The US regulator of the FTC and the prosecutors of 46 US states, the capital Washington and Guam accuse Facebook in two charges of an illegal monopoly on the social media market. To part that the company would have to divest its two main subsidiaries: Instagram and Whatsapp.
History is repeating, or rather rhyming, as this reminds me of the time Bill Gates was facing similar charges in 1998 as Microsoft was accused of having an “abusive monopoly”, after which (on June 7, 2000) the US court ordered a breakup of Microsoft. Microsoft would have to be broken into two separate units, one to produce the operating system and one to produce the other software components.
Considering that this all happened over 20 years ago, it is only fair and about time, even quite late if you ask me, to start to accuse Facebook and expect Mark Zuckerberg of doing the same. In fact, it was already back in 2012 that Facebook bought Instagram for 1 billion dollars, and in 2014 they bought WhatsApp for a whopping 19 billion dollars. Therefore, claiming their monopoly not only on the social media market, but more or less on the communication- and data industry itself.
So according to the FTC this is a “systemic strategy” whereby Facebook, in part by buying the two apps, could prevent them from becoming a threat to the monopoly position of the social network. The accusation is that Facebook’s dominance means that consumers have fewer choices, because competing apps are less able to get in between and perhaps offer a better alternative. This, in turn, also has consequences for advertisers, who have less choice. Together with Google, Facebook is the largest online advertising network.
Domination of the data industry?
The FTC is going to ask an American judge to have Facebook cut up, according to the indictment. That will likely result in a long lasting legal battle, with the platform doing everything it possibly can to avoid actually having to divest the two apps. Both Instagram and Whatsapp are seen as essential parts of Facebook that in fact ensure the future of the company.
Furthermore, the FTC and the states require, among other things, that Facebook informs them in advance if it wants to acquire a company in the future. Earlier this tear, Facebook bought the well-known and increasingly popular GIF platform GIPHY. So these stept being taken mark an important moment in the parties’ two major investigations into Facebook’s dominance.
“The main fact in this case, which the committee does not mention in its 53-page indictment, is that it approved these acquisitions years ago,” said Facebook’s’ legal chief Jennifer Newstead in a response. “The government wants to repeat this now, telling American companies that a sale is not yet final.”
According to Newstead, consumers and businesses use the services not because they have to, but because they provide the most value. “We are going to defend that choice vigorously.”
So what’s next?
Facebook is undeniably a company that acquired if not a monopoly, a near world-wide domination of several markets and industries: the social media market, the advertising industry and now accumulating companies in the digital entertainment industry such as the well-known GIF platform GIPHY.
Therefore, despite legal chief Newstead’s strong argument in their defense, I expect this to become a very long legal battle in which there’s a big chance for Facebook to have to cut up its company just like Bill Gates had to do to Microsoft back in the years around the millennium shift. Although the case will take some years, it seems to me quite likely that either one or both Instagram and WhatsApp is going to have to be cut off Facebook, Inc. Finally, to me this raises the next question: if Facebook has to split – while we’re at it – why not also look into Google?