Forty-eight attorneys general, led by New York’s Letitia James, also filed antitrust charges, saying Facebook illegally stifled competition.
Central to both the FTC’s case and the state charges are Facebook’s $1 billion acquisition of Instagram in 2012 and its $19 billion purchase of WhatsApp in 2014. Both complaints say that Facebook used the deals to neutralize competitors it viewed as a threat.
“Mr. Zuckerberg recognized that by acquiring and controlling Instagram, Facebook would not only squelch the direct threat that Instagram posed, but also significantly hinder another firm from using photo-sharing on mobile phones to gain popularity as a provider of personal social networking,” the FTC writes in court documents. “Just as with Instagram, WhatsApp presented a powerful threat to Facebook’s personal social networking monopoly, which Facebook targeted for acquisition rather than competition.”
These deals ultimately hurt consumers because it harmed privacy and reduced viable alternatives to Facebook services, the attorneys general allege. Following the two acquisitions, Facebook has increased the data it gathers from users and the number of ads in its app, while failing to adequately deal with fake accounts and misinformation, they write in the lawsuit.
It’s not the first time Facebook’s past acquisitions have come under scrutiny. Members of Congress grilled Zuckerberg on the matter earlier this year, with one lawmaker saying the social network was a “a case study in monopoly power.”
Both cases also cite Facebook’s handling of third-party developers including its treatment of Twitter-owned Vine in 2013. Mark Zuckerberg approved an employee’s decision to cut off its access from one of Facebook’s APIs within hours of its public debut. The incident has also been cited by regulators in the UK.
The lawsuits also refer to Facebook’s controversial use of data acquired from VPN app Onavo, which it acquired in 2013. Stats pulled from the app, which could track which applications its users were spending time in, helped inform the company’s decision to buy WhatsApp and its pursuit of Snapchat. The company shut down the app last year after fallout from a separate privacy scandal.
Facebook didn’t immediately respond to a request for comment. In a statement posted to Twitter, the company said the government now wants a do-over with no regard for the impact that precedent would have on the broader business community.”
We’re reviewing the complaints & will have more to say soon. Years after the FTC cleared our acquisitions, the government now wants a do-over with no regard for the impact that precedent would have on the broader business community or the people who choose our products every day.
— Facebook Newsroom (@fbnewsroom) December 9, 2020
Update 12/9 4:18pm ET: In a statement, Facebook VP and General Counsel Jennifer Newstead called the lawsuits “revisionist history” and said Facebook would “vigorously defend” against the charges.
This is revisionist history. 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. 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. We are going to vigorously defend people’s ability to continue making that choice.
Update 12/9 6:05pm ET: Newstead released a longer response to the lawsuits. In the blog post, she names Apple, Google, Twitter, Snap, Amazon, TikTok and Microsoft as Facebook’s “world-class competitors” and defended the company’s past acquisitions and platform policies.
“No American antitrust enforcer has ever brought a case like this before, and for good reason,” Newstead writes. “The FTC and states stood by for years while Facebook invested billions of dollars and millions of hours to make Instagram and WhatsApp into the apps that users enjoy today. This lawsuit risks sowing doubt and uncertainty about the US government’s own merger review process and whether acquiring businesses can actually rely on the outcomes of the legal process.”