The Government Sues to Break Up Facebook

The Government Sues to Break Up Facebook

By  |  December 9, 2020  |  Uncategorized  |  No Comments

The Federal Trade Commission and 48 state attorneys general filed separate lawsuits against Facebook Wednesday, calling it an illegal monopoly that needs to be broken up.

The complaints argue that Facebook acquired Instagram and WhatsApp illegally to stifle competition in the social media marketplace and calls for the company to divest from these popular applications, which have become key business units in recent years. 

“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,” said New York Attorney General Letitia James, who is leading the coalition of states in their lawsuit. “Instead of competing on the merits, Facebook used its power to suppress competition so it could take advantage of users and make billions by converting personal data into a cash cow.”

The FTC’s complaint includes a 2008 internal Facebook email, obtained through subpoena, in which CEO Mark Zuckerberg wrote “it is better to buy than compete.” The states’ lawsuit paints a portrait of Zuckerberg as an attack dog, writing that the Facebook executive laid out that there would be “ominous ramifications if Instagram did not partner with Facebook.” 

“When a high-ranking Facebook executive asked whether one of Zuckerberg’s goals in trying to purchase Instagram was to ‘neutralize a potential competitor,’ Zuckerberg answered that it was,” according to the states’ suit. The suits also allege anti-competitive behavior with third-party developers working on its platform. 

Facebook’s conduct “harms competition, leaves consumers with few choices for personal social networking, and deprives advertisers of the benefits of competition,” the FTC wrote in a statement. Both suits called for Facebook to divest from Instagram and WhatsApp, commit to better business practices, and require government approval for future large-scale acquisitions. 

The states’ complaint alleges violations of Section 2 of the Sherman Act, which makes it illegal to “monopolize or attempt to monopolize,” and Section 7 of the Clayton Act, which prohibits mergers that “may be substantially to lessen competition, or to tend to create a monopoly.” The FTC lawsuit alleges Sherman Act violations, but also violations of Section 5 of the FTC Act, which prohibits “unfair or deceptive acts or practices in or affecting commerce.”

Jennifer Newstead, Facebook’s vp and general counsel, called the suit “revisionist history” in a statement. “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.” Newstead said Facebook will “vigorously defend” itself against the suits.

In a time when Democrats and Republicans agree on little, the two parties share a belief that the largest firms in Silicon Valley have become too big and powerful. Internet firms’ Section 230 liability protections have come under fire this year, the Trump administration has cracked down on Chinese tech, and antitrust has reemerged as a hot topic in Washington.

This summer, the House Democrats on the Judiciary Committee’s Antitrust Subcommittee slammed Amazon, Apple, Facebook and Google for abusing their market power in a lengthy report. The Justice Department also sued Google in October for anticompetitive behavior in its online search and search advertising business. Experts told Adweek that the suit will continue uninterrupted when the Biden administration takes over in late January.

About the Author: Scott Nover

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