11:51am PT by Eriq Gardner
Facebook's Acquisitions Targeted in Lawsuits By U.S. States, FTC
In a move that could culminate in Facebook being forced to divest prized assets, nearly all U.S. states led by New York have filed an antitrust action against the social media giant. The complaint filed on Wednesday in D.C. federal court alleges that Facebook illegally maintains "monopoly power by deploying a buy-or-bury strategy that thwarts competition and harms both users and advertisers."
The complaint alleges that Facebook is no longer content to compete on the quality of its service. Instead, with a detailed account of the decision-making behind Facebook's 2012 purchase of Instagram and its 2014 acquisition of WhatsApp, state attorney generals allege that Mark Zuckerberg's company is in "destroy mode," with a strategy aimed at snuffing out competitive threats.
"Users of personal social networking services have suffered and continue to suffer a variety of harms as a consequence of Facebook’s illegal conduct, including degraded quality of users’ experiences, less choice in personal social networks, suppressed innovation, and reduced investment in potentially competing services," continues the complaint. "By eliminating, suppressing, and deterring the emergence and growth of personal social networking rivals, Facebook also harms advertisers in a number of ways, including less transparency to assess the value they receive from advertisements, and harm to their brand due to offensive content on Facebook services."
In addition to having Facebook's acquisition of Instagram and WhatsApp be declared a violation of the Clayton Act, the states (all but Georgia and South Carolina) are demanding that Facebook be required to provide notice anytime the company wishes to make an acquisition larger than $10 million.
Additionally, the Federal Trade Commission has filed its own complaint against Facebook in federal court. Alleging that Facebook has maintained its monopoly position by buying up companies that present competitive threats, the complaint is similar in scope to the one from the U.S. states, although it perhaps has a slightly deeper focus on how Facebook leverages access to and control of user data.
Besides seeking a breakup for Facebook, the FTC also demands the company be permanently enjoined from imposing anticompetitive conditions on access to APIs and data, plus have a monitor look over Facebook and force the company to file periodic compliance reports.
“This is revisionist history,” said Facebook General Counsel Jennifer Newstead in a statement. “Antitrust laws exist to protect consumers and promote innovation, not to punish successful businesses. 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. The most important fact in this case, which the Commission does not mention in its 53-page complaint, is that it cleared these acquisitions years ago. The government now wants a do-over, sending a chilling warning to American business that no sale is ever final. People and small businesses don’t choose to use Facebook’s free services and advertising because they have to, they use them because our apps and services deliver the most value. We are going to vigorously defend people’s ability to continue making that choice.”