FTC: Facebook has an illegal monopoly and must divest Instagram and WhatsApp

The US Federal Trade Commission and 46 US states have sued Facebook for maintaining an illegal monopoly position. The regulator wants to enforce through the court that Facebook must divest Instagram and WhatsApp.

According to the FTC, Facebook owes its current monopoly position in the social networking market to a “long course of anti-competitive behavior.” The FTC and prosecutors from 46 US states have concluded after lengthy investigations that Facebook has maintained a systematic strategy to hinder competition. Prosecutors include the acquisitions of Instagram in 2012 and that of WhatsApp in 2014.

Facebook also imposes anti-competitive conditions on software developers, the prosecutors conclude. The course of action is detrimental to competition and consumers have few choices for social networks. Advertisers also lack the advantage of competition, according to the indictment.

With the indictment, the FTC wants to enforce through federal court that Facebook stops obstructing competition. Possibilities for this are the divestment of Instagram and WhatsApp and the prohibition of anti-competitive conditions for developers. The FTC also wants to demand that Facebook must now request approval for future mergers and acquisitions.

The prosecution offices of 46 US states, capital Washington and the island of Guam are filing a similar complaint. “For nearly a decade, Facebook has been using its monopoly to crush smaller rivals and knock out competition, all at the expense of users,” said Letitia James, New York’s Attorney General, who is taking the lead in the joint lawsuit.

Acquisitions from Instagram and WhatsApp

According to the FTC’s indictment, the top of Facebook, including CEO Mark Zuckerberg, recognized that Instagram was on the rise and the company initially tried to compete with it with its own services. Facebook decided to take over Instagram in April 2012 for $ 1 billion. This eliminated competition, but the acquisition also made it more difficult for other social networks to become big.

The situation with WhatsApp was similar. According to the charges, Facebook realized that chat services were a threat to social networks and when WhatsApp was the market leader in 2014, Facebook decided to buy the chat service for $ 19 billion.

The indictment also states that Facebook has imposed anti-competitive conditions on software developers in recent years. This made it difficult for them to access APIs. Facebook would have made certain APIs available to third parties only if they promised not to develop or promote competing social networks.

The lawsuit follows an investigation by the FTC’s Technology Enforcement Division. Its staff worked with a coalition of prosecutors from 46 different US states. In a video message, Ian Connor, chief executive of the FTC’s Bureau of Competition, says he is confident that the lawsuit will be won. The regulator emphasizes that he wants to fight the legal battle in court and not in the media.

Facebook response

In a first reaction Facebook reports on Twitter that it will review the complaints and will say more about it shortly. Furthermore, the social network notes that the FTC approved the acquisitions years ago and that the government now thinks differently, without taking into account the impact that this has on users.

Facebook said last month that splitting off from Instagram and WhatsApp is ‘almost impossible’. According to the social network, that would cost billions of dollars and come at the expense of users’ safety. Facebook itself is working on the further integration of its own Messenger platform with Instagram and WhatsApp and wants to provide all services with the same end-to-end encryption.

Major tech companies under attack

Not only Facebook, but also other large tech companies are under fire from American regulators. At the end of October, the US Department of Justice announced that it was suing Google for abusing its monopoly position in the search and advertising market.

The charges against Google came several weeks after the publication of a major investigation into the abuse of monopoly positions by major tech companies. In the 449-page report, a committee of the US House of Representatives concluded that not only Google, but also Amazon, Apple and Facebook have a monopoly and are abusing their dominant position.