FTC Information New Antitrust Case In opposition to Fb, Citing Anti-Aggressive Conduct By way of Acquisitions
After recently dismissing an FTC antitrust case against Facebook for failing to provide compelling evidence to support its claims, the Trade Commission has now launched an amended antitrust push against The Social Network in an attempt to combat anti-competitive behavior by the company and possibly push for a breakdown of its various elements.
As stated by the FTC:
“Today the Federal Trade Commission has one modified complaint against Facebook in the agency’s ongoing federal antitrust proceedings. The complaint alleges that after repeated failed attempts to develop innovative mobile features for its network, Facebook instead resorted to an illegal buy-or-bury program to maintain its dominance. “
In the case, it is alleged that the advent of smartphones and mobile internet access in the 2010s took Facebook by surprise and lacked the infrastructure or tools to capitalize on this element. This then posed a risk to its dominance in social networks, and in response Facebook then bought “mobile innovators” in Instagram (2012) and Whatsapp (2014).
This, the FTC claims, amounts to anti-competitive behavior, while Facebook also:
“… lured app developers to its platform, monitored them for traces of success, and then buried them when they became a competitive threat. In the absence of serious competition, Facebook was able to refine a monitoring-based advertising model and place ever greater burdens on its users . “
The case claims that as a result of these efforts, Facebook is now dominating the mobile advertising market, which has subsequently stifled competition and limited the industry’s ability to innovate.
In response, Facebook made the following statement:
“It is unfortunate that, despite the court’s dismissal of the lawsuit and the conclusion that there was no basis for a lawsuit, the FTC has chosen to continue this unsubstantiated lawsuit. There wasn’t a valid claim that Facebook was a monopoly – and that hasn’t changed. Instagram and WhatsApp acquisitions were reviewed and approved many years ago, and our platform policies were lawful. “
As previously mentioned, the FTC’s original lawsuit against Facebook was dismissed because it failed to back up its claims with clear evidence of the company’s wrongdoing. The new case, the FTC claims, contains detailed statistics showing that Facebook “had dominant market share in the US personal social networking market.”
“The lawsuit also provides new direct evidence that Facebook has the power to control prices or exclude competition, significantly reduce the quality of its offering to users without losing a significant number of users or any appreciable level of user engagement, and Eliminate competition by putting actual or potential competitors out of business. “
What’s interesting – the FTC says here that Facebook has “significantly” reduced the quality of its platforms without affecting usage. How would you quantify that? By pointing out more ads to be added? Highlighting reduced post reach? Are you aware of the negative effects of feed algorithms?
It seems like a speculative claim and a risky avenue for a move that has already been denied.
Still, it’s hard to argue that Facebook doesn’t have a tight grip on digital advertising and social media. The company has a total of 3.5 billion viewers with its apps, which is more than three times the reach of its closest competitor, while it is also the dominant advertising tool in most of the regions where its apps are present. With this influence, Facebook has absolute control of the market and has clearly tried to displace competitors with dual functions such as stories and reels in its apps.
But none of these specific tools are considered here – the case is specifically limited to Instagram and WhatsApp and Facebook’s behavior in swallowing up emerging competitors and adding to its already massive footprint.
Of course, as before, Facebook will argue that the case is based on revisionist history, with each of its mergers approved as per the requirements at the time.
Again from Facebook:
“The FTC’s allegations are an attempt to rewrite antitrust law and reverse the established expectations of the merger review by telling the business community that no sale will ever be final. We struggle every day to win people’s time and attention, and we will continue to vigorously defend our company. “
On the latter point, the rise of TikTok would be a major example of Facebook not completely dominating the market, with the short video app now potentially posing an existential threat to Facebook if it continues to gain momentum.
So, despite its many attempts to copy TikTok, Facebook wouldn’t be entirely upset if it hit a billion users, as that would then disprove the FTC’s claim that Facebook is simply crushing competition at every turn and stifling innovation in the industry .
The new case is headed by Lina Khan, the recently appointed FTC chief who has a long history of public opposition to Facebook and Amazon’s monopoly behavior. Khan’s stance is so well known that Facebook actually tried to reject her from this new case, suggesting that she has already made up her mind and she would not give them a fair trial. Khan has stayed, and their inclusion in the push is likely to put more pressure on Facebook this time around if the case finds full support and filing.
Will that force big changes at The Social Network? It seems unlikely that a resolution of its apps would be possible at all now, especially as Facebook is working on integrating its messaging tools. But it could impose new regulations for the expansion of Zuck and Co, which could have an impact on future developments in VR, where it has also bought up competitors.
That seems like the most likely outcome – and even then, the case doesn’t seem overly convincing, based on a review of old deals.
Still, it will be another challenge for the company to look forward to the next phase of growth.