FTC, States’ Lawsuits Seek Facebook To Divest Instagram, WhatsApp

The Federal Trade Commission or FTC and state attorneys general filed lawsuits against Facebook seeking divestiture of Instagram and WhatsApp, alleging illegal monopolization.

The agency, along with a coalition of attorneys general of 46 states, the District of Columbia, and Guam, filed the suits following an investigation, seeking a permanent injunction in federal court that could require divestiture of these apps, among other things.

In a statement, the FTC said the social media network is illegally maintaining its personal social networking monopoly through a years-long course of anticompetitive conduct.

They accused Facebook of engaging in a systematic strategy to eliminate potential competitive threats to its dominance. This includes its 2012 acquisition of up-and-coming rival Instagram, 2014 acquisition of the mobile messaging app WhatsApp, and the imposition of anticompetitive conditions on software developers.

According to the plaintiffs, Facebook’s course of conduct harms competition, leaves consumers with few choices for personal social networking, and deprives advertisers of the benefits of competition.

Meanwhile, calling the lawsuits as “revisionist history,” Facebook said both acquisitions were reviewed by relevant antitrust regulators at the time and allowed these deals to move forward because they did not threaten competition.

Trying to justify its position, Facebook also said the lawsuits ignore the reality that with so many rivals, its customers can at any time choose to move to another product or service.

The company said given that there are more choices for people, it is competing for their time and attention against other apps through which they share, connect, and communicate.

Facebook’s acquisition of Instagram for $1 billion in April 2012 allegedly neutralizes the direct threat posed by Instagram and also makes it more difficult for another personal social networking competitor to gain scale. The complaint said that Facebook chose to buy an emerging threat rather than compete, and announced an agreement in February 2014 to acquire WhatsApp for $19 billion.

In response, Facebook said the FTC and states stood by for years while it invested billions of dollars and millions of hours to make Instagram and WhatsApp into the apps that users enjoy today.

Facebook noted that at the time of acquisition, Instagram had about 2% of the users it has today, just 13 employees, no revenue and virtually no infrastructure of its own. Meanwhile, WhatsApp charged a subscription fee at the time of acquisition.

It was under Facebook that Instagram became more reliable and avoided the growing pains, and has grown to over a billion users worldwide, with more features and better experiences, the social networking giant stated. Further, WhatsApp was made free worldwide, with new features like voice and video calling, and added security.

Facebook said it also competes for advertising dollars with other digital platforms, from Google to TikTok, and with other channels such as television, radio and print. Unfortunately, these lawsuits misunderstand the advertising landscape and offer instead a distorted view of how advertisers spend to reach their target audiences, the company believes.

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