Antitrust goes social: FTC, states sue Facebook

December 15, 2020

Antitrust Alert

Author(s): Gordon L. Lang, Alycia A. Ziarno

On December 9, the Federal Trade Commission (FTC) and the attorneys general of 46 states, Guam, and the District of Columbia filed antitrust suits against Facebook alleging violation of federal antitrust law. (FTC complaint and states’ complaint). The complaints follow a long investigation and calls for action by politicians and others. Interestingly, the FTC’s decision to bring a complaint involved an unusual coalition. Chairman Simons, a Republican, joined the two Democratic commissioners in authorizing the complaint, while the two other Republican commissioners opposed it.

The FTC and states’ complaints differ, but the central allegation is the same. According to the regulators, Facebook has maintained a monopoly in violation of Section 2 of the Sherman Act in the U.S. market for “Personal Social Networking Services.” Facebook has allegedly accomplished this by buying competitive threats, such as Instagram and WhatsApp, and conditioning access by third-party applications to Facebook’s platform to apps not offering competitive services or dealing with those who do. Among other things, the complaints seek the divestiture of acquired assets, such as Instagram and What’s App (indeed, the States charge these acquisitions violated Section 7 of the Clayton Act), and an order requiring Facebook to end its anticompetitive practices. The FTC also asks that Facebook be prohibited from making future acquisitions without its approval.

Facebook does not charge for its services. But, the FTC and states claim that consumers were harmed because if Facebook faced competition from other sites, there could be increased innovation, consumer choice among social networks offering different advertising types and amounts, and notably, different privacy protections. The FTC and states also contend that advertisers, who are the source of Facebook’s revenue, would also have benefitted by Facebook competing with others.

For its part, Facebook has blasted the lawsuits as “revisionist history.” It says the FTC conducted an in-depth second request investigation of the Instagram deal in 2012 before deciding to take no action, and the EU investigated the WhatsApp deal before approving it in 2014. The company says that it has invested billions of dollars in WhatsApp and Instagram, and those products today reflect what Facebook built, not what it acquired. And, it points out, before its acquisition, WhatsApp had a subscription fee, but Facebook provides it for free.

We will continue to track these events as they unfold.

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