Yesterday, the U.S. Federal Trade Commission (FTC) and state attorneys filed multiple lawsuits against Facebook, claiming that its acquisitions of Instagram and WhatsApp in 2012 and 2014 respectively stifled competition and gave the company a monopoly on social media. In other parts of the lawsuit, the parties also challenged the ways in which Facebook provides access to its APIs and user data to third-party apps. Ultimately, the lawsuits called on the firm to sell Instagram and WhatsApp to restore competition. Facebook has now responded to these lawsuits, calling them "revisionist history".
In a sternly worded blog post, Vice President and General Counsel of Facebook Jennifer Newstead highlighted that the company is always competing against the likes of Google, Twitter, Microsoft, Amazon, and TikTok, among others, and does not command monopoly over the market. The executive indicated that it aids millions of businesses reach new audiences, and in fact, most of its advertisers are small businesses for whom Facebook is a very important tool especially in the ongoing pandemic.
Newstead stated that the lawsuits are "revisionist history" especially since both the FTC and the European Commission cleared the acquisitions over five years ago, with the prior party now suddenly deciding that it got its initial assessment wrong and wants a complete do-over. The executive went on to say that:
Now the agency has announced that no sale will ever be final, no matter the resulting harm to consumers or the chilling effect on innovation. When we acquired Instagram and WhatsApp, we believed these companies would be a great benefit to our Facebook users and that we could help transform them into something even better. And we did. This lawsuit risks sowing doubt and uncertainty about the US government’s own merger review process and whether acquiring businesses can actually rely on the outcomes of the legal process. It would also punish companies for protecting their investment and technology from free-riding by those who did not pay for the innovation, making those companies less likely over the long term to make their platforms available to spur the growth of new products and services.
Newstead also hinted that the lawsuit is likely now being brought up in light of big tech companies being challenged for their role in the elections, ensuring user privacy, and removing harmful content. However, the executive claims that none of those matters involve antitrust issues and these lawsuits will do nothing to solve them.
The blog post highlights that Facebook has completely evolved and improved Instagram and WhatsApp following their respective acquisitions. Instagram, in particular, had 13 employees and 2% of its current user base when it was acquired by Facebook. Similarly, WhatsApp was expensive for users, but following the acquisition, Facebook made it free worldwide and added new features like video calling and end-to-end encryption.
Regarding claims about restricting API usage for third-parties, Facebook claims that it only does that for companies that use this to unfairly copy Facebook's core capabilities. It emphasized that:
This restriction is standard in the industry. Where platforms give access to other developers — and many do not provide access at all — they usually prohibit duplication of core functions. LinkedIn, The New York Times, Pinterest and Uber, to name a few, all have similar policies. Companies are allowed to choose their business partners, and it gives platforms comfort that they can open access to other developers without that access being exploited unfairly. What’s more, the policy had no impact on competition. YouTube, Twitter and WeChat, for example, have done just fine without our platform. Significantly, Facebook did nothing to prevent any apps from offering their services on their own sites or anywhere else on the internet.
Lastly, Newstead has stressed that Facebook is where it is today because of U.S. laws that encourage competition and because of its investments in technology. The company looks forward to court proceedings in which it will be allowed to present evidence to dismiss the lawsuits filed by the FTC and state attorneys.
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