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It’s Facebook against the world as US regulators take social media giant to court

United States trade regulators have asked for Facebook to be forced to sell its Instagram and WhatsApp messaging services, accusing the company of abusing its market power in social networking to crush smaller competitors.

Dec 10, 2020, updated Dec 10, 2020
Facebook CEO Mark Zuckerberg (Photo: AP Photo/Marcio Jose Sanchez, File)

Facebook CEO Mark Zuckerberg (Photo: AP Photo/Marcio Jose Sanchez, File)

In a lawsuit, the Federal Trade Commission (FTC) is seeking the separation of the services from Facebook, saying Facebook has engaged in “a systematic strategy” to eliminate its competition, including by purchasing smaller up-and-coming rivals like Instagram in 2012 and WhatsApp in 2014.

The lawsuit — which includes 46 states, Guam and the District of Columbia — accuses Facebook of anti-competitive conduct and using its market dominance to harvest consumer data and reap a fortune in advertising revenues.

The antitrust lawsuits were announced by the Federal Trade Commission and New York Attorney-General Letitia James.

James said in a press conference that Facebook “used its monopoly power to crush smaller rivals and snuff out competition, all at the expense of everyday users”.

“It’s really critically important that we block this predatory acquisition of companies and that we restore confidence to the market,” James said.

James alleged Facebook had a practice of opening its site to third-party app developers, then abruptly cutting off developers that it saw as a threat.

The coalition of governments are confident they will succeed, James said, pointing to previous break-up actions, such as the 1980s action against telecommunications company AT&T, as possible precedent.

“Personal social networking is central to the lives of millions of Americans,” Ian Conner, director of the FTC’s Bureau of Competition, said in a statement.

“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.”

Facebook called the government actions “revisionist history” that punishes successful businesses and noted that the FTC 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.

Facebook is the world’s biggest social network with 2.7 billion users and a company with a market value of nearly $US800 billion ($1.07 trillion), and whose chief executive Mark Zuckerberg is the world’s fifth-richest individual.

Facebook paid $US1 billion for Instagram, bolstering the social networking platform’s portfolio a month before its stock went public. At the time, the photo-sharing app had about 30 million users and wasn’t producing any revenue.

The suit alleges that Facebook executives including Zuckerberg, “quickly recognised that Instagram was a vibrant and innovative personal social network and an existential threat to Facebook’s monopoly power.”

Zuckerberg vowed both companies would be run independently, but over the years the services have become increasingly integrated with users able to link accounts and share content across the platforms. Instagram now has more than 1 billion users worldwide.

Facebook acquired WhatsApp, an encrypted messaging service, for $US19 billion.

Facebook has started to integrate Instagram and WhatsApp, most recently by linking the apps’ chat functions with its Messenger service.

 

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