Today, the U.S Federal Trade Commission and 46 States filed antitrust lawsuits against the social media tech giant, Facebook. Accusing the company of anti-competitive behavior of its “buy or bury” strategy. Reuters reports that Facebook is the second tech company to face major legal challenges this year. In October, Alphabet Inc’s Google was sued by the U.S. Justice Department for using its market position to crush rivals or smaller developers.
In July, the U.S House judiciary subcommittee began an anti-trust investigation of anti-competitive policies and practices of Silicon Valley’s four tech giants: Apple, Google, Facebook, and Amazon. Tim Cook, Apple’s CEO, explained his company’s acquisition business model in an interview to separate it from the others. He said,
“If you look at the things behind the investigation, the things are acquisitions, and if you noticed, we didn’t get any questions on acquisitions because our approach on acquisitions has been to buy companies where we have challenges, and IP, and then make them a feature of the phone.”
Although the committee completed its probe in October, Facebook’s troubles didn’t end there. Now the social media company is accused of buying rivals to deter competition and might be forced to sell Instagram and WhatsApp which it acquired in 2012 and 2014, respectively. Four U.S states, Alabama, Georgia, South Carolina, and South Dakota have not participated in the lawsuit.
Facebook faces antitrust lawsuits in the U.S.
It is reported that primarily focusing on the acquisition of Instagram and WhatsApp, the Federal and state regulator is accusing Facebook of acquiring the apps with intent to crush completion by small developers. It states that,
The lawsuits highlight the growing bipartisan consensus to hold Big Tech accountable for its business practices and mark a rare moment of agreement between the Trump administration and Democrats, some of whom have advocated breaking up both Google and Facebook.
The complaints on Wednesday accuse Facebook of buying up rivals, focusing specifically on its previous acquisitions of photo-sharing app Instagram for $1 billion in 2012 and messaging app WhatsApp for $19 billion in 2014.
The regulators are seeking to “unwound” the acquisitions which were approved by FTC years ago. On behalf of a coalition of 46 states, New York Attorney General Letitia James said that
“For nearly a decade, Facebook has used its dominance and monopoly power to crush smaller rivals, snuff out competition, all at the expense of everyday users.
The company acquired rivals before they could threaten the company’s dominance.”
For its defense, Jennifer Newstead, Facebook’s general counsel calls the lawsuits “revisionist history” and claims that both apps prospered after the social media company invested billions of dollars in them and users benefited from the company’s decision to offer the apps for free. She further added,
“The government now wants a do-over, sending a chilling warning to American business that no sale is ever final.”
Antitrust experts have a divided opinion on the said strength of the lawsuit. Some say that Mark Zuckerberg’s, Facebook’s CEO, former statements make the regulators’ case strong against the company, in a 2008 email CEO wrote that it was better to buy than to compete. Judging on the lapsed duration of the acquisitions, other experts and investors call the case weaker than Google’s.
Whatever the decision may be, the longer the legal battle continues it will not only drain resources but will also affect social media’s growth like Microsoft in 1998. The publisher reports that Facebook’s share fell by 3% as soon as the news of lawsuits hit the media.
In an unexplained twist of events, Facebook has fallen into the hole it was digging for Apple and other rivals. Upset with App Store review policy, commission rate, and the new ATT privacy feature, Mark Zuckerberg strongly criticized Apple on various platforms. And in addition, he was reported to influence the Trump administration to ban popular app TikTok in the country, along with encouraging deeper scrutiny of Apple.
We will keep you updated as the case proceeds. Let us know in the comments what you think about Facebook’s accountability.