NEWS: Facebook in big trouble, risks breakup under the Anti-Trust law

By Legal Wires 6 Minutes Read

On 9th December, 2020 the Federal Trade Commission (FTC), the U.S agency responsible to curb anti-competitive practices and protect consumers, together with attorney generals of 46 states filed a suit against the social networking giant Facebook. The complaint alleged that Facebook has over the years has unlawfully dictated its monopoly in the arena of social networking by either eliminating or acquiring potential competitive candidates. A call has been made thereof, for a break-up of Facebook. This suit has come in wake of the new founded challenge issued by different jurisdictions across the world to the ‘Big Tech’ giant companies on anti-trust charges. Earlier, in October, the U.S Department of Justice had also sued Google for alleged abuse of dominant position in the search engine service market.

Allegations in Complaint

The plaintiffs have alleged that the Mark Zuckerberg led company has engaged in anti-competitive conduct over the past many years in order to maintain its monopoly status in social networking services market. The lawsuit essentially highlights two broad areas where such conduct has been prima facie evident, namely the acquisition of photo-sharing app Instagram and the message sharing platform Whatsapp, which reflect the Facebook’s policy of “better buy than compete”. The allegations are that Facebook paid an extremely hefty amount of 19 billion dollars to buy Whatsapp, which at that point of time was not yet monetised, was that by doing so, it would be eliminating a serious contention to its lead position in the social media market.
Another serious allegation against Facebook has been regarding its “anti-competitive platform conduct” wherein if Facebook failed or not opted to purchase a competing firm, it withdrew “access to key components of its immensely valuable network.” The lawsuit cited example of such conduct of Facebook in relation to Twitter’s Vine, Path, Circle and other apps. The complaint mentions that Facebook closed access to its platform by potential competitors after having opened it up to enlarge its base and increase its engagements with its users.

The FTC lawsuit cited example of Twitter’s Vine app, which allowed users to create and share short videos that go in a loop. Its features allowed users to find friends through Facebook. But on the day of its launch, Facebook removed this availability of this feature to the app, thereby prevented it from accessing the APIs (Application Programming Interfaces) that could have helped it grow.

Lawpoint

Under Section 2 of the Sherman Act, 1890 it is unlawful for a company to achieve monopoly status or maintain such status through anti-competitive means. Section 7 of Clayton Act,1914 prevents mergers of companies that will lessen competition or lead to a monopoly. In effect, if the lawsuit under the framed charges is successful, Facebook could be forced to sell off Instagram and Whatsapp and it would be prevented from imposing anti-competitive platform conditions on other apps and platforms. It has also been alleged that Facebook did not sought prior approval for its acquisitions as mandated by the Hart-Scott-Rodino Act, and be ordered to do so in future. The Hart-Scott-Rodino Act requires “companies to file pre-merger notifications with the Federal Trade Commission and the Antitrust Division of the Justice Department for certain acquisitions.”

Facebook’s response

Facebook has denied any engagement in anti-competitive practices and has claimed it has complied with all relevant anti-trust regulations. The company in its official reply has remarked, “this lawsuit risks sowing doubt and uncertainty about the U.S. government’s own merger review process and whether acquiring business can actually rely on the outcomes of the legal process.” It has said that its platform conduct regulations are well accepted and standard in the industry and there has been no arbitrary imposition of such restrictions on apps which sought its services.