FTC and 48 States Sue Facebook for Anticompetitive Practices

Facebook haters rejoice: the United States government is with you. On Wednesday, December 9th, both the Federal Trade Commission and a coalition of 48 state attorneys general filed separate lawsuits against Facebook citing anti-competitive practices, with special attention to the company’s purchases of Instagram and Whatsapp in 2012 and 2014, respectively.

This follows a similar lawsuit that the Justice Department filed against Google this October, as well as statements from both current United States President Donald Trump and allies of president-elect Joe Biden that big tech companies currently hold too much power over the market and users.

"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," New York Attorney General and leader of the 48-state coalition Letitia James said in a press conference on December 9th. “Today, we are taking action to stand up for the millions of consumers and many small businesses that have been harmed by Facebook’s illegal behavior."

The coalition’s lawsuit calls for Facebook to be barred from making any future acquisitions worth $10 million or more without advance notice to state governments, as well as calls for unspecified additional relief and for Facebook to end other anticompetitive practices. The FTC’s lawsuit goes a step further- it’s also pushing for advance notice of Facebook mergers, but in addition, the FTC is seeking to unwind Instagram and Whatsapp from Facebook’s control.

“Personal social networking is central to the lives of millions of Americans,” FTC Bureau of Competition Director Ian Conner said today in a press release. “Facebook’s actions to entrench and maintain its monopoly deny consumers the benefits of competition. Our aim is to roll back Facebook’s anticompetitive conduct and restore competition so that innovation and free competition can thrive.”

Facebook, predictably, denies these claims.

“This is revisionist history,” Facebook vice president and general counsel Jennifer Newstead told ABC News.

She argues that 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.” She also pointed out to the publication that the FTC “cleared these acquisitions years ago.”

A post on the Facebook newsroom Twitter account mirrored Newstead's words, saying that an official statement is on the way and calling out the government for wanting a do-over.

The FTC’s lawsuit, however, follows an 18-month long investigation into the platform and makes additional claims about Facebook’s alleged anti-competitive practices, including accusations that Facebook deliberately cut off API access to rivals like Vine in order to hamper their success. This indicates what the FTC is calling a “systematic strategy” to create a monopoly.

The state coalition lawsuit, meanwhile, argues that Facebook’s acquisitions and anticompetitive conduct violate Section 2 of the Sherman Act and Section 7 of the Clayton Act, both of which are longstanding federal antitrust laws that aim to preserve “free and unfettered competition as the rule of trade.”

Moving into the hardware market, we’re not sure yet how these lawsuits will affect Oculus. Facebook acquired Oculus in 2014, which is the same year the company bought WhatsApp, but neither lawsuit has made any references to it as of yet.

While Facebook claims that Oculus has social potential, its primary use so far has still largely been in games. Since these lawsuits mostly focus on Facebook’s monopoly over social media, it’s unclear whether Facebook will be asked to sell Oculus as well.

However, according to Letitia James, the state coaliation’s lawsuit is also taking into account damage to users. In her press conference, she argued that 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."

Given that Oculus is now requiring users to log in with Facebook accounts, and thus opening them up to having their data scraped, it could very well come up in either lawsuit soon enough.