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:
“Today, the Federal Trade Commission filed an amended complaint against Facebook in the agency’s ongoing federal antitrust case. The complaint alleges that after repeated failed attempts to develop innovative mobile features for its network, Facebook instead resorted to an illegal buy-or-bury scheme to maintain its dominance.”
The case alleges that Facebook was caught off-guard by the emergence of smartphones and mobile internet access the 2010s, and lacked the infrastructure or tools to capitalize on this element. That then posed a risk to its social networking dominance, and in response, Facebook then bought up ‘mobile innovators’ in Instagram (2012) and WhatsApp (2014).
That, the FTC claims, amounts to anti-competitive behavior, while Facebook also:
“…lured app developers to its platform, surveilled them for signs of success, and then buried them when they became competitive threats. Lacking serious competition, Facebook has been able to hone a surveillance-based advertising model and impose ever-increasing burdens on its users.”
The case claims that Facebook now dominates the mobile advertising market as a result of these efforts, and that has stifled subsequently competition, and limited the capacity for innovation in the sector.
In response, Facebook issued the following statement:
“It’s unfortunate that despite the court’s dismissal of the complaint and conclusion that it lacked the basis for a claim, the FTC has chosen to continue this meritless lawsuit. There was no valid claim that Facebook was a monopolist – and that has not changed. Our acquisitions of Instagram and WhatsApp were reviewed and cleared many years ago, and our platform policies were lawful.”
As noted, the FTC’s original lawsuit against Facebook was dismissed due to its failure to support its claims with clear evidence of wrongdoing by the company. The new case, the FTC claims, includes detailed statistics which show that Facebook “had dominant market shares in the US personal social networking market”.
“The suit also provides new direct evidence that Facebook has the power to control prices or 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.”
Which is interesting – the FTC here is saying that Facebook has ‘significantly’ reduced the quality of its platforms, without impacting usage. How would you quantify that? By pointing to the addition of more ads? Highlighting reduced post reach? Noting the negative impacts of feed algorithms?
It seems like a speculative claim, and a risky path to go down for a push that’s already been rejected once.
Still, it’s hard to argue that Facebook doesn’t have a firm grip on the digital advertising and social media space. The company has a collective audience of 3.5 billion across its apps, which is more than triple the reach of its closest competitor, while it’s also the dominant ad tool in most regions in which its apps are present. With that amount of influence, Facebook can absolutely control the market, and it has clearly sought to quash competitors with duplicate features like Stories and Reels within its apps.
But neither of these specific tools are under consideration here – the case is confined to Instagram and WhatsApp specifically, and Facebook’s conduct in swallowing up rising competitors, expanding its already massive footprint.
Of course, Facebook will argue, as it has previously, that the case relies on revisionist history, with each of its mergers approved at the time, in line with requirements.
Again, from Facebook:
“The FTC’s claims are an effort to rewrite antitrust laws and upend settled expectations of merger review, declaring to the business community that no sale is ever final. We fight to win people’s time and attention every day, and we will continue vigorously defending our company.”
On the latter point, the rise of TikTok would be a key example that Facebook doesn’t completely dominate the market, with the short video app now potentially posing an existential threat to Facebook, if it continues to gain momentum.
Which is why, despite its many attempts to copy TikTok, Facebook wouldn’t be entirely upset to see it reach a billion users of its own, because that would then belie the FTCs claim that Facebook simply crushes competition at every turn, and stifles all innovation in the sector.
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 seems like the most likely outcome – and even then, the case doesn’t seem overly compelling, based on revisiting old deals.
Still, it’ll be another challenge for the company to contend with as it looks to the next stage of its growth.