- Facebook, Inc. (NASDAQ: FB) is being sued by the U.S. Federal Trade Commission and a coalition of attorneys general from 48 states and territories. These are the details.
Facebook, Inc. (NASDAQ: FB) is being sued by the U.S. Federal Trade Commission and a coalition of attorneys general from 48 states and territories. They had filed two separate antitrust lawsuits against the social networking company, targeting the acquisitions of Instagram and WhatsApp specifically.
Both of the lawsuits are pursuing remedies for the alleged anti-competitive conduct — which could require Facebook to divest from Instagram and Facebook. The FTC is also seeking to prohibit Facebook from anti-competitive conditions against third-party developers.
In a blog post, Facebook chief counsel Jennifer Newstead responded by saying that the lawsuits are “revisionist history.” The government approved both acquisitions several years ago.
“The most important fact in this case, which the Commission does not mention in its 53-page complaint, is that it cleared these acquisitions years ago,” said Newstead in a statement. “The government now wants a do-over, sending a chilling warning to American business that no sale is ever final.”
The lawsuit says that Facebook has a history of buying or attempting to acquire smaller companies. And then it uses market power to hinder potential competition.
The FTC cited Facebook’s previous attempts to buy Twitter and Snap. And this acquisition strategy alleged prevented competitors and advertisers that depend on the platform to reach larger audiences with fewer alternatives to select from.
“Since toppling early rival Myspace and achieving monopoly power, Facebook has turned to playing defense through anticompetitive means,” wrote the FTC in the lawsuit documents. “After identifying two significant competitive threats to its dominant position — Instagram and WhatsApp — Facebook moved to squelch those threats by buying the companies, reflecting CEO Mark Zuckerberg’s view, expressed in a 2008 email, that ‘it is better to buy than compete.'”
A redacted portion of the FTC lawsuit says that Facebook’s main blue app had lost users and engagement due to Instagram. And as a result, Facebook allegedly prevented Instagram from becoming independent since it would “constitute a significant threat to Facebook’s personal social networking monopoly.”
The FTC also said that Facebook prevented WhatsApp from becoming a competing personal social networking provider. And the FTC claims that Facebook limited the promotion of WhatsApp in the U.S.
Disclosure: I have a small FB position in my stock portfolio.
