In December 2020, the Federal Trade Commission (FTC) and 46 states sued Facebook, accusing the firm of buying up competitors – mainly WhatsApp and Instagram –to liquidate competition in the social media industry. The aim of the FTC antitrust lawsuit was to force Facebook to do away with these two major acquisitions.
How Did It Begin?
As per the timeline given by Forbes, the FTC alleges Facebook, which rebranded itself as Meta, has engaged in “anticompetitive conduct and unfair methods of competition,” including through its acquisition of Instagram and WhatsApp and by imposing allegedly “anticompetitive restrictions” on other app developers to ensure they couldn’t compete with Facebook.
The agency initially sued Facebook in December 2020, but had to refile the lawsuit in August after U.S. District Judge James E. Boasberg initially dismissed the case for being “legally insufficient” and “light on specific factual allegations.”
Boasberg let the case proceed this time in January 2022, ruling that the FTC’s new complaint includes factual evidence about Facebook’s alleged misconduct that’s “far more robust and detailed than before,” though he did throw out one aspect of the lawsuit challenging Facebook’s policies for app developers because the company discontinued them in 2018.
What Is An Antitrust Lawsuit?
Antitrust laws were created by Congress to preserve competition among businesses and prevent any one business from dominating a single industry and building a monopoly.
When businesses compete and monopolies are restricted, companies have strong incentives to “operate efficiently, keep prices down and keep quality up,” according to the FTC.
Antitrust laws are the pillars that support capitalism in the United States. The first antitrust law, the Sherman Antitrust Act, was passed in 1890. Today, the Sherman Act, the Federal Trade Commission Act, and the Clayton Act work together to ensure fair competition across the economy. Here’s how antitrust responsibilities are divided between these three laws:
- The Sherman Antitrust Act. This law prohibits groups of businesses from working together or merging to create a monopoly to control pricing in a single market.
- The Federal Trade Commission Act. Passed in 1914, this law created the Federal Trade Commission (FTC) as an independent government agency tasked with enforcing consumer protection and antitrust laws.
- The Clayton Antitrust Act. Also passed in 1914, the Clayton Act regulates business activities and defines unethical business practices, including monopolies.
When a company is suspected of behavior that infringes on any one of these three laws, the federal government or state governments may file an antitrust lawsuit against the company.
What Will Be The Impact?
As per the recent ruling, the case will now move forward, and could potentially have severe consequences for Meta if it succeeds. The FTC asks the court in its lawsuit to declare the company in violation of federal antitrust law and “permanently enjoin” it from acting unlawfully.
It also asks for the “divestiture or reconstruction of businesses” that would “restore competition,” which could mean breaking up the company to make WhatsApp and Instagram – which Meta acquired in 2014 and 2012, respectively – their own separate entities again. The lawsuit does acknowledge, however, that Facebook may provide “ongoing support or services” to companies from which it divests.