The social media behemoth Facebook Inc. (NASDAQ: FB) just got slapped with two massive lawsuits.
On Wednesday, the Federal Trade Commission along with a whopping 48 state attorneys general filed two suits, both of which are centred around Facebook’s acquisition of the photo-sharing app Instagram and the instant messaging platform WhatsApp.
The lawsuits allege that the Menlo Park, California-based social media giant used acquisitions as their primary tool to neutralize competitors which could threaten their dominance in the social media space.
Now, as a result, both the complaints want to effectively break up WhatsApp and Instagram from Facebook’s family of apps or in other words, force the company to divests these assets.
But that is not all.
In addition to WhatsApp-Instagram break up, Facebook might now require to get approval from the U.S Government before they participate in any mergers or acquisitions going forward.
The coalition of the attorneys general which was led by Letitia James the New York Attorney General, began an investigation into Facebook in September 2019, after which FTC joined the band subsequently. Currently, the only U.S states whose attorneys general have not yet signed on to the lawsuit are Alabama, Georgia, South Carolina, and South Dakota.
On Wednesday, Facebook said that even though FTC had previously cleared their acquisitions, the U.S. Government simply wants a do-over with no regard to the impact it would have on the broader business community and the people who use their products every day globally.
Zuckerberg’s 2012 Emails Disclosed: Instagram Can Hurt Us
As part of the investigation which led to the lawsuits being filed, Facebook CEO Mark Zuckerberg’s emails from 2012 came into light.
In those emails, it seemed like Zuckerberg looked at Instagram as a probable threat to Facebook and reasoned that buying the popular photo-sharing app would ensure Facebook’s longevity in the social media space.
“One way of looking at this is that what we’re really buying is time. Even if some new competitors springs up, buying Instagram, Path, Foursquare, etc now will give us a year or more to integrate their dynamics before anyone can get close to their scale again,” Zuckerberg said in the email.
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This, according to Rep. David Cicilline, displayed Facebook’s acquisitions of Instagram and WhatsApp were a classic example of “monopoly behaviour” and thus, the company needs to be broken up immediately.
Now, the disclosure of the emails wasn’t precisely the first instance where Facebook admitted to Instagram being a competitor.
In July, the congressional lawmakers grilled Zuckerberg at an antitrust hearing about what motivated the company to acquire Instagram and WhatsApp which were popular standalone platforms capable of computing with Facebook if they hadn’t purchased them.
To that, Zuckerberg replied he viewed Instagram as “a competitor” and also as a complement to their services.
Lastly, for WhatsApp, while there exist no direct references of Facebook deeming them as a competitor. But, by 2012, it was clear that the WhatsApp had emerged as the global category leader in mobile messaging while the Facebook messenger was still lagging behind. Thus, Facebook chose to buy the emerging threat rather than compete with them for $19 billion.
It would now be interesting to observe if these lawsuits will interfere with Facebook’s recent acquisition – Kustomer and how will the social media behemoth respond back to the FTC.
Also, one must note that the recent lawsuits against Facebook are a second major legal action aimed at the Big Tech, following the lawsuit filed against Google by the Department of Justice in October. We will keep you updated on all future developments. Until then, stay tuned.
