In what may be the most consequential U.S. antitrust action in years, the U.S. government and 48 state attorneys general have filed suit against Facebook, asking that the social media giant sell off its WhatsApp messaging app and the social photo platform Instagram.
Facebook CEO Mark Zuckerberg has in the past spoken of such a remedy as an “existential” threat to his company.
The U.S. Federal Trade Commission and the state AGs charge that Facebook has become a powerful monopoly through its practice of buying up competing services.
“For nearly a decade, Facebook has used its dominance and monopoly power to crush smaller rivals and snuff out competition, all at the expense of everyday users,” New York Attorney General Letitia James said in a statement Wednesday. “Today, we are taking action to stand up for the millions of consumers and many small businesses that have been harmed by Facebook’s illegal behavior.”
The FTC and state AGs have been investigating Facebook’s strategic and business practices for more than a year. The attorneys reportedly held a meeting in New York in October to decide whether, and how, to go forward with their action. They apparently decided to go big, and go it together, which could pose a real threat to Facebook as we know it today.
Jennifer Newstead, Facebook’s vice president and general counsel, said the company plans to fight the action with all its might.
“This is revisionist history,” she said 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.”
Facebook bought Instagram for $1 billion in 2012, and WhatsApp for $19 billion in 2014. Both companies’ user bases and revenue have grown rapidly since coming under Facebook’s control. Facebook, Instagram, and WhatsApp are now the world’s top social apps.
Facebook has for some time been working to unite the back-end systems of Facebook, WhatsApp, and Instagram—ostensibly to create a better service for people who use more than one of the services, but more likely to create a more unified business that will be harder to pull apart by regulators.
Facebook launched in 2004 and, powered by a sprawling advertising business, is worth more than $800 billion.
As Facebook’s popularity, reach, and influence in policy circles have accelerated in recent years, lawmakers on both sides of the aisle have become increasingly interested in reigning in the company. And with a Biden administration on the way, support in Washington for some major action against Facebook may only grow.
“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,” Newstead added. “We are going to vigorously defend people’s ability to continue making that choice.”