Facebook hit by US Federal Trade Commission lawsuit

Antitrust enforcers launch action against Facebook, alleging its purchase of Instagram, WhatsApp created a monopoly that has destroyed competition.

The US lawsuits call for Facebook to divest Instagram and WhatsApp. Picture: AFP

The US Federal Trade Commission has filed a huge antitrust lawsuit against Facebook, accusing it of destroying its competitors through monopolistic practices.

The historic lawsuit could potentially result in the break-up of the tech giant and is a further reckoning for America’s Big Tech sector following a similar antitrust lawsuit brought against Google in October.

The FTC lawsuit, which is backed by 48 US state attorneys general targets two of Facebook’s major acquisitions, Instagram and WhatsApp.

The FTC alleges that since Facebook purchased Instagram in 2012 and WhatsApp in 2014, it has held a monopoly power in the personal social networking market and has acted systematically to eliminate threats to that monopoly.

“Personal social networking is central to the lives of millions of Americans,” said Ian Conner, Director of the FTC’s Bureau of Competition. “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 CEO Mark Zuckerberg testifies before a senate hearing in the US in late October. Picture: AFP

In its lawsuit, the FTC states: “Since toppling early rival Myspace and achieving monopoly power, Facebook has turned to playing defence through anticompetitive means. After identifying two significant competitive threats to its dominant position — Instagram and WhatsApp — Facebook moved to squelch those threats by buying the companies, reflecting CEO Mark Zuckerberg’s view, expressed in a 2008 email, that ‘it is better to buy than compete’.”

The move comes at a time when Facebook is at loggerheads with the Morrison Government and local news organisations over the news media bargaining code which, if it became law, would govern how Facebook and Google pay local media companies for using content.

Facebook is considering blocking Australian users from sharing news on its platform if the federal government’s proposed media bargaining regulations become law.

In Washington, the Trump administration, federal antitrust agencies and Congress have become increasingly hostile towards big tech companies like Google, Facebook, Apple, Twitter and Amazon believing they are too powerful and unaccountable.

Prosecutors in the lawsuit against Facebook have called for Instagram and WhatsApp to be broken away from the parent company and for new regulations to govern their conduct.

“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 Attorney-General Letitia James of New York, who led the multistate investigation into the company’s in parallel with the federal agency. “By using its vast troves of data and money, Facebook has squashed or hindered what the company perceived to be potential threats.”

Today’s suit should send a clear message to Facebook and every other company:

Efforts to stifle competition, reduce innovation, or cut privacy protections will be met with the full force of almost every attorney general's office in the nation.

— NY AG James (@NewYorkStateAG) December 9, 2020

In October the US Department of Justice filed an antitrust lawsuit against Google alleging that the tech giant used its search engine to create monopolies and undermine rivals.

“Absent a court order, Google will continue executing its anti-competitive strategy, crippling the competitive process, reducing consumer choice, and stifling innovation,” the DOJ said.

“For the sake of American consumers, advertisers, and all companies now reliant on the internet economy, the time has come to stop Google’s anticompetitive conduct and restore competition.”

The DOJ alleged that Google used its murky business practices to capture almost 90 per cent of all search queries in the US and that this ‘grip on distribution’ has stymied other search engines from competing.

Cameron Stewart is also US Contributor for Sky News Australia