The US FTC and attorneys general from 46 states filed a lawsuit against Facebook, alleging gross abuse of market power and illegal acquisition of WhatsApp and Instagram.
When you talk about social media platforms, the first three that come to mind are Facebook, Instagram, and WhatsApp. These social networks have over 3 billion users combined worldwide. Many believed the popularity of these social media is due to their free usage, most especially WhatsApp. Facebook acquired both Instagram and WhatsApp, and has over the years snuffed out competition from other tech firms wanting to create new social media platforms.
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The US Federal Trade Commission (FTC) announced earlier this year that it would review acquisitions made by the five Big Tech firms over the past decade, opening door to a wave of potential antitrust investigations. These are Amazon, Apple, Google parent Alphabet and of course Facebook. As the momentous decision starts to take its due course, on Wednesday morning the US FTC and attorneys general from 46 states filed a lawsuit against Facebook, alleging gross abuse of market power and illegal acquisition of WhatsApp and Instagram.
The Allegation
In a press release, New York Attorney General Letitia James accused Facebook of having used market dominance and monopolistic power for nearly a decade “to crush smaller rivals and snuff out competition, all at the expense of everyday users.” James further said that the action being taken was in order to bring justice to “millions of consumers and many small businesses” she says have been “harmed by Facebook’s illegal behavior.”
Watch: Antitrust lawsuits call for Facebook to be broken up
However, this is not the first time the social network giant will be facing a lawsuit by the FTC. In 2019, Facebook was fined $5 billion over violation of user privacy by the FTC. On this recent antitrust lawsuit, Ian Conner, director of the FTC’s Bureau of Competition stated that the organization’s objective is to “roll back Facebook’s anti-competition conduct”. thereby enabling markets where “innovation and free competition can thrive”.
Facebook acquired Instagram in 2012 for $1 billion and WhatsApp for $22 billion in 2014. Instagram, the photo and video sharing app generated a revenue of $19 billion in 2019 and is valued at $100 billion by Bloomberg in 2018. The divestment of WhatsApp and Instagram from Facebook, though a far-fetched proposition at this stage, could have immense impact on their users – both personal and businesses.
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Impact on social media users
WhatsApp is a free app that many believed was made possible because it was bought by Facebook. They have invested billions of dollars into the app to give it better user experience, stronger encryption, and more reliability. A split from Facebook could make WhatsApp lose the resources that account for most of its functionality enjoyed and appreciated by users.
This could even go far enough that users might have to start paying to use WhatsApp.
Furthermore, businesses have heavily relied on the use of social media to conduct business. Brands have used the influence of Instagram to reach out to millions of audiences. This was all made possible by the improvement made on the app after its acquisition by Facebook. Since the app is owned by Facebook, data required to target the right audience for any business is readily available from the massive data mines at disposal with Facebook and added by WhatsApp. Like WhatsApp, a divestment for Instagram from Facebook could mean bad business for the e-commerce industry. Many companies will lose access to readily available data that has transformed affiliate marketing and propelled it to the forefront of the highly efficient digital advertisement industry.
In response to the FTC’s move that result in such catastrophic business unravelling for the global social media giant, Facebook general counsel Jennifer Newstead expressed the company’s disappointment at the move in a statement: “Antitrust laws exist to protect consumers and promote innovation, not to punish successful businesses”.
