The FTC’s trial against META began Monday in Washington, D.C. as tech giants struggled to avoid spinoffs from Instagram and WhatsApp. The Federal Trade Commission (FTC) claims Meta illegally acquired the two startups to curb competition.
Meta (at the time Facebook) bought Instagram for photo sharing for $1 billion in 2012. About two years later, the company snapped up the chat tool WhatsApp for about $22 billion.
The FTC is one of the U.S. antitrust law enforcement agencies, hoping that Judge James Boasberg will undertake the big deal to illegally maintain a social media monopoly. It called on Boasberg to order Meta to sell its precious assets to restore competition. The government’s victory could prevent large tech companies from acquiring startups in the future, reducing the main sources of innovation and return on investment.
The initial trial can last up to 37 days until early July packaging. If needed, a trial will be conducted to determine the penalty – very likely next year. An appeal to any ruling may take years to resolve. So, WhatsApp and Instagram won’t be available for sale anytime soon. But the possibility of losing two valuable properties helps explain why Mark Zuckerberg is reportedly going to have a last-minute deal with President Donald Trump and White House officials to avoid fighting in court. So far, these efforts seem to be unsuccessful.
As the trial begins, this is expected.
What is the FTC arguing about?
First, the FTC must demonstrate Facebook’s long-term monopoly on “providing personal social networking services in the United States.” The categories Facebook allegedly monopolizes include services like Snapchat and the little-known Mewe, but not particularly the FTC believes more YouTube, Tiktok and other platforms than watching creators’ videos rather than focusing on family and friends. From 2012 to 2020, Facebook commanded 80% of its user time per year in this narrow market.
Second, it must indicate that the acquisition has damaged competition in the social network market. According to the lawsuit, Facebook was concerned about the threat posed by app startups to their monopoly at the start of Instagram and WhatsApp deal negotiations began. The FTC cites emails between Zuckerberg and other company executives, such as Zuckerberg once wrote about how to write “better than competition”. “The company’s executives cannot maintain their monopoly through fair competition, so they address the existential threat by purchasing Facebook’s failed new innovators,” the lawsuit said.
The FTC claims that Facebook has fewer apps on the heel after purchasing Instagram and WhatsApp and escapes less data privacy for users, as well as goods and expensive services for advertisers. The deals also sent a message to competitors: FTC said companies trying to beat Facebook independently would not be able to achieve. According to the lawsuit, this further competition.
What does FTC want?
The commission hopes to resume competition, including through Meta Divest Instagram and WhatsApp. This can be disastrous for Meta, which relies on Instagram to make up a large portion of its advertising revenue, estimated to be 50% or more in the U.S. Other measures may include preventing Meta from completing similar transactions in the future.
What is Yuan’s defense?
The company’s main argument is that the committee’s definition is too narrow. Meta believes that various social apps, including Tiktok and YouTube, are Facebook competitors. The company said that adding them to Facebook is no longer considered a monopoly.
If the argument doesn’t win META immediately, another major argument for it is that the FTC cannot prove that the situation for consumers and advertisers has become worse due to the company’s ownership of Instagram and WhatsApp, which is a requirement for the FTC case. Meta said that without its management, the applications would not be as successful as they are today. “The FTC must demonstrate that if there is no acquisition, consumers will choose as soon as possible (or better) as possible,” the company’s attorney wrote in court filings last week. “Meta is cautious about the fact that the FTC will not be able to introduce any evidence to meet its burden.”
