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FTC Sues Facebook for Monopolization Tactics

Jan 12 | 2021  by

The Federal Trade Commission has filed a lawsuit against Facebook, Inc. alleging the tech-giant illegally maintained its social networking monopoly through a years-long utilization of anticompetitive tactics. The lawsuit comes after a lengthy investigation with the cooperation of attorneys general of 46 states including the District of Columbia and Guam.

The FTC specifically references Facebook’s 2012 purchase of up-and-coming social media rival Instagram, its 2014 acquisition of mobile messaging app WhatsApp, as well as the anti-competitive conditions Facebook imposes on software developers using their platform.

The Federal Trade Commission and this lawsuit seek a permanent injunction in federal court that could require Facebook to: Divest assets including Instagram and WhatsApp; prohibit the company from imposing anti-competitive conditions on software developers; and require them to notify and seek approval for future mergers and acquisitions.

2012 saw the acquisition of two-year-old photo-sharing app, Instagram for an impressive $1 billion. The move was viewed as smart, considering the new application offered a formidable mobile experience, an area Facebook was severely lacking at the time.

Fast forward two years to 2014, Facebook acquires WhatsApp for $19 billion, an acquisition that blows their Instagram purchase out of the water. WhatsApp was five years old at the time, and Facebook CEO Mark Zuckerberg was looking to dominate the messaging world against competitors such as Twitter, Google, and Microsoft’s Skype.

There is an obvious pattern in Facebook’s business strategy, that is identifying its weaknesses, evaluating competition in the market, and deciding which competitor can provide the largest advantage if acquired.

So how are they imposing anticompetitive conditions on software developers? Well, the FTC lawsuit alleges that Facebook imposed conditions on third-party software developers’ access to valuable interconnections on its platform, such as the application programming interfaces (“APIs”) that allow developers’ apps to interact with Facebook. More specifically, Facebook allegedly made API keys available to third-party applications only if they refrain from developing competing functionalities.

In recent years, Government entities are becoming increasingly more aggressive seeking out and intervening with companies that pose as anti-competitive threats to industries. More specifically focusing on big-tech and social media conglomerates. In July 2020, Facebook along with Amazon, Apple, and Google, sat on Capitol Hill to defend their business practices. The 6-hour grilling aimed to explore whether the tech industry’s most influential core gained and maintained their status through potentially anti-competitive means.

Switching to October of this year, the Justice Department filed a lawsuit against Google alleging monopolistic business practices in the search and search advertising landscapes – read our recent blog on this news. Ian Conner, Director of the FTC’s Bureau of Competition said: “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.”

If the FTC is successful in their lawsuit, and Facebook is required to divest their assets in both Instagram and WhatsApp, do you think they will still be successful?