Facebook is facing antitrust lawsuits initiated Wednesday by the US Federal Trade Commission and a coalition of attorneys general from 46 states, Washington, DC, and Guam. The lawsuits allege that Facebook has abused its position as the “world’s dominant online social network” by acquiring companies to maintain its monopoly over its rivals.
The issue arose when Facebook purchased Whatsapp in 2014 for $16 billion and Instagram in 2012 for $1 billion. The lawsuit alleges that Facebook has been buying competitive advantage by acquiring companies that were previously competitive threats. Facebook adopted an “it’s better to buy than to compete” corporate mentality, comparing itself to other silicon-valley acquirers like Google and Apple. It also highlighted several instances in which Facebook has attempted to buy rival tech giants Twitter and Snapchat.
Several other software skirmishes were highlighted in the lawsuits. In one instance, Zuckerberg ordered engineers to cut off Facebook APIs from working on Vine, a competitive social network service. Vine’s user growth slowed after the function to share its videos to Facebook was blocked. Facebook applied similar obstruction tactics on social-networking app Path. Path terminated its service in late 2018.
The suit also details how Facebook purchased Onavo, a surveillance company that analyses and tracks web activities. Facebook has used Onavo to track emerging competitors. The suit described the usage of Onavo as Facebook having an “unparallel competitive intelligence” machine. By buying Onavo, Facebook is entitled to an all-encompassing power not entitled to other competitors. Facebook shut down Onavo in 2019, but the European Commission has started a stand-alone antitrust probe on Facebook’s intel surveillance using Onavo.
Facebook’s lawyer Jennifer Newstead argued that laws should not punish successful companies in a recent statement. She stated that antitrust regulators from the FTC have cleared both purchases of the companies back in 2012 and 2014, as they did not purport to threaten competition.
The FTC is seeking a permanent injunction on Facebook to divests Whatsapp and Instagram. It will also seek a permanent injunction to prevent Facebook from practicing anti-competitive measures on third-party software. The States and territories are seeking remedies that will deem the purchase of Whatsapp and Instagram a violation of the Clayton and Sherman Acts. The Clayton Act is a piece of legislation that defines unethical business practices and develops on the US antitrust regime. The Sherman Act prescribes the rule of free competition amongst individuals and entities that are engaged in commerce.
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