Facebook sued by coalition of US states and federal government for obstructing competition

Facebook CEO Mark Zuckerberg at a hearing in Washington in April 2018.

The American Competition Commission (FTC) as well as prosecutors representing 48 states and territories in the country announced Wednesday, December 8 that they had filed a complaint against Facebook, which they accuse of abusing its dominant position and its well-filled coffers to oust competition.

Such practices, the authorities argue, harm consumers by leaving them less choice and reducing the protection of their private data, and advertisers by leaving them little other way of placing their ads.

The authorities blame Facebook in particular for the takeovers of the Instagram application, in 2012 for $ 1 billion, and of WhatsApp messaging, in 2014 for $ 22 billion. They also attack the conditions imposed by Facebook on software developers.

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Force reselling Instagram and Whatsapp?

The FTC is therefore asking the courts to eventually force Facebook to resell Instagram and WhatsApp. The agency also wants Mark Zuckerberg’s group to stop forcing developers to accept certain conditions and ask for his approval for any takeover operation. Prosecutors claim, for their part, to be warned of any acquisition over $ 10 million that the social network would like to make.

“For nearly a decade, Facebook has used its monopoly to crush rivals, stifle competition, all to the detriment of users”, said New York Attorney General Letitia James, who is leading the case. Mme James claimed the company used large sums of money to acquire rivals before they could threaten its dominant position in the market.

In doing so, the group “Reduces consumer choice, stifles innovation, degrades the privacy of millions of Americans”, she estimated. But more than half of Americans log on to Facebook every day, Mr.me James. And while they spend time chatting on the social network, “Facebook spends its time monitoring and profiting from users and their personal information”. “No company should have such power over our personal information and unchecked social interactions”, assaulted the prosecutor.

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Facebook, for its part, accused the US government of wanting to rewrite history: “Antitrust laws exist to protect consumers and promote innovation, not to punish successful companies. “ “Years after the FTC approved our acquisitions, the government wants to start from scratch regardless of the impact this precedent may have on the businesses and users who choose our products every day.”, the company continued in a statement. “It would send a worrying message to businesses, suggesting that no acquisition is ever final. “

The social network ensures: “Instagram and Whatsapp have become amazing products because Facebook has invested billions of dollars, years of expertise and innovation, to develop new features and better experiences. “

“A very serious challenge for Facebook”

Facebook CEO Mark Zuckerberg was confronted with embarrassing emails about the Instagram takeover in 2012. “Instagram can hurt us”, he confided in April of that year to collaborators. To his CFO who then asks him if he should buy this platform for “Neutralize a competitor, acquire talents, integrate products or for another reason”, the CEO replies: “The first and the third reason. ”

“You saw this platform as a threat, so you bought it”, had summed up the influential Democrat Jerrold Nadler during a hearing of the boss of Facebook by elected representatives of the House of Representatives at the end of July. Mr. Zuckerberg had defended himself: Instagram only competed with Facebook in the field of photos, the company grew thanks to its takeover, the latter was authorized by the FTC… But the sequence marked. Facebook “Copy, redeem or kill” his rivals, had assured the elected Democrat of Washington Pramila Jayapal.

For William Kovacic, former FTC and law professor at Georgetown University in Washington, the proceedings launched on Wednesday are solid: “The argument developed in the complaint of the American Competition Commission is pretty straightforward. This procedure will represent a very serious challenge for Facebook. “

How likely is it that the court will actually order a dismantling of Facebook? “The FTC and the States clearly have a chance of succeeding in securing a separation of the assets of Facebook, according to Mr. Kovacic. In the past, American courts have ordered the dismantling of companies which had acquired their dominant position through company takeovers. It even goes back to the foundations of American antitrust, with the case of Standard Oil. “ In addition to this reference to the oil giant dismantled by justice in 1911, the lawyer cites more recent cases, such as that of the battery manufacturer Polypore, forced in 2010 to resell a competing company bought in 2008.

Similar accusations were launched in the late 1990s against the computer group Microsoft. After nearly three years of proceedings, however, the US Department of Justice had failed to dismantle the firm.

According to Mr. Kovacic, the trial could begin as early as the second half of 2021, with a decision rendered in early 2022. By then, the FTC and state complaints will likely be joined, and a judge, appointed in the coming weeks. Until then, Facebook will begin to develop its defense strategy and advance its arguments, because this procedure is already proving vital for Mark Zuckerberg’s business.

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