FTC, State Prosecutors Seek to Break Up Facebook for 'Anticompetitive Conduct'
The FTC and a coalition of attorneys general argue that Facebook acquired Instagram and WhatsApp to stop them from leapfrogging Facebook. But Facebook says the legal action is "revisionist history."
The Federal Trade Commission and 46 state attorneys general are calling on the court to potentially break up Facebook over claims the company has an illegal monopoly over the social networking industry.
On Wednesday, the FTC and a coalition of state prosecutors filed two antitrust lawsuits against Facebook, alleging the company established the monopoly by buying would-be rivals, Instagram and WhatsApp, in 2012 and 2014 respectively.
In response, FTC and state prosecutors will ask a U.S. district court to rectify the situation, which could include forcing Facebook to divest both properties. "Our aim is to roll back Facebook's anticompetitive conduct and restore competition so that innovation and free competition can thrive," Ian Conner, director of the FTC's Bureau of Competition, said in today's announcement.
The lawsuits' central claim is that Facebook recognized that both Instagram and WhatsApp posed a threat to its hold over the social networking industry. But rather than compete, the company deliberately sought to acquire them, depriving consumers and the ad industry of alternatives to Facebook.
"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," said New York State Attorney General Letitia James, who's leading the coalition of state prosecutors.
The lawsuits also allege the company can impose "anti-competitive conditions" on third-party software developers by denying them access to the social network's API — the interface needed for an app to connect to a Facebook user account or service.
"For example, in 2013, Twitter launched the app Vine, which allowed users to shoot and share short video segments. In response, according to the complaint, Facebook shut down the API that would have allowed Vine to access friends via Facebook," the FTC says.
To no surprise, Facebook is rejecting the accusations. "This is revisionist history. Antitrust laws exist to protect consumers and promote innovation, not to punish successful businesses," the company's general counsel, Jennifer Newstead, said in a statement.
"Instagram and WhatsApp became the incredible products they are today because Facebook invested billions of dollars, and years of innovation and expertise, to develop new features and better experiences for the millions who enjoy those products," she added.
Newstead also points out the FTC originally cleared Facebook's acquisitions of both Instagram and WhatsApp years earlier. "The government now wants a do-over, sending a chilling warning to American business that no sale is ever final. People and small businesses don't choose to use Facebook's free services and advertising because they have to, they use them because our apps and services deliver the most value," she said.
The company plans on fighting both lawsuits in court. But if Facebook loses, the social network faces the prospect of a judge forcing the company to restructure its entire business.
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