SAN FRANCISCO – When the Federal Trade Commission and more than 40 states on Wednesday sued Facebook for illegally killing the competition and calling for the company to be split up, lawmakers and public interest groups applauded.
Connecticut Democrat Senator Richard Blumenthal said: “Facebook’s reign over unaccountable, abusive practices against consumers, competitors, and innovation must end. “Senator Josh Hawley, Republican of Missouri, called the lawsuits” a necessity “and said Facebook’s acquisitions of emerging rivals were” anti-competitive and should be resolved. “
However, lawmakers and consumer advocates haven’t addressed one hard-to-deny factor: the cases against Facebook are far from a blast.
Antitrust laws are complex and were introduced before the advent of modern technology. The FTC and attorneys general are now facing an uphill battle to prove their allegations, some competition experts said.
First, the prosecutor has to prove that Facebook bought rivals like the photo sharing website Instagram and the messaging service WhatsApp in order to eliminate the competition. Then they have to argue a theory: consumers and the social media market would have been better off without the mergers.
In addition, regulators reviewed Facebook’s acquisitions years ago, and didn’t stop them. You need to explain why you have now changed your mind. And any divestment of companies could face the skepticism of courts reluctant to reverse mergers as it can sometimes do more harm than good to consumers, some legal experts said.
Winning the cases against Facebook will be “challenging because the standards of evidence are huge,” said Diana Moss, president of the American Antitrust Institute, a left-wing think tank and competition advocacy group.
Facebook, according to which regulators are using antitrust laws to “punish” successful companies, plans to vigorously fight the lawsuits. In a memo to employees on Wednesday, Mark Zuckerberg, the company’s executive director, said he disagreed with the allegations in the lawsuits and that the social network intends to move on.
“Today’s news is a step in a process that can take years to complete,” he wrote. He asked staff not to openly discuss the cases “except with our legal team.”
Other antitrust experts said the cases would go smoothly. “This is a straightforward and straightforward case,” said Tim Wu, a professor at Columbia Law School who was part of an effort by academics, public interest groups and Facebook co-founder Chris Hughes, who is campaigning for regulators to dismantle Facebook. Mr Wu, a writer on the New York Times opinion pages, said it was an easy case to show that Facebook bought Instagram and WhatsApp in order to maintain their dominance.
In a wave of legal action aimed at limiting the power of the world’s largest tech companies, the US government and states are watching closely as they pursue their cases against Facebook. Google is battling an antitrust lawsuit filed by the Justice Department in October, and the Attorneys General are expected to file separate lawsuits against them soon. The regulators are also investigating Apple and Amazon.
The penalties that the supervisory authorities are demanding in the case against Facebook are particularly onerous. They suggested that courts block future mergers, forcing the company to sell Instagram and WhatsApp. Ian Conner, the FTC’s head of competition enforcement, said the remedial action would help restore competition and “lay a foundation for future competitors to grow and innovate without being threatened by Facebook”.
But cases in which completed mergers are called into question are uncommon, as are lawsuits aimed at winding up companies, according to legal experts. The last major antitrust lawsuit that resulted in divestments was against AT&T in 1984, said William Kovacic, a former Republican chairman of the Federal Trade Commission. In this case, AT&T was hired to sell local telecommunications companies known as Baby Bells.
Decades have passed without a similar action. This is in part because defendants and economists often tell the courts that it’s too adamant to force companies to sell parts of themselves, Kovacic said. “Courts have expressed concern about this in the past,” he said.
Mr Kovacic added that another difficulty for the FTC and states is to prove that the world would have been better off if the mergers with Instagram and WhatsApp hadn’t happened. “It’s hard to prove a hypothesis,” he said.
However, Facebook will be able to show that Instagram and WhatsApp have grown significantly after the takeover. The company claims to have invested millions of dollars in the apps to amass billions of users and turn them into world-class communication channels around the world.
“These transactions should provide better products to the people who use them, and they undoubtedly did,” Facebook General Counsel Jennifer Newstead wrote on Wednesday in a blog post.
One challenge for the FTC is to explain why it decided not to block Facebook’s acquisition of Instagram in 2012 and WhatsApp in 2014. During the Obama administration, these deals were checked for possible effects on competition using market analyzes. The acquisitions eventually continued.
“It should be assumed that Facebook will try to preserve any internal work products that were behind the original decisions that the acquisitions were not a competitive issue,” said George Hay, a law professor at Cornell University and a former Justice Department antitrust officer.
Ms. Newstead signaled that previous government reviews of the WhatsApp and Instagram deals would be key in defending Facebook. She called the acquisitions “regulated law” and beat the regulators for wanting a “do over”.
Mr. Zuckerberg also advised staff in his memo that the government’s definition of competition was too narrow. In its complaint, the FTC said Facebook had dominated social networks, with more than three billion people around the world using one of its apps every month. In their complaint, the attorneys general said Facebook’s behavior arose out of a fear of losing that position of dominance.
But Mr. Zuckerberg said Facebook is battling a far larger ecosystem of competitors that goes beyond social networks, including “Google, Twitter, Snapchat, iMessage, TikTok, YouTube and more consumer apps for many others in advertising”. This is because Facebook and its other apps are used for communication and entertainment such as: B. to stream videos and games. Against this broader universe, competition is healthy.
Even if the FTC and the states prove their cases against Facebook, the question remains whether the company can even separate WhatsApp and Instagram from its core business with social networks.
Mr. Zuckerberg operated WhatsApp, Instagram and Messenger independently for years, but announced that he would merge the underlying infrastructures last year so they could work better together. That way, someone using Facebook Messenger could send a private message to a friend from their Instagram account and the two services would communicate seamlessly with each other.
Putting these systems together is technically complicated, which means that undoing it would also be technically complicated. In September, 18 months after the first announcement that the apps would work together, Facebook unveiled the integration of Instagram and its messenger services. The company believes it may take even longer to complete the technical work to merge WhatsApp with the other apps.
Facebook hasn’t said whether the suits will affect these efforts. Mr. Zuckerberg said the company definitely intends to move on with its day-to-day operations.
“We work hard to develop products that people find valuable and we have built a strong business serving millions of small businesses around the world,” he wrote in the internal memo. “That doesn’t change.”
Mike Isaac reported from San Francisco and Cecilia Kang from Washington.