

Sen. Josh Hawley (R-Mo.) called the lawsuits “a necessity.” “The Instagram and WhatsApp mergers with Facebook were anti-competitive, they were meant to be anti-competitive, and they should be broken up,” he said in a tweet.

Tim Wu, a Columbia University professor and author of “The Curse of Bigness: Antitrust in the New Gilded Age,” called the FTC’s action “quite possibly the most significant complaint that it has filed in the institution’s history.”

That said, the lawsuits could amount to just a lot of noise with little to no actual change, said Dan Ives, managing director of Wedbush Securities.

Facebook shares closed down only about 2% in Wednesday trading.

“The chances of a breakup for Facebook or any other tech giant such as Amazon or Apple is slim today despite the noise,” he said. Wall Street “is shrugging this FTC news off.”

Facebook was founded in 2004. Co-founder and Chief Executive Mark Zuckerberg has become one of the world’s richest individuals, with an estimated net worth of $105 billion.

The Associated Press was used in compiling this report.