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FTC Sues Facebook for Monopolization Tactics

The Federal Trade Commission has filed a lawsuit against Facebook, Inc. alleging the tech-giant illegally maintained its social networking monopoly through a years-long utilization of anticompetitive tactics. The lawsuit comes after a lengthy investigation with the cooperation of attorneys general of 46 states including the District of Columbia and Guam.

The FTC specifically references Facebook's 2012 purchase of up-and-coming social media rival Instagram, its 2014 acquisition of mobile messaging app WhatsApp, as well as the anti-competitive conditions Facebook imposes on software developers using their platform.

The Federal Trade Commission and this lawsuit seek a permanent injunction in federal court that could require Facebook to: Divest assets including Instagram and WhatsApp; prohibit the company from imposing anticompetitive conditions on software developers; and require them to notify and seek approval for future mergers and acquisitions.

2012 saw the acquisition of two-year-old photo-sharing app, Instagram for an impressive $1 billion. The move was viewed by experts as smart, considering the newly acquired application offered a formidable mobile player experience, an area Facebook was severely lacking at the time.

Fast forward two years to 2014, Facebook acquires WhatsApp for $19 billion, an acquisition that completely blows their Instagram purchase out of the water. WhatsApp was five years old at the time, and Facebook CEO Mark Zuckerberg was looking to dominate the messaging world against competitors such as Twitter, Google, and Microsoft's Skype.

There is an obvious pattern in Facebook's business strategy, that is identifying its weaknesses, evaluating competition in the market, and deciding which competitor can provide the largest advantage if acquired.

So how are they imposing anticompetitive conditions on software developers? Well, the FTC lawsuit alleges that Facebook imposed conditions on third-party software developers' access to valuable interconnections on its platform, such as the application programming interfaces ("APIs") that allow developers' apps to interact with Facebook.

More specifically, Facebook allegedly has made key APIs available to third-party applications on the condition that they refrain from developing competing functionalities, and from connecting with or promoting other social network services.

In recent years, Government entities are becoming increasingly more aggressive seeking out and intervening with companies that pose as anti-competitive threats to industries. More specifically focusing on big-tech and social media conglomerates.

In July 2020, Facebook along with three other big-tech companies, including Amazon, Apple, and Google, sat on Capitol Hill to defend their business practices. The 6-hour grilling aimed to explore whether the tech industry's most influential core gained and maintained their status through potentially anti-competitive means.

Switching gears to October of this year, the Justice Department issued a lawsuit against Google alleging monopolistic business practices in the search and search advertising landscapes - read our recent blog on this news.

Ian Conner, Director of the FTC's Bureau of Competition said: "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."

If the FTC is successful in their lawsuit, and Facebook is required to divest their assets in both Instagram and WhatsApp, do you think they will still be successful?

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