Dozens of attorney generals, as well as the Federal Trade Commission, filed two separate lawsuits against Facebook on Wednesday which attempt to break the social media giant into its component parts: specifically, the divestiture of WhatsApp and Instagram.
The lawsuits claim Facebook illegally suppressed competition by purchasing rival companies that challenged its dominance. This includes its purchase of Instagram for $1 billion in 2012, and its $19 billion acquisition of WhatsApp in 2014. Facebook’s aggressive acquisitions of competing companies, which helped bring the company’s total value to more than $800 billion, violates the Sherman Antitrust Act and the Clayton Antitrust Act, the lawsuits claim.
“Facebook has used its monopoly power to crush smaller rivals and snuff out competition, all at the expense of everyday users,” New York Attorney General Letitia James, who is leading the effort, said in a statement posted to Twitter. “Instead of improving its own product, Facebook took advantage of consumers and made billions of dollars converting their personal data into a cash cow.”
Deleware Attorney General Kathy Jennings echoed James, comparing Facebook to the railroad and telecom monopolies of the past.
“Whether it’s railroads, telecom, or social media, monopolies undermine our economy’s foundation of consumer choice,” Jennings said in a statement. “Facebook knowingly, openly, and illegally made digital hostages of its users and developers over a decade of unfair acquisitions and mistreatment of developers. We are suing not just to hold this company accountable for its conduct, but to release consumers from a monopoly and to allow Delawareans the choice and freedom they deserve.”
In much the same vein, 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.
“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.”
In a statement, Facebook’s VP and general counsel, Jennifer Newstead, claimed the lawsuits were “revisionist history” because it received regulatory approval to purchase WhatsApp and Instagram in the first place. This, of course, ignores the fact that approving an acquisition in no way insulates a company from future legal or regulatory scrutiny. Facebook further asserted that its products are good for users and small businesses “because our apps and services deliver the most value.”
“This is revisionist history. 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,” Newstead said. “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.”
The FTC began looking into Facebook’s anticompetitive practices last summer, while several states began a similar investigation several months after.
In addition to New York, Delaware, plaintiffs in the state lawsuit include Alaska, Arizona, Arkansas, California, Colorado, Connecticut, District of Columbia, Florida, the territory of Guam, Hawaii, Idaho, Illinois, Iowa, Indiana, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming.
Update 4pm ET, Dec. 9: Added statement from Facebook.