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Facebook lawsuits: Why the social network is facing calls to sell WhatsApp and Instagram, and if it could work

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Facebook is being sued by US federal regulators and more than 45 state prosecutors, following accusations that the tech giant sought to illegally squash smaller competitors through buying up rivals.

The antitrust lawsuits, which were brought against Facebook on Wednesday, represent one of the most significant legal actions the US government has taken against the tech firm, heralded by some analysts as an unprecedented move.

Facebook’s acquisitions of WhatsApp and Instagram are now facing scrutiny as part of the action, with officials arguing that the deals should be broken up even though regulators approved them years ago.

The company’s dominance online and in society as a whole, especially following these acquisitions, cannot be overstated – more than 2.5 billion people use one of Facebook’s apps each day and the firm is valued at nearly $800bn (£601.7bn). With such a large monopoly on social media platforms, it has been suggested consumers were pushed into accepting the company’s controversial privacy concerns.

Whether the tech firm’s power can be curtailed is yet to be seen, especially as the lawsuits could take years to litigate.

What are the cases against Facebook?

Facebook lawsuits: Why the social network is facing calls to sell WhatsApp and Instagram, and if it could work
CEO of Facebook Mark Zuckerberg testified in front of Congress on tech monopoly in July (Photo: Getty)

Antitrust laws are statutes developed by governments to protect consumers from predatory business practices and ensure fair competition by stopping practices such as price fixing or rigs and monopolies.

US Federal Trade Commission (FTC) and 48 attorneys general have claimed in separate lawsuits that when Facebook bought Instagram for $1bn (£751.3m) in 2012 and WhatsApp for $19bn (£14.3bn) two years later, the company illegally stifled competition that could have eventually threatened its monopoly, the New York Times reported.

The agency also claims that Facebook bolstered its dominance by threatening to cut off third-party software developers from accessing the site if they created products which competed with it.

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Facebook lawsuits: Breaking up the social network would be a mammoth task — one it will fight tooth and nail

Biggest antitrust case in a generation

The lawsuits represent the biggest antitrust cases in the US a generation, with many comparing it to a landmark case brought against Microsoft Corp in 1998. The lawsuit accused Microsoft of monopolising the web browser market, questioning whether the company had manipulated its computers to favour Internet Explorer over other companies’ browsers, and was not settled until 2001.

The Facebook lawsuits are the result of an 18-month investigation by the states and the FTC, with millions of documents released which appeared to show Facebook executives, including CEO Mark Zuckerberg, expressing concern Instagram and WhatsApp could become competition, before aggressively pursuing them.

The legal filings cite internal messages from Mr Zuckerberg, such as one 2008 email that said it was “better to buy than compete”, the BBC reports.

What could happen?

While federal regulators are calling for the company’s conglomerate to break up, Facebok has said it plans to vigorously defend itself against the accusations, and is expected to use the argument that regulators approved the deals at the time.

If the case against Facebook is successful however, the company could be completely transformed after experiencing years of unrestrained growth, especially as regulators are calling for the company’s future deals to face the same restrictions.

Previous antitrust tech cases have shown there is rarely a situation where the company is forced to break up, however, and Facebook will likely appeal if it is pushed to.

In 2013, the FTC wrapped up a two-year investigation into Google after allegations of biased search results, concluding the company had not violated antitrust laws.

While in the 1998 Microsoft case the court initially ruled that the company should be broken into two separate companies, but the firm appealed. In the end, Microsoft settled with the US government, agreeing to evolve.

Larger examination of Big Tech

This year has seen some of the biggest tech firms come under fresh scrutiny.

In October, Google was hit with an equally significant antitrust lawsuit, accused of harming competition in internet search and search advertising through distribution agreements.

In July, Mr Zuckerberg, Apple’s Tim Cook, Google’s Sundar Pichai, and Amazon’s Jeff Bezos testified to Congress, in an antitrust hearing determining whether the industry’s biggest players intentionally used their market power to hurt smaller rivals.


All content in this article is for informational purposes only and in no way serves as investment advice. Investing in cryptocurrencies, commodities and stocks is very risky and can lead to capital losses.

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