Facebook hit by massive lawsuit that could force it to sell Instagram, WhatsApp

Facebook is being sued for using its “monopoly power” to kill competition, in a move that could force it to sell Instagram and WhatsApp.

Facebook has been hit with a mammoth lawsuit for allegedly using its “monopoly power” to stifle competition, in a case that could force it to offload Instagram and WhatsApp.

The social networking giant “illegally acquired competitors in a predatory manner and cut services to smaller threats”, the lawsuit filed by New York Attorney-General Letitia James alleges.

Ms James is leading a “bipartisan coalition” of Attorneys-General from 48 other states.

In their sights is Facebook’s approximately US$1 billion (A$1.34 billion) acquisition of a then-fledgling Instagram in 2012, as well as another move that appeared designed to hurt quasi-rival Twitter.

After Twitter acquired the looping video app Vine, a sort-of precursor to TikTok, and launched with it publicly, Facebook, within hours, took away its ability to let users find their Facebook friends on there.

“Yup, go for it,” Facebook boss Mark Zuckerberg allegedly replied when a company director suggested removing Vine’s ability to use Facebook’s Find Friends feature, according to the lawsuit.

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New York Attorney-General Letitia James is leading the coalition of states suing Facebook. Picture: Spencer Platt

Similar tactics were allegedly deployed against other upstart rivals like Path and Circle.

“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,” Ms James said.

“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 behaviour.”

Facebook has responded with a brief statement that it will have more to say soon.

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In 2012, Mark Zuckerberg “didn’t mean to imply that we’d be buying them to prevent them from competing with us in any way” when he emailed Facebook’s CFO about snapping up a competitor. The company bought Instagram within three months of that email.

“Years after the (Federal Trade Commission) 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,” the company claimed.

In a press release from Ms James’ office announcing the lawsuit, the subject of choice also comes up.

“The elimination of competitive alternatives means users have no alternative to Facebook, fuelling its unfettered growth without competition and further entrenching its position,” it reads.

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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

How Instagram looked when Facebook bought it in 2012. Picture: AP

It cited Instagram and WhatsApp, “both which posed a unique and dire threat to Facebook’s monopoly”, as the two “most obvious” examples.

While it is true that Facebook’s acquisition of Instagram was “cleared” and allowed to go ahead by regulators, the FTC noted “the public interest may require” reopening inquiries into Facebook’s acquisition of Instagram at a later date.

It appears that date has now arrived.