FTC Sues Facebook: Antitrust Case Aims to Break Up Social Media Giant

The Federal Trade Commission revealed a new antitrust case against Facebook today, asserting that the social media giant employed its monopolistic standing “to suppress, neutralize, and discourage substantial competitive challenges,” and should therefore be divided. This legal action is distinct from, yet was investigated alongside, a similar suit brought by 48 state attorneys general, also announced today.

Both legal complaints allege that Facebook has consistently engaged in unlawful activities, which state and federal investigators collaborated to define. However, the state-level lawsuit focuses on breaches of state laws, while the FTC cites violations of federal statutes. Consequently, despite both lawsuits objecting to the same Facebook actions, they will proceed and be resolved independently.

The core accusations in both cases are remarkably similar: Facebook’s acquisitions of WhatsApp and Instagram both represented the elimination of emerging competitors by a monopoly, and Facebook has leveraged its platform’s reach to hinder the rise of alternative competitors.

Both the FTC and the state lawsuits seek a retroactive determination that the acquisitions of Instagram and WhatsApp – and potentially others – were illegal, and that these companies be separated from Facebook.

Beyond this divestiture, Facebook would be required to obtain advance notification and approval from both the FTC and state authorities for all future mergers and acquisitions. Furthermore, certain behaviors would be prohibited, such as restricting API access based on the presence of competing features.

In a statement on Twitter, Facebook indicated it is reviewing the lawsuits, but criticized them, stating, “The government is seeking to revisit past decisions without considering the broader implications for the business community.”

A legitimate question arises: How can the government initially authorize the purchases of Instagram and WhatsApp, then later invalidate them, without raising concerns about the effectiveness of the FTC and other regulatory bodies’ oversight processes?

As the FTC explains in its Q&A regarding the lawsuit, this situation is not unprecedented or unexpected. The approval of one company’s acquisition of another may not reveal any obvious legal issues at the time, but hidden concerns may exist. A completed merger can be reversed if, for instance, it was discovered to have been based on false information, or – as in this instance – if it is later determined to be part of a pattern of unlawful conduct.

“Our legal action addresses more than just the acquisitions,” the FTC clarifies. “We are challenging a sustained pattern of behavior that constituted monopolization of the personal social networking market … the FTC is authorized – and frequently does – challenge completed transactions when they violate the law. Identifying anti-competitive completed transactions has been a central focus of the Technology Enforcement Division since its establishment in February 2019 as the Technology Task Force.”

These legal filings represent only the initial phase of what will likely be a prolonged process – potentially spanning multiple years and administrations, which will inevitably slow down the proceedings. Facebook’s likely next step will be a public relations campaign to assert its innocence.