FTC Files New Antitrust Case Against Facebook, Citing Anti-Competitive Behavior Through Acquisitions
After a recent FTC antitrust case against Facebook was dismissed due to its failure to cite compelling evidence to support its claims, the Trade Commission has now launched an amended antitrust push against The Social Network, through which it will seek to address anti-competitive behavior by the company, and potentially push for a break up of its various elements.
As explained by the FTC:
“The Federal Trade Commission today filed an updated complaint against Facebook in the agency’s ongoing federal antitrust action, which is still under investigation. According to the lawsuit, after several failed attempts to build novel mobile features for its network, Facebook instead resorted to an unlawful buy-or-bury plan in order to retain its control over the mobile market.”
According to the lawsuit, Facebook was caught off guard by the rise of smartphones and mobile internet access in the early 2010s, and lacked the infrastructure and tools to capitalize on this trend. Facebook has denied the allegations. That subsequently presented a threat to Facebook’s social networking dominance, prompting the company to acquire’mobile innovators’ in the form of Instagram (2012) and WhatsApp (2013). (2014).
According to the Federal Trade Commission, this is anti-competitive activity, while Facebook also:
“…attracted app developers to its platform, monitored their progress for signals of success, and then buried them when they posed a danger to the company’s business. Faced with a dearth of real competition, Facebook has been able to refine its surveillance-based advertising strategy while imposing ever-increasing costs on its customers.”
According to the lawsuit, as a result of these efforts, Facebook has gained a dominant position in the mobile advertising industry, which has hindered competition and limited the ability of the sector to innovate.
In response, Facebook issued the following statement:
“It is regrettable that the Federal Trade Commission has chosen to proceed with this meritless action notwithstanding the court’s rejection of the complaint and determination that the complaint lacked a foundation for a claim. Previously, there was no legitimate claim that Facebook was a monopolist – and this has not been altered. In addition, our purchases of Instagram and WhatsApp were examined and approved many years ago, and our platform standards were in compliance with the law.”
As previously stated, the Federal Trade Commission’s initial complaint against Facebook was rejected because the agency failed to provide concrete proof of the company’s misconduct in support of its accusations. According to the Federal Trade Commission, the new lawsuit includes extensive facts that demonstrate that Facebook “had significant market shares in the United States personal social networking industry.”
According to the lawsuit, “Facebook has the ability to control prices and exclude competition; significantly reduce the quality of its offering to users without losing a significant number of users or a meaningful amount of user engagement; and exclude competition by driving actual or potential competitors out of business.”
It’s noteworthy to note that the Federal Trade Commission (FTC) claims that Facebook has’significantly’ lowered the quality of its platforms without affecting usage. How would you put a monetary value on that? By drawing attention to the inclusion of more advertisements? Is it appropriate to draw attention to a limited post reach? Taking note of the negative consequences of feed algorithms?
A speculative assertion, and a dangerous road to take for an initiative that has already been rejected once, appears to be the case.
It is difficult to deny that Facebook does not have a strong grip on the digital advertising and social media spaces. The company’s applications have a combined audience of 3.5 billion users, which is more than three times the reach of the company’s closest competition. It is also the leading advertising tool in the vast majority of the countries where its apps are available. With that kind of power, Facebook has complete control over the market, and it has obviously attempted to suffocate competitors by including identical services such as Stories and Reels into its own applications.
In this case, however, neither of these specific technologies is taken into consideration; rather, the focus is on Instagram and WhatsApp in particular, and on Facebook’s strategy of gobbling up growing competitors and increasing its already vast presence.
Of course, Facebook will argue, as it has in the past, that the case is based on a revisionist history, and that each of its mergers was allowed at the time they were completed in accordance with the law.
Here’s another one from Facebook:
“With its assertions, the Federal Trade Commission is making an attempt to rewrite antitrust rules and to upend long-held assumptions about merger scrutiny, thereby proclaiming to the business world that no deal is ever final. Every day, we battle to gain people’s time and attention, and we will continue to defend our company with zeal and determination.”
On the latter point, the rise of TikTok would be a key example of how Facebook does not completely dominate the market, with the short video app now potentially posing an existential threat to Facebook if it continues to gain traction. TikTok is a popular short video app that allows users to record and share short videos.
Because, despite numerous attempts to copy TikTok, Facebook would not be overjoyed if the app achieved a billion users of its own, because it would disprove the Federal Trade Commission’s claim that Facebook simply crushes competition at every turn and stifles all innovation in the sector, as claimed by the FTC.
The new case will be lead by Lina Khan, the recently appointed head of the FTC, who has a long history of public opposition against the monpoly behavior of both Facebook and Amazon. Khan’s stances are so well known that Facebook actually sought to recuse her from this new case, suggesting that her mind was already made up, and she would not give them a fair trial. Khan has remained, and her inclusion in the push will likely put Facebook under more pressure this time around, if the case does gain full support and submission.
Will that force big changes at The Social Network? It seems unlikely that a break-up of its apps would even be possible now, especially as Facebook works to integrate its messaging tools. But it could impose new regulations on how Zuck and Co look to expand, which could have implications for its future development in VR, where it’s also been buying up rivals.
That appears to be the most likely conclusion – and even in that event, the case does not appear to be very persuasive when compared to other transactions.
Nonetheless, it will provide another obstacle for the firm to overcome as it moves forward to the next stage of its development.
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