The United States government and 48 states on Wednesday filed lawsuits against Facebook, accusing the social media giant of abusing its market power to “crush” smaller competitors, AP reported.
The lawsuits sought remedies that could include a forced spinoff of the company’s Instagram and WhatsApp platforms. A corporate spinoff pertains to the creation of an independent company through sale or distribution of new shares of an existing business or division of a parent company.
The antitrust lawsuits are led by the US Federal Trade Commission and New York Attorney General Letitia James. “It’s really critically important that we block this predatory acquisition of companies and that we restore confidence to the market,” said James at a press conference.
The trade commission said that Facebook has engaged in “a systematic strategy” to eliminate its competition, including by buying smaller rivals such as WhatsApp in 2014 and Instagram in 2012. The attorney general echoed similar views in her press conference. She said that Facebook “used its monopoly power to crush smaller rivals and snuff out competition, all at the expense of everyday users”.
North Carolina Attorney General Josh Stein, who was on the executive committee that conducted a multi-state investigation into Facebook, said the lawsuit has the potential to alter the communications landscape in the same way the breakup of AT&T’s local phone service monopoly did in the 1980s.
“Our hope is to restructure the social networking marketplace in the United States, and right now there’s one player,” Stein said. James also clarified that the executive committee worked with the Federal Trade Commission, but the attorneys general conducted their investigation separately.
Facebook responded to the lawsuits, claiming the actions by the government were “revisionist history” that punishes successful businesses. The company said that the trade commission had cleared the Instagram and WhatsApp acquisitions years ago. “The government now wants a do-over, sending a chilling warning to American business that no sale is ever final,” Facebook General Counsel Jennifer Newstead said in a statement.
In a post on the social media giant’s internal discussion platform, Facebook Chief Executive Mark Zuckerberg told employees he did not anticipate “any impact on individual teams or roles” resulting from the lawsuits, reported Reuters. He said the litigations were “one step in a process which could take years to play out in its entirety”.
President-elect Joe Biden has been considering breaking up tech giants and had also referred to Zuckerberg as a “real problem”. Although Facebook had acquired Instagram and WhatsApp some years ago, they are most frequently referred to by critics of the platform as subsidiaries that need to be split off. Facebook has bought around 70 companies including WhatsApp and Instagram, according to AP.
Zuckerberg had earlier said that both these companies would be run independently. However, they are becoming increasingly integrated with Facebook as users can now link accounts and share content across platforms. With Instagram having over 1 billion (100 crore) users worldwide, splitting it off could pose difficulties, according to AP.
In addition, a House Judiciary Committee has since June 2019 led a bipartisan congressional inquiry into the state of competition in digital markets, including an examination of Facebook’s dominance online. Amazon and Apple also are also under the lens of Congress and federal authorities for alleged anti-competitive conduct.
The lawsuits are one of the biggest antitrust cases in a generation and can be compared to the lawsuit against Microsoft in 1998. In the Microsoft case, the government had eventually settled it, but the years-long court battle and extended scrutiny blocked the technology company from dominating competitors. The Microsoft lawsuit is also credited for paving the way for the growth of the Internet.
US lawmakers hail lawsuits
Various lawmakers have hailed the decision to sue Facebook, with many calling it a “long ovedue” move, reported PTI.
House Judiciary Committee chairperson Jerrold Nadler said that rather than competing with Instagram and WhatsApp, it seemed that Facebook simply bought these firms to expand its dominance. “As a result, Facebook has illegally maintained its monopoly, allowing it to engage in other abusive conduct,” he said. “This should never have happened in the first place, and accountability is long overdue.”
Congressman Joe Neguse, the vice chairperson of the House Judiciary Subcommittee on Antitrust, Commercial and Administrative Law, said the panel’s inquiry unearthed evidence that Facebook used its market power to acquire, clone, or eliminate its competitive threats to maintain its monopoly in social networking.
“It’s purchase of Instagram and WhatsApp have allowed Facebook to own the top four most downloaded apps of the last decade. Left unchecked, Facebook’s monopoly will remain harmful to consumers, innovation and our democracy. Today’s antitrust lawsuits against Facebook is a welcome step to ensuring we have robust competition in the digital marketplace, and it is long overdue, he said.”— Congressman Joe Neguse
Senator Mike Lee noted that the antitrust committee members were finally taking the threats posed by tech giants seriously. Senator Richard Blumenthal, a member of the Senate Judiciary Committee, said the litigations “should set a new standard for how we fight back against entrenched corporate power”.
However, Information Technology and Innovation Foundation, a public policy think tank, condemned the lawsuits, saying it threatens both the country’s competitiveness and consumers.