Facebook sued by FTC, most states over alleged abuse of monopoly power

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Facebook has been facing more scrutiny from US lawmakers and regulators.


Graphic by Pixabay; illustration by CNET

The US Federal Trade Commission and a coalition of more than 40 states and territories sued Facebook on Wednesday, alleging the social media giant had illegally stifled competition by snapping up rivals to protect its monopoly power in social networking. 

The joint actions focus on Facebook’s key acquisitions of Instagram, a photo-sharing service, and WhatsApp, an encrypted messaging app. The deals sealed Facebook’s dominance in social networking, the lawsuits contend.

“For nearly a decade, Facebook has used its dominance and monopoly power to crush smaller rivals and snuff out competition, all at the expense of everyday users,” New York Attorney General Letitia James said in a statement. “Today, we are taking action to stand up for the millions of consumers and many small businesses that have been harmed by Facebook’s illegal behavior.”

Facebook’s alleged monopoly has harmed consumers, resulting in fewer choices for social networking because it isn’t easy for users to migrate their data to other platforms. The social media giant, which makes money from ads, has also come under fire for not doing enough to protect the privacy of its 2.7 billion monthly users.  

The lawsuit brought forth by 46 states and Guam and the District of Columbia asks a federal court to stop Facebook’s alleged anticompetitive practices and require the social network to notify these states before acquiring companies valued at $10 million or more. The court should also take other measures that it determines is appropriate including the divestment of Instagram and WhatsApp, according to the lawsuit.

The FTC complaint, filed in a federal court, also could require Facebook to divest the two companies and seek prior approval or notice before an acquisition. 

Jennifer Newstead, vice President and general counsel for Facebook, said in a statement that the FTC cleared its acquisitions of Instagram and WhatsApp. Facebook users and advertisers choose to use the social network because of its “value” not because they’re forced to do so, she added.

“This is revisionist history. Antitrust laws exist to protect consumers and promote innovation, not to punish successful businesses,” she said. Facebook fueled the success of Instagram and WhatsApp and the government’s lawsuit sends a “chilling warning to American business that no sale is ever final.”

The lawsuits comes as lawmakers and regulators scrutinize the power that tech giants wield. In addition to Wednesday’s actions, the US Department of Justice’s antitrust division has been talking to developers about their interactions with Oculus, the virtual reality headset maker Facebook owns, Bloomberg reported last week. In October, the DOJ filed a landmark lawsuit against Google for allegedly holding monopolies in both search and search advertising.

European antitrust regulators have also been cracking down on major tech companies. In November, the European Commission filed antitrust charges against Amazon over how the e-commerce giant uses data gathered from sellers on its platform. Regulators are also looking into Facebook’s access to user data and whether the company used that information to stifle competition. Google has been hit with a series of fines, including one last year for $1.7 billion over “abusive” online advertising practices. 

State and federal investigators had reportedly been looking into whether Facebook strategically purchased photo service Instagram in 2012 and messaging app WhatsApp in 2014 to squash its rivals. Over the summer, CEO Mark Zuckerberg was asked about the acquisition during a high-profile House antitrust subcommittee hearing that included the heads of Google, Amazon and Apple.

The company has also said social media is a competitive space, citing rivals such as short-form video app TikTok, short-messaging site Twitter and Google-owned video platform YouTube.

Facebook has been accused of engaging in other anti-competitive business practices including the use of data to identify its competitors. In a 449-page report released in October, the House antitrust subcommittee accused Facebook, Google, Amazon and Apple of abusing their monopoly power. Facebook’s lack of competition, the report said, has led to major problems, such as the rise of misinformation on social media and poorer user privacy protections.

Some of Facebook’s most vocal critics, including one of the site’s co-founders, Chris Hughes, say Instagram and WhatsApp should be separated from Facebook. Despite these calls, Facebook has been tying its apps more closely together. The company this year rolled out a new way for users on Facebook Messenger to chat with people on Instagram without having to switch apps.



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