NY Attorney General Latitia James holds a news conference to announce the antitrust lawsuit the FTC and a number of states are filing against Facebook. For access to live and exclusive video from CNBC subscribe to CNBC PRO: https://cnb.cx/2NGeIvi
The Federal Trade Commission and a coalition of attorneys general from 48 states and territories filed two separate antitrust lawsuits against Facebook on Wednesday. The lawsuits target two of Facebook’s major acquisitions: Instagram and WhatsApp.
Both are seeking remedies for the alleged anticompetitive conduct that could result in requiring Facebook to divest the two apps.
The company’s stock was down almost 4% following the news of the lawsuits.
Facebook said in a tweet shortly after the lawsuits were released, that it was reviewing the complaints and “will have more to say soon. 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.”
The FTC alleges that Facebook engaged in a systematic strategy to eliminate threats to its monopoly, including the 2012 and 2014 acquisitions of Instagram and WhatsApp. It alleges Facebook holds monopoly power in the U.S. personal social networking market.
The FTC alleges that Facebook engaged in a systematic strategy to eliminate threats to its monopoly, including the 2012 and 2014 acquisitions of Instagram and WhatsApp, which the FTC previously cleared. Facebook acquired Instagram for $1 billion and WhatsApp for $19 billion.
As part of the lawsuit, the FTC will seek a permanent injunction that could result in the divestitures of Instagram and WhatsApp, the agency said. Additionally, the FTC will seek to prohibit Facebook from imposing anticompetitive conditions against third-party software developers.
“Since toppling early rival Myspace and achieving monopoly power, Facebook has turned to playing defense through anticompetitive means,” the FTC states in its lawsuit. “After identifying two significant competitive threats to its dominant position — Instagram and WhatsApp — Facebook moved to squelch those threats by buying the companies, reflecting CEO Mark Zuckerberg’s view, expressed in a 2008 email, that ‘it is better to buy than compete.’”
The FTC lawsuits also notes that Facebook tried and failed to buy up rivals Twitter and Snapchat.
“In lamenting that Twitter had ‘turned down [Facebook’s] offer’ to be acquired in November 2008, Mr. Zuckerberg wrote: ‘I was looking forward to the extra time that would have given us to get our product in order without having to worry about a competitor growing,’” the FTC lawsuit states.
A partially redacted portion of the FTC lawsuit states that Facebook’s main blue app has lost users and engagement to Instagram.
“Through its control of Instagram, Facebook has attempted to prevent Instagram from ‘cannibalizing’ Facebook Blue, confirming that an independent Instagram would constitute a significant threat to Facebook’s personal social networking monopoly,” the lawsuit reads.
“Facebook has kept WhatsApp cabined to providing mobile messaging services rather than allowing WhatsApp to become a competing personal social networking provider, and has limited promotion of WhatsApp in the United States,” the FTC states in another partially redacted portion of the lawsuit.
The commissioners voted to file the complaint in the U.S. District Court for the District of Columbia in a 3-2 vote. Republican Commissioners Noah Phillips and Christine Wilson dissented while Republican Chairman Joe Simons joined his two Democratic colleagues Rohit Chopra and Rebecca Kelly Slaughter in the majority.
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