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US states sue Facebook amid Instagram, WhatsApp unbundling push

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Facebook CEO Mark Zuckerberg.
Facebook CEO Mark Zuckerberg.

A group of US states is suing Facebook for anti-competitive behaviour, with the country’s Federal Trade Commission (FTC) pushing for the unbundling of Instagram and WhatsApp by the social media titan.

The FTC and 46 US attorneys general yesterday filed anti-trust lawsuits against the social media company, alleging it is illegally maintaining its personal social networking monopoly through a years-long course of anti-competitive conduct.

In a statement on Wednesday, the FTC said it is seeking a permanent injunction in federal court that could, among other things, “require divestitures of assets, including Instagram and WhatsApp; prohibit Facebook from imposing anti-competitive conditions on software developers; and require Facebook to seek prior notice and approval for future mergers and acquisitions.

“Personal social networking is central to the lives of millions of Americans,” says Ian Conner, director of the FTC’s Bureau of Competition. “Facebook’s actions to entrench and maintain its monopoly deny consumers the benefits of competition. Our aim is to roll back Facebook’s anti-competitive conduct and restore competition so that innovation and free competition can thrive.”

According to the FTC’s complaint, Facebook is the world’s dominant personal social networking service and has monopoly power in a market for personal social networking services. It says this unmatched position has provided Facebook with staggering profits. Last year alone, Facebook generated revenue of more than $70 billion and profit of more than $18.5 billion.

Recently, Facebook posted better-than-expected third quarter results, as COVID-19 advert sales helped the company record $8 billion in profit.

The social media titan cited the pandemic as a major contributor to an acceleration in the shift of commerce from offline to online, and it experienced increasing demand for advertising as a result.

In the quarter, Facebook recorded a 22% year-over-year increase in revenue to $21.2 billion, as well as a 12% increase in profit to $8 billion.

Facebook daily active users were 1.82 billion on average for September, an increase of 12% year-over-year, and monthly active users were 2.74 billion as of 30 September, another increase of 12% year-over-year.

According to the FTC’s complaint, Facebook targeted potential competitive threats to its dominance.

“Instagram, a rapidly growing start-up, emerged at a critical time in personal social networking competition, when users of personal social networking services were migrating from desktop computers to smartphones, and when consumers were increasingly embracing photo-sharing.”

The complaint alleges Facebook executives, including CEO Mark Zuckerberg, quickly recognised that Instagram was a vibrant and innovative personal social network and an existential threat to Facebook’s monopoly power.

The FTC complaint alleges Facebook initially tried to compete with Instagram on the merits by improving its own offerings, but Facebook ultimately chose to buy Instagram rather than compete with it.

“Facebook’s acquisition of Instagram for $1 billion in April 2012 allegedly both neutralises the direct threat posed by Instagram and makes it more difficult for another personal social networking competitor to gain scale.”

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