48 States Sue Facebook, FTC Calls for Breakup

Attorneys general from 48 states sue Facebook for antitrust violations yesterday. Meanwhile, the Federal Trade Commission filed its own case against the company. They alleged unchecked monopoly power that removed any potential rivals.

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FTC lawsuit

In its lawsuit filed Wednesday, the FTC accused Facebook of consolidating its power through the acquisition of rivals. The commission said that “Facebook has maintained its monopoly position by buying up companies that present competitive threats and by imposing restrictive policies that unjustifiably hinder actual or potential rivals that Facebook does not or cannot acquire.” As a result, it asked the courts to order the “divestiture of assets, divestiture or reconstruction of businesses (including, but not limited to, Instagram and/or WhatsApp),” among other things. 

The FTC commissioners voted 3-2 to file the case. In favor were Chairman Joseph Simons and commissioners Rohit Chopra and Rebecca Slaughter. Meanwhile, commissioners Noah Joshua Phillips and Christine S. Wilson cast the dissenting votes. Ian Conner, director of the FTC’s Bureau of Competition, said Facebook hurt innovation. “Personal social networking is central to the lives of millions of Americans,” he said. Thus, the company's actions “deny consumers the benefits of competition. In filing the lawsuit, the FTC aims “to roll back Facebook’s anticompetitive conduct and restore competition so that innovation and free competition can thrive,” he said.

48 States led by New York

Meanwhile, Attorneys general from 48 states filed their own lawsuits against Facebook, alleging that the lack of competition harmed consumers. Consequently, this reduced consumer protection against privacy infringements. The coalition of 48 included the attorneys general from 46 states, plus Washington DC and Guam. States who declined to join are Alabama, Georgia, South Carolina, and South Dakota. 

Similarly, the states’ lawsuits focused on Facebook’s habit of buying off potential rivals. They asked that a federal court force the company to spin off Instagram and WhatsApp. Also, they requested that Facebook cannot make new acquisitions worth more than $10 million while the case is ongoing. 

‘Monopoly Power’

New York Attorney General Letitia James said “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. 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.” 

James said that Facebook employs a tactic common among monopolies. “Facebook has employed a buy-or-bury strategy to impede competing services,” she said. Then, if the company fails to acquire rivals, it cuts off their access to Facebook's data to suffocate them. James noted that some companies experienced a loss of users “almost overnight.” Then, these companies' growth stalled. More importantly, it sends a clear message to rivals. “Don't step on Facebook's turf,” she added.

Facebook Says It’s a Do-Over

Prior to the lawsuit, Facebook is already facing a proposed class action. A group of app developers charged the company with illegal monopolistic behavior. In addition, it agreed to pay a $5 billion fine to the FTC. This closes the agency’s investigation on Facebook’s privacy practices. Earlier this October, Facebook's name came up as one of the tech firms that abuse market position. 

Facebook posted on its official Twitter account that they are studying the charges. In a December 10 post, they wrote “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.”

Revisionist History

Facebook's VP and general counsel Janet Newstead said the FTC case is “revisionist history.” She argued that antitrust laws shouldn't “punish successful businesses.” Instagram and WhatsApp only grew bigger because of their acquisition. They “became the incredible products they are today” because of Facebook's involvement. Consequently, this resulted in “better experiences for the millions who enjoy those products,” she said. 

Newstead also noted that during the time of the acquisition, the FTC gave approvals. “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,” she said. “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. We are going to vigorously defend people’s ability to continue making that choice,” she added.

View the Yahoo! Finance news detail why 48 states and the FTC are suing Facebook for alleged antitrust abuses:

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As the FTC and 48 states sue Facebook, do you agree that there are antitrust violations made? Do you agree that Facebook is wielding monopoly power? Also, do you agree that they should spin off some of their assets? Let us know what you think about this latest controversy surrounding Facebook. Share your comments below.