Facebook might be forced to sell its prized assets WhatsApp and Instagram following the US Federal Trade Commission and almost every US state filed lawsuits against the social media firm, saying it used a “buy or bury” approach to snap up competitions and keep smaller opponents at bay.
With the filing of this double lawsuits on Wednesday, Facebook becomes the 2nd tech company to confront a major legal challenge this year after the US Justice Department sued Alphabet Inc’s Google in October, accusing the $1 trillion business of using its market power to fend off competitors.
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 government and Democrats, a few of whom have advocated breaking up both Google and Facebook.
The complaints on Wednesday accuse Facebook of purchasing rivals, focusing especially on its prior acquisitions of photo-sharing app Instagram for $1 billion in 2012 and messaging app WhatsApp for $19 billion in 2014.
Federal and state regulators said the acquisitions should be unwound – a move that’s likely to put a long legal struggle as the deals were cleared years earlier by the FTC.
“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,” said New York Attorney General Letitia James on behalf of the coalition of 46 nations, Washington, D.C. and Guam. Alabama, Georgia, South Carolina and South Dakota did not engage in the lawsuit.
James said the firm acquired rivals before they could threaten the company’s dominance.
Facebook’s general counsel Jennifer Newstead called the lawsuits “revisionist history” and stated antitrust laws don’t exist to punish “successful companies.” She said WhatsApp and Instagram have triumphed after Facebook spent countless dollars in developing the apps.
“The government now wants a do-over, sending a chilling warning to American business that no sale is ever final,” Newstead explained.
Newstead also increased doubts about alleged harms caused by Facebook, arguing that consumers benefited from the decision to create WhatsApp totally free, and rivals like YouTube, Twitter and WeChat did “just fine” without access to its developer platform.
In a post on Facebook’s internal conversation stage, Chief Executive Mark Zuckerberg told workers he did not anticipate “any impact on individual teams or roles” as a consequence of the lawsuits, he stated were “one step in a process which could take years to play out in its entirety.”
Opinions were turned off to Zuckerberg’s article, as well as for other posts on the suits shared by Newstead and Chief Privacy Officer for Product Michel Protti, according to copies viewed by Reuters. Newstead also warned workers not to post about the cases.
Facebook did not immediately respond to questions about the articles.
Zuckerberg told workers in July that Facebook would “go to the mat” to fight a legal challenge to break up the company, calling it an “existential” threat, based on audio of internal business meetings published by popular tech publisher The Verge.
Although separation remedies are rare, some researchers said the case was remarkably powerful given damning statements from Zuckerberg plucked from Facebook’s own files, like a 2008 email in which he explained “it is better to buy than compete.”
Other specialists such as Seth Bloom of Bloom Strategic Counsel stated the FTC complaint has been “significantly weaker” than the DOJ’s lawsuit against Google.
Investors echoed similar issues.
“I do not know if the FTC or DOJ will be successful in breaking Facebook up.
The lawsuits are the largest antitrust cases in a production, comparable to the litigation against Microsoft Corp in 1998. The federal government eventually settled that case, but the years long court struggle and extended scrutiny prevented the company from thwarting competitors and is credited with clearing the way for the explosive growth of the world wide web.
Last month, Facebook stated it had been buying customer support start-up Kustomer, in an acquisition that the Wall Street Journal said valued Kustomer at $1 billion.
Facebook also bought Giphy, a favourite website for sharing and making animated pictures, or GIFs, in May. That acquisition has drawn scrutiny from the United Kingdom’s competition watchdog.
Facebook shares fell as much as 3 percent following the information before paring losses to close down 1.9%.
The team at Platform Executive hope you have enjoyed the ‘Facebook faces lawsuits that could force sale of Instagram and WhatsApp‘ article. Initial reporting via our official content partners at Thomson Reuters. Reporting by Diane Bartz, Nandita Bose, David Shepardson and Katie Paul. Additional reporting by Elizabeth Culliford and Sinead Carew in New York. Editing by Chris Sanders and Lisa Shumaker.
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