FTC, states file antitrust suits against Facebook

Suits take aim at acquisitions of Instagram and WhatsApp

Mark Zuckerberg, Chief Executive Officer of Facebook, testifies remotely during the Senate Judiciary Committee hearing in November.  (Bill Clark/CQ Roll Call file photo)
Mark Zuckerberg, Chief Executive Officer of Facebook, testifies remotely during the Senate Judiciary Committee hearing in November. (Bill Clark/CQ Roll Call file photo)
Posted December 9, 2020 at 5:40pm

The Federal Trade Commission and a bipartisan group of 48 attorneys general filed concurrent antitrust lawsuits against Facebook on Wednesday, accusing the company of engaging in anti-competitive conduct to maintain a monopoly over personal social networking.

The lawsuits, filed in the U.S. District Court for the District of Columbia, allege that Facebook illegally acquired other companies, including Instagram and WhatsApp, to undercut rivals before they posed a threat to Facebook’s dominance.

The suits also accuse the company of imposing anti-competitive terms on third-party software developers to prevent them from building competing products.

“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 press conference. “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.”

The lawsuits are asking the courts to consider forcing Facebook to divest from acquisitions deemed to have been illegal, which means the company could be forced to split off Instagram and WhatsApp should either prevail. “We are pretty confident we will succeed,” said James.

[OK to change Section 230, Facebook and Twitter CEOs say, but how remains elusive]

In a statement, Jennifer Newstead, Facebook's general counsel, called the lawsuits an attempt at "revisionist history."

"Antitrust laws exist to protect consumers and promote innovation, not to punish successful businesses," Newstead said. "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 noted that the FTC approved the acquisitions of both companies.

"The government now wants a do-over, sending a chilling warning to American business that no sale is ever final," she said.

The cases mark the second and third major lawsuits against a large technology company to be announced by law enforcement this year, after the Justice Department and 11 states sued Google in October. They come amid heightened antitrust scrutiny of online market power as lawmakers and regulators seek to rein in the power amassed by Silicon Valley in recent decades.

Founded in 2004 in the Harvard University dormitory of CEO Mark Zuckerberg, Facebook generated around $70 billion in revenue last year. But along the way it has incurred the wrath of lawmakers, privacy advocates and civil rights activists in addition to antitrust enforcers. Last year, the company was fined $5 billion by the FTC for privacy violations.

Facebook, along with Google, Amazon and Apple, have become the main targets of antitrust hawks.

A report released in October by Democrats on the House Judiciary Committee concluded that all four companies maintain monopolies, including Facebook in social networking. The report urged Congress to pass new antitrust laws and force the companies to separate their businesses and limit the markets in which they can simultaneously operate.

Rep. David Cicilline, D-R.I., the chairman of the Judiciary Antitrust subcommittee, called the lawsuits “a major step in our ongoing work to bring the tech industry's monopoly moment to an end.”

“In the absence of competition and accountability, Facebook has harmed people's privacy and allowed disinformation to flourish on its platform, threatening our democracy,” Cicilline said. “Facebook has broken the law. It must be broken up.”

Republicans, including Sen. Josh Hawley, R-Mo., also offered plaudits. “The Instagram and WhatsApp mergers with Facebook were anti-competitive, they were meant to be anti-competitive, and they should be broken up,” Hawley said on Twitter.

While the DOJ and FTC lawsuits against Google and Facebook arrive at the conclusion of President Donald Trump’s term in office, it remains likely that they will be continued by regulators and law enforcement officials appointed by President-elect Joe Biden, who has been critical of Big Tech.

The lawsuit brought by James and the attorneys general of 45 other states plus the District of Columbia and Guam will proceed regardless of the new administration in Washington.