Federal and State Antitrust Suits Challenging Facebook’s Acquisitions are a Welcome Sight
BY MITCH STOLTZ AND KAREN GULLO
DECEMBER 10, 2020 EFF
Antitrust enforcers charged with protecting us from monopolists have awoke from decades-long hibernation to finally address something users have known, and been paying for with their private data, for years: Facebook’s acquisitions of rival platforms have harmed social media users by reducing competition, leaving them with fewer choices and creating a personal data-hoovering behemoth whose profiling capabilities only cement its dominance.
Now the government’s enforcers want Facebook broken up. The company’s acquisitions of Instagram in 2012 and WhatsApp in 2014 are at the center of lawsuits filed yesterday by the Federal Trade Commission (FTC) and forty U.S. states and territories that accuse the giant platform of having and illegally maintaining monopoly power in the “personal social networking” market. Facebook CEO Mark Zuckerberg, the lawsuits allege, strategized that it was better to buy rather than compete. Acquiring Instagram and WhatsApp, the lawsuits allege, deprives social media users of the benefits of competition—more choice, quality, and innovation.
The suits also focus on how Facebook treats companies that want to interoperate with its services. Facebook has long recognized that the ability to interoperate with an incumbent platform is a powerful anti-monopoly weapon. That’s why, say the lawsuits, Facebook attaches conditions when it allows app developers to use its APIs: they can’t provide services that compete with Facebook’s functions, and they can’t connect with or promote other social networks.
Like many antitrust suits, a key issue will be whether the court accepts the governments' definition of the relevant market that’s being monopolized. In other words, is “personal social networking services" a unique type of service that Facebook dominates? Or does Facebook compete head-to-head with everything from email to television as one player among many? That issue is sure to be hotly contested as the government and states grapple with Facebook about what other companies are part of the relevant market.
Facebook will probably also argue that its acquisitions were good for consumers and weren’t illegal from an antitrust standpoint because, even if they gave the company market dominance, they led to innovation that benefited users. Because no one can know for sure what would have happened if Instagram and WhatsApp had remained independent, Facebook will argue, the courts can do nothing now.
Tell that to former Instagram and WhatsApp users who saw the platforms they chose over Facebook be subsumed into Facebook’s ecosystem. Those users thought their preferred network, and their data, could be kept separate from Facebook’s; first because they were actually separate, and then because Facebook told them so, only to go back on its word, siphon off their data, and be opaque about the privacy implications to boot.
Antitrust regulators were mostly asleep at the wheel. Meantime, Instagram users saw the Instagram Direct logo disappear and be replaced with Facebook Messenger logo. Facebook continues to blur the lines between the two apps, we noted last month, as part of a broader plan to consolidate Instagram Direct, Facebook Messenger, and WhatsApp. In a recent messaging “update,” Facebook encouraged Instagram users take advantage of new “cross-platform messaging” features that in essence give you Facebook Messenger inside Instagram. But hey, you get innovations like colors in chats and new emojis.
Facebook will also have to defend its 2013 acquisition of VPN maker Onavo, which was specifically called out in the states’ lawsuit. Onavo’s data-gathering features were billed as a way for Facebook customers to keep their web browsing safe. But as it turns out, Facebook was using Onavo to gather intelligence about potential rivals by seeing how many messages users were sending through WhatsApp, which is what led it to buy WhatsApp. Facebook shut down the Onavo service after the practice was revealed. Whoops.
The enforcers aren’t asking that Facebook pay damages in the lawsuit. Rather, they want a court to require Facebook to divest Instagram, WhatsApp and possibly other acquisitions, and to limit the companies’ future mergers and acquisitions.
That’s the right approach. Even though company break-ups are hard to achieve—the last significant technology company to be broken up was AT&T in 1982—spinning off Facebook’s acquisitions could inject competition into a field where it’s been stifled for many years now. Even the pursuit of a break-up and restrictions on future mergers can create needed space for competition in the future. That’s why these lawsuits, though they won’t be easy to win, are a welcome sight.
BY MITCH STOLTZ AND KAREN GULLO
DECEMBER 10, 2020 EFF
Antitrust enforcers charged with protecting us from monopolists have awoke from decades-long hibernation to finally address something users have known, and been paying for with their private data, for years: Facebook’s acquisitions of rival platforms have harmed social media users by reducing competition, leaving them with fewer choices and creating a personal data-hoovering behemoth whose profiling capabilities only cement its dominance.
Now the government’s enforcers want Facebook broken up. The company’s acquisitions of Instagram in 2012 and WhatsApp in 2014 are at the center of lawsuits filed yesterday by the Federal Trade Commission (FTC) and forty U.S. states and territories that accuse the giant platform of having and illegally maintaining monopoly power in the “personal social networking” market. Facebook CEO Mark Zuckerberg, the lawsuits allege, strategized that it was better to buy rather than compete. Acquiring Instagram and WhatsApp, the lawsuits allege, deprives social media users of the benefits of competition—more choice, quality, and innovation.
The suits also focus on how Facebook treats companies that want to interoperate with its services. Facebook has long recognized that the ability to interoperate with an incumbent platform is a powerful anti-monopoly weapon. That’s why, say the lawsuits, Facebook attaches conditions when it allows app developers to use its APIs: they can’t provide services that compete with Facebook’s functions, and they can’t connect with or promote other social networks.
Like many antitrust suits, a key issue will be whether the court accepts the governments' definition of the relevant market that’s being monopolized. In other words, is “personal social networking services" a unique type of service that Facebook dominates? Or does Facebook compete head-to-head with everything from email to television as one player among many? That issue is sure to be hotly contested as the government and states grapple with Facebook about what other companies are part of the relevant market.
Facebook will probably also argue that its acquisitions were good for consumers and weren’t illegal from an antitrust standpoint because, even if they gave the company market dominance, they led to innovation that benefited users. Because no one can know for sure what would have happened if Instagram and WhatsApp had remained independent, Facebook will argue, the courts can do nothing now.
Tell that to former Instagram and WhatsApp users who saw the platforms they chose over Facebook be subsumed into Facebook’s ecosystem. Those users thought their preferred network, and their data, could be kept separate from Facebook’s; first because they were actually separate, and then because Facebook told them so, only to go back on its word, siphon off their data, and be opaque about the privacy implications to boot.
Antitrust regulators were mostly asleep at the wheel. Meantime, Instagram users saw the Instagram Direct logo disappear and be replaced with Facebook Messenger logo. Facebook continues to blur the lines between the two apps, we noted last month, as part of a broader plan to consolidate Instagram Direct, Facebook Messenger, and WhatsApp. In a recent messaging “update,” Facebook encouraged Instagram users take advantage of new “cross-platform messaging” features that in essence give you Facebook Messenger inside Instagram. But hey, you get innovations like colors in chats and new emojis.
Facebook will also have to defend its 2013 acquisition of VPN maker Onavo, which was specifically called out in the states’ lawsuit. Onavo’s data-gathering features were billed as a way for Facebook customers to keep their web browsing safe. But as it turns out, Facebook was using Onavo to gather intelligence about potential rivals by seeing how many messages users were sending through WhatsApp, which is what led it to buy WhatsApp. Facebook shut down the Onavo service after the practice was revealed. Whoops.
The enforcers aren’t asking that Facebook pay damages in the lawsuit. Rather, they want a court to require Facebook to divest Instagram, WhatsApp and possibly other acquisitions, and to limit the companies’ future mergers and acquisitions.
That’s the right approach. Even though company break-ups are hard to achieve—the last significant technology company to be broken up was AT&T in 1982—spinning off Facebook’s acquisitions could inject competition into a field where it’s been stifled for many years now. Even the pursuit of a break-up and restrictions on future mergers can create needed space for competition in the future. That’s why these lawsuits, though they won’t be easy to win, are a welcome sight.
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