The Federal Trade Commission has launched new legal action against Facebook, which alleges that the company is "illegally maintaining its personal social networking monopoly through a years-long course of anticompetitive conduct".
The suit specifically focuses on Facebook's acquisitions of Instagram and WhatsApp, and calls for a divestment of the two apps, which would break-up Facebook into separate parts.
As per the FTC:
"Following a lengthy investigation in cooperation with a coalition of attorneys general of 46 states, the District of Columbia, and Guam, the complaint alleges that Facebook has engaged in a systematic strategy - including its 2012 acquisition of up-and-coming rival Instagram, its 2014 acquisition of the mobile messaging app WhatsApp, and the imposition of anticompetitive conditions on software developers - to eliminate threats to its monopoly. This course of conduct harms competition, leaves consumers with few choices for personal social networking, and deprives advertisers of the benefits of competition."
The action claims that Facebook has total dominance over the 'social advertising' market, which it has solidified through its acquisitions and intimidatory behavior. Facebook CEO Mark Zuckerberg faced questions on the same from a House Judiciary Committee earlier this year, which, among other findings, suggested that Facebook purchased Instagram to 'neutralize' a competitor'.
That initial examination, however, did not set out any course for legal action, which is now being implemented by the FTC. That could eventually lead to Facebook being forced to sell off Instagram and WhatsApp, significantly reducing its market presence.
Which would be a drastic step, and I'm not sure anyone believes that it will go that far, at least at this stage. But it's a real possibility, laid out within the terms of the FTC complaint.
"The FTC is seeking a permanent injunction in federal court that could, among other things: require divestitures of assets, including Instagram and WhatsApp; prohibit Facebook from imposing anticompetitive conditions on software developers; and require Facebook to seek prior notice and approval for future mergers and acquisitions."
Facebook issued a quick response via tweet, but says that it will provide a more in-depth reply shortly.
We're reviewing the complaints & will have more to say soon. Years after the FTC cleared our acquisitions, the government now wants a do-over with no regard for the impact that precedent would have on the broader business community or the people who choose our products every day.— Facebook Newsroom (@fbnewsroom) December 9, 2020
In the past, Facebook has successfully argued that it's only one part of a much broader digital advertising landscape, and that it can't truly be considered monopolistic given the breadth of options available, both for advertisers and consumers.
One specific argument could be the rise of TikTok - despite the FTC's claims that Facebook has stifled competition, TikTok has risen to become a rival for Facebook in various respects. Snapchat, too, has grown in the shadow of The Social Network - but then again, in both cases, Facebook did try its best to limit each app's growth.
Facebook made an offer to acquire Snapchat back in 2013, which CEO Evan Spiegel famously refused, while Facebook reportedly sought to sow questions around TikTok's Chinese ownership with US Senators, which lead to an official investigation being launched into the app. Facebook has also launched copycat functions of each within its apps to blunt their respective growth.
Yet, even so, TikTok and Snapchat have succeeded in many respects. Can Facebook then use this as an argument that it doesn't have a definitive hold on the market?
The legal technicalities will go into far more depth, and it's impossible to know which way the case will lean. But it's a significant challenge for Zuck and Co, with major impacts at stake.
Will Facebook have to sell off Instagram? Will it be able to argue that, due to the merger of its messaging functions, it can't split up its apps (which some have suggested is a defensive tactic for this exact occurence)?
Expect a prolonged legal battle, with more questions than answers, which will carry on throughout 2021 and beyond.
UPDATE: Facebook has now posted its official response, in which it says the FTC lawsuit is based on 'revisionist history'.
"This lawsuit risks sowing doubt and uncertainty about the US government’s own merger review process and whether acquiring businesses can actually rely on the outcomes of the legal process. It would also punish companies for protecting their investment and technology from free-riding by those who did not pay for the innovation, making those companies less likely over the long term to make their platforms available to spur the growth of new products and services."
Facebook also highlights both Snapchat and TikTok as key competitors, along with Google, Twitter, Amazon and Microsoft.