FTC alleges illegal monopoly in Facebook suit

A new lawsuit brought by the Federal Trade Commission (FTC) against Facebook could potentially force the social media giant to divest its ownership of Instagram.

In a public statement, the FTC announced that following an investigation conducted in cooperation with the attorneys general of 46 states, the District of Columbia, and Guam, it has determined Facebook is illegally maintaining a personal social networking monopoly through a years-long course of anticompetitive conduct.

The FTC’s complaint against Facebook alleges the company has engaged in a “systematic strategy”—including its 2012 acquisition of rival Instagram and its 2014 acquisition of the mobile messaging app WhatsApp, as well as the imposition of anticompetitive conditions on software developers—to eliminate threats to its monopoly. 

The complaint singles out Facebook’s acquisitions of Instagram and WhatsApp as being primarily motivated by desire to eliminate potential threats to its monopoly power and to make it more difficult for any future rival to compete at scale. In addition, the FTC cites Facebook’s decision to shut down the application programming interface (API) that would have provided the Twitter video app Vine to access friends via Facebook as an example of anticompetitive platform conduct (Twitter shut down Vine in January 2017).

According to the FTC’s complaint, Facebook is the world’s dominant personal social networking service and has monopoly power in a market for personal social networking services. In 2019, Facebook generated revenues of more than $70 billion and profits of more than $18.5 billion.

The FTC is seeking a permanent injunction in federal court that could, among other things: require divestitures of assets, including Instagram and WhatsApp; prohibit Facebook from imposing anticompetitive conditions on software developers; and require Facebook to seek prior notice and approval for future mergers and acquisitions.

This marks the second federal antitrust lawsuit brought against a U.S.-based global technology giant in 2020, following a suit filed against Google in October. Facebook and other tech giants have been under government scrutiny for some time. 

In July 2019, Facebook agreed to pay an historic $5 billion settlement with the FTC to resolve charges it violated the privacy rights of its users. That same month, the Department of Justice said it was reviewing competitive practices of “market-leading online platforms,” and representatives from Amazon, Apple, Facebook, and Google all testified in a Washington, D.C., hearing held by the House Judiciary Committee’s antitrust panel. In March 2019, then-presidential hopeful and Democratic senator from Massachusetts Elizabeth Warren publicly called for the federal government to break up the “monopolies” of Amazon, Google, and Facebook.

“Personal social networking is central to the lives of millions of Americans,” said Ian Conner, director of the FTC’s bureau of competition. “Facebook’s actions to entrench and maintain its monopoly deny consumers the benefits of competition. Our aim is to roll back Facebook’s anticompetitive conduct and restore competition so that innovation and free competition can thrive.”

The Commission vote to authorize staff to file for a permanent injunction and other equitable relief in the U.S. District Court for the District of Columbia was 3-2. Commissioners Noah Joshua Phillips and Christine S. Wilson voted no.

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