The social media giant Facebook could be forced to sell its prized assets WhatsApp and Instagram after the US Federal Trade Commission (FTC) and nearly every US state filed lawsuits against it, saying it used a “buy or bury” strategy to snap up rivals and keep smaller competitors at bay.
Facebook is the second big tech company to face a significant legal battle this year with the new twin litigation, after the US Department of Justice sued Alphabet’s Google in October, accusing the $1 trillion company of using its market power to fight off rivals.
The lawsuits highlight the increasing acceptance to hold Big Tech responsible for its business practices and represent a rare moment of cooperation between the Trump administration and Democrats, some of whom have advocated breaking up both Google and Facebook.
The complaints accuse Facebook of buying up rivals, focusing specifically on its previous acquisitions of photo-sharing app Instagram for $1 billion in 2012 and messaging app WhatsApp for $19 billion in 2014.
The acquisitions should be revised, federal and state regulators said, which is a move that is likely to set off a long legal challenge as the deals were cleared by the FTC years earlier.
“For nearly a decade, Facebook has used its dominance and monopoly power to crush smaller rivals, snuff out competition, all at the expense of everyday users,” said New York Attorney General Letitia James on behalf of the coalition of 46 states. Ms. James said the company acquired rivals before they could threaten the company’s dominance.
“No harm done”
Facebook’s general counsel Jennifer Newstead called the lawsuits “revisionist history” and said antitrust laws do not exist to punish “successful companies.” She said WhatsApp and Instagram have succeeded after Facebook invested billions of dollars in growing the apps.
“The government now wants a do-over, sending a chilling warning to American business that no sale is ever final,” Ms. Newstead said.
She also raised doubts about Facebook’s supposed harms, claiming that users benefited from its decision to make WhatsApp free, and even without access to its developer network rivals such as YouTube, Twitter and WeChat did “just fine.”
Chief Executive Mark Zuckerberg told employees in a post on the internal discussion site of Facebook that he did not expect “any impact on individual teams or roles” as a result of the lawsuits, which he said were one step in a process that could take years to complete.”
In July, Mr. Zuckerberg told employees that Facebook will go to all lengths to combat a legal challenge that could break the business up, calling it an “existential threat.”
A strong case
Although breakup remedies are rare, some antitrust experts said the case was unusually strong given damning statements by Mr. Zuckerberg plucked from Facebook’s own documents, like a 2008 email in which he said “it is better to buy than compete.”
Comparable to the 1998 case against Microsoft Corp, the current lawsuits are the biggest antitrust cases in a decade. In Microsoft’s case, the federal government ultimately settled the lawsuit, but the years-long court battle and extended scrutiny stopped the business from curtailing rivals and is credited with paving the way for the rapid growth of the internet.
Recently, Facebook announced that it was buying customer service startup Kustomer, in an acquisition that valued Kustomer at $1 billion.
Facebook also bought Giphy, a popular website for making and sharing animated images, or GIFs, in May. That acquisition has already drawn scrutiny from the United Kingdom’s competition watchdog.