Commentary on Political Economy

Thursday, 10 December 2020



US sues Facebook for ‘years-long’ abuse of monopoly power

The FTC highlighted Facebook’s acquisitions of Instagram and WhatsApp as designed to neutralise competition © REUTERS

The US Federal Trade Commission and 46 states have brought antitrust cases against Facebook, accusing the company of using its social media dominance to crush competition and calling for penalties that could include a forced break-up.

The FTC accused Facebook of conducting a “years-long course of anti-competitive conduct”, which included strategically buying up rivals that threatened its monopoly power and cutting off services to squeeze rival developers.

In particular, the FTC highlighted the social media company’s acquisitions of Instagram and WhatsApp in 2012 and 2014, respectively, as designed to neutralise competition.

The FTC said it was seeking a permanent injunction in federal court that could potentially require Facebook to unwind its Instagram and WhatsApp acquisitions, or to seek approval before making any future acquisitions.

In a separate lawsuit, a group of 46 states and two other jurisdictions — led by New York attorney-general Letitia James — described the Silicon Valley group as carrying out a “buy or bury” approach towards its rivals, which in turn “deprived users from the benefits of competition and reduced privacy protections and services along the way”.

Our aim is to roll back Facebook’s anti-competitive conduct and restore competition so that innovation and free competition can thrive

Ian Conner, director of the FTC’s bureau of competition

Ms James said: “Instead of competing on the merits, Facebook used its power to suppress competition so it could take advantage of users and make billions by converting personal data into a cash cow.”

Facebook, which has long denied any anti-competitive practices, said it was reviewing the complaints and would provide further updates shortly.

“Years after the FTC cleared our acquisitions, the government now wants a do-over with no regard for the impact that precedent would have on the broader business community or the people who choose our products every day,” Facebook added. Its shares fell nearly 2 per cent on Wednesday.

The lawsuits, both filed in US federal court in Washington DC, mark the second significant antitrust action against a big Silicon Valley group this year, as politicians and regulators circle the tech sector. In October, the US sued Alphabet’s Google for using a “web of exclusionary” deals to lock out competitors in the search business.

Efforts to rein in the power of internet platforms have garnered support from across the political spectrum. President Donald Trump has long argued that groups such as Facebook have too much power and need “to be stopped”.

A report published several weeks ago by a Democratic-led US congressional subcommittee concluded that Facebook had “maintained its monopoly through a series of anti-competitive business practices”, including scooping up potential competitors and writing up policies to benefit its own services while squeezing out rivals. 

The FTC began an antitrust investigation into Facebook in June 2019, as it rounded off a separate probe into the company over privacy violations related to the Cambridge Analytica scandal. The company paid a $5bn fine to resolve the case.

Shortly after that, Ms James announced plans to lead a small group of attorneys-general in probing Facebook over antitrust concerns, which was later expanded to include most US states.

“Facebook’s actions to entrench and maintain its monopoly deny consumers the benefits of competition,” said Ian Conner, director of the FTC’s bureau of competition. “Our aim is to roll back Facebook’s anti-competitive conduct and restore competition so that innovation and free competition can thrive.”

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