Regulators in the US have filed a landmark competition claim against Facebook, accusing it of abusing its market power to takeover or kill smaller competitors.
The US Federal Trade Commission and 48 states and districts have sued the Silicon Valley giant, seeking remedies that could include forcing it to spin-off its Instagram and WhatsApp businesses.
The regulators have accused the tech giantof cutting consumer choice and harming their data privacy. It is the second major US competition case against Big Tech after Google was sued in October by the Justice Department.
Around the world, 2.7 billion people use Facebook’s free service, supported by advertising, to talk to friends or share news. Still more use its other messaging apps.
If Facebook is used by billions of people for no cost, what is the case to answer? Here is everything you need to know:
What are the allegations against Facebook?
The US government alleges that Facebook strategically buys and kills rivals, often paying over the odds, before they have a chance to grow into challengers.
It acquired Instagram in 2012 for $1bn, which at the time had just a handful of staff. In 2013, it acquired an app called Onavo, which allowed Facebook to identify takeover targets from their user data.
Its biggest deal was the $19bn takeover of messaging app WhatsApp, viewed as a major rival to Facebook that was growing rapidly while not using advertising for tracking its users. “Rather than compete on the merits, Facebook illegally protected its turf by buying up or snuffing out competitors,” alleges Rohit Chopra, an FTC commissioner.
Rather than compete on the merits, @Facebook illegally protected its turf by buying up or snuffing out competitors. The lawsuits describe the motives for buying Instagram and WhatsApp, how Onavo was used to monitor threats, and how it buried rivals by cutting off data access. pic.twitter.com/VbEzcwvL2z
— Rohit Chopra (@chopraftc) December 9, 2020
What is the harm to consumers?
While Facebook’s acquisitions may not obviously seem to hit individual users, the regulators argue its monopoly power has meant consumers have less freedom to choose apps that put privacy ahead of advertising revenues.
They also argue there is less choice for businesses to buy adverts online, thanks to Facebook’s massive power in the space, which ultimately sees costs passed on to individuals.
This control of the advertising space has also come at the detriment of news publishers, who are reliant on Facebook for traffic.
They also argue that consumers have to give away their data to make the best use of Facebook’s features. Over time, it has taken more information from users in order to micro-target advertising.
Does the FTC have a strong case?
The regulators have said they will push for the possible break-up of the company, although such orders are rare.
It is not since the 1980s that the US attempted such an unwinding, with AT&T, and that de-merger is largely viewed as a failure. While cutting Facebook down to size has bipartisan support in the US, any effort to break it up will go to court. Seth Bloom, a US competition law expert, says: “We are talking about acquisitions that are six or eight years old.”
The other big previous case against Big Tech firms was the 1998 suit against Microsoft. While that case settled, Microsoft had to agree to open up some of its Windows systems. It wasn’t broken up, but competition improved.
Breaking up big tech | Who wants to curb the power of FAANG?
What is the political viewpoint?
The administration of US President Donald Trump has repeatedly expressed its anger with Facebook for allegedly silencing Republicans. Most recently, Facebook has posted labels on President Trump’s comments about fraud in the US election. However, the case has support from both sides in the US and Joe Biden’s team are unlikely to ease the pressure.
What has Facebook said?
Facebook has vowed to “vigorously defend” itself. Jennifer Newstead, its general counsel, called the claims “revisionist history” and said WhatsApp and Instagram required billions of dollars in investment to make them a success. “The government now wants a do-over, sending a chilling warning to American business that no sale is ever final,” she said.
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