10 December 2020

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US Govt Facebook Must be broken Up, FTC 46 Attorney General Bring Case

US Govt Facebook Must be broken Up, FTC 46 Attorney General Bring Case 
Thursday, December 10, 2020

Facebook is the world’s biggest social network with 2.7 billion users and a company with a market value of nearly $800 billion whose CEO Mark Zuckerberg is the world’s fifth-richest individual

The U.S. government and 48 attorneys general filed landmark antitrust lawsuits against Facebook on Wednesday, seeking to break up the social networking giant over charges it engaged in illegal, anti-competitive tactics to buy, bully and kill its rivals.

The Federal Trade Commission, led by Republican Chairman Joe Simons, brought its lawsuit in a D.C. district court. Letitia James, the Democratic attorney general of New York, led her Democratic and Republican counterparts from dozens of states and territories in filing their complaint in the same venue. Appearing at a news conference, James on Wednesday sharply rebuked Facebook for having put “profits ahead of consumers’ welfare and privacy.”

A group of 46 U.S. attorneys general led by New York filed an antitrust lawsuit against Facebook (FB) on Wednesday, alleging the social media giant is violating antitrust law by buying up competitors and depriving consumers of alternatives that would better protect their privacy.

Instagram and WhatsApp are among some 70 companies that Facebook has acquired over the past 15 years.

The lawsuits seek court orders unwinding Facebook’s acquisition of Instagram and WhatsApp, according to copies of the complaints provided by the states and the FTC.

The government lawsuits at times point to correspondence from Zuckerberg, who acknowledged in 2012 — before purchasing Instagram — that Facebook had fallen “very behind” in photo sharing and needed to make the critical acquisition to catch up, according to the FTC complaint. In making its move, Facebook sought to wield its “power as a sword,” the state attorneys general found, threatening negative repercussions against Instagram and its founders if they did not agree to a sale.

State and federal investigators detailed a similar troubling pattern with WhatsApp, highlighting additional emails from Zuckerberg, who saw the company and other messaging services at the time as “the next biggest consumer risk” for his social networking empire.

The FTC said Facebook has engaged in a “a systematic strategy” to eliminate its competition, including by purchasing smaller up-and-coming rivals like Instagram in 2012 and WhatsApp in 2014.
The Federal Trade Commission, which focuses on consumer protection, slapped Facebook with a record-setting $5 billion fine in 2019, which was very less compared to company profits and business after UK political consultancy Cambridge Analytica harvested the data of up to 87 million users of the social network without their knowledge.

“Personal social networking is central to the lives of millions of Americans,” Ian Conner, the director of the FTC’s Bureau of Competition, said in a statement. “Facebook’s actions to entrench and maintain its monopoly deny consumers the benefits of competition. Our aim is to roll back Facebook’s anticompetitive conduct and restore competition so that innovation and free competition can thrive.”
Facebook used “vast amounts of money” to acquire companies that could potentially threaten its dominance, particularly Instagram and WhatsApp, she said. The effort was meant to “squeeze every bit of oxygen out of the room.”

Facebook offered $1 billion for Instagram in 2012 when it had only 25 million users and no revenue, but had already started to capture the market for mobile photo-sharing. Facebook “quickly recognized that Instagram was a vibrant and innovative personal social network and an existential threat to Facebook’s monopoly power,” the FTC said.

Chief Executive Officer Mark Zuckerberg knew that by buying Instagram, Facebook “would not only squelch the direct threat that Instagram posed, but also significantly hinder another firm from using photo-sharing on mobile phones to gain popularity as a provider of personal social networking.”
The states’ complaint says Zuckerberg was able to convince former Instagram CEO Kevin Systrom to sell the company “based in no small part upon Zuckerberg’s growing reputation for wielding Facebook’s power as a sword.” Systrom asked an Instagram investor if Zuckerberg was likely to “go into destroy mode” if he turned down the offer. Systrom later said, “bottom line I don’t think we’ll ever escape the wrath of mark...it just depends how long we avoid it,” according to the complaint.

The company repeated its anti-competitive acquisition strategy when it acquired WhatsApp, the mobile messaging leader, in 2014 for $19 billion, the FTC and the states said. Facebook saw direct messaging apps as a significant threat, according to emails that were included in the complaints from Zuckerberg and employees. 

In a 2012 email, Zuckerberg said messaging apps could be used “as a springboard to build more general mobile social networks.” A Facebook business growth director predicted internally that “[t]his might be the biggest threat we’ve ever faced as a company.”

WhatsApp’s position as a global service without ties or restrictions to work with any single platform made it an attractive acquisition, the FTC found.

“Once again, Facebook decided it was better to buy than compete,” the FTC said. “After Facebook announced the acquisition of WhatsApp, employees internally celebrated the acquisition of ‘probably the only company which could have grown into the next FB purely on mobile[.]’”
WhatsApp, unlike Instagram, does not contribute meaningful revenue to Facebook today, but the company is setting the stage to turn the messaging app into a commerce and payments service in key international markets, including India and Brazil. In recent years, Facebook has been combining the WhatsApp and Instagram networks with its own, strengthening its power over global communication and making any future breakup more technically difficult.

The lawsuits also accuse Facebook of thwarting competition in violation of antitrust laws by preventing apps that were seen as competitive threats from accessing its platform. The House committee that investigated Facebook and the other tech companies said Facebook “weaponized” its platform against rivals by preventing them from getting access to the data they needed to grow.

“The two most utilized strategies have been to acquire smaller rivals and potential rivals before they could threaten Facebook’s dominance and to suffocate and squash third-party developers that Facebook invited to utilize its platform,” James’s office said in a statement.

Facebook’s aggressive “buy-or-bury” strategy, the state attorneys general added, ultimately meant that users who were “otherwise dissatisfied with the data usage and privacy options available on Facebook have nowhere else to go.” In the meantime, Facebook reaped massive profits, since its popularity helped it generate data about users’ relationships and interests — which in turn generated more money from advertisers.

Facebook also cut off data access to developers such as Twitter-owned Vine that could be potential competitive threats, the FTC said.

North Carolina Attorney General Josh Stein, who was on the executive committee of attorneys general conducting the investigation, said the litigation has the potential to alter the communications landscape the way the breakup of AT&T’s local phone service monopoly in the early 1980s did.
The FTC, is an independent regulatory agency whose five commissioners currently include three Republicans and two Democrats.

President-elect Joe Biden has said the breakup of Big Tech giants should be seriously considered
Federal and state regulators want a federal court to potentially order Facebook to break up Instagram and WhatsApp from the company and to get prior notice and approval for future mergers and acquisitions.

Now what will happen?

Facebook will challenge the law suit and may be like 1980 History will get repeated as consumer privacy and protection is most important thing. 

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