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Facebook could face antitrust lawsuits over deals for Instagram and WhatsApp

The US Federal Trade Commission (FTC) and a coalition of attorney generals from up to 40 states separately, are preparing antitrust suits against Facebook reportedly over the acquisition of Instagram and WhatsApp.

twitter-logoYasmin Ahmed | December 9, 2020 | Updated 11:03 IST
(Picture: Reuters)

Highlights

  • Facebook bought Instagram for $1 billion in 2012 and WhatsApp for $19 billion in 2014.
  • The purchases of the platforms would constitute antitrust violations if Facebook believed the companies were competitors.
  • Earlier this year, Zuckerberg in his congressional testimony argued that the company has a range of competitors, including other tech giants.

Facebook is facing legal challenges from the US Federal Trade Commission (FTC) and separately a coalition of attorney generals from up to 40 states are preparing antitrust suits. The charges against the tech giant are unclear. However, reports have noted that it mainly pertains to the Facebook acquisition of Instagram and WhatsApp. Facebook bought Instagram for $1 billion in 2012 and WhatsApp for $19 billion in 2014. Now, Facebook owns the four most popular and downloaded apps including Instagram, Facebook, Facebook messenger, and WhatsApp.

At the time of purchase, Instagram had 30 million users and Facebook had 450 million users, The Guardian reported. The purchases of the platforms would constitute antitrust violations if Facebook believed the companies were competitors.

It is still unclear where the FTC may choose to bring a case, either in federal court or before its administrative law judge. A federal court, which would leave the outcome to a judge whereas, in the case of FTC, the committee would decide. If the FTC chooses to bring the case in-house, it cannot combine its lawsuit with the states.

The FTC has released documents that showed Facebook executives, including Mark Zuckerberg showing concern over the apps becoming competition before the company pursued them. Both the FTC and the state. attorney generals, led by New York attorney general Letitia James, have been investigating Facebook since last year, CNBC noted.

Earlier this year, Zuckerberg in his congressional testimony argued that the company has a range of competitors, including other tech giants. "In many areas, we are behind our competitors," Zuckerberg told the US House of Representatives Judiciary Committee on Antitrust. "The most popular messaging service in the US is iMessage. The fastest-growing app is TikTok. The most popular app for video is YouTube. The fastest-growing ads platform is Amazon. The largest ads platform is Google. And for every dollar spent on advertising in the US, less than ten cents is spent with us."

He also defended controversial acquisitions like Instagram and WhatsApp by saying the social media platform helped them expand from small, insignificant companies into powerhouses, Reuters reported. The Justice Department and FTC in 2019 began antitrust investigations into the four big tech companies, which also include Amazon and Apple. Shortly after that, attorneys generals quickly joined together to probe Google and Facebook.


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