Facebook faces lawsuits that could force sale of Instagram, WhatsApp

WION Web Team
New York, New York, United States of America Published: Dec 10, 2020, 08:55 AM(IST)

Facebook Photograph:( Reuters )

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The several lawsuits say the social media giant uses a "buy or bury" strategy to snap up rivals and keep smaller competitors at bay.

Facebook Inc could be forced to sell its prized assets WhatsApp and Instagram after the US Federal Trade Commission and nearly every US state filed lawsuits against the social media company.

The several lawsuits say the social media giant uses a "buy or bury" strategy to snap up rivals and keep smaller competitors at bay.

The lawsuits also highlight the growing bipartisan consensus to hold Big Tech accountable for its business practices and mark a rare moment of agreement between the Trump administration and Democrats, some of whom have advocated breaking up both Google and Facebook.

With the filing of the twin lawsuits on Wednesday, Facebook becomes the second big tech company to face a major legal challenge this year after the US Justice Department sued Alphabet Inc's Google in October, accusing the $1 trillion company of using its market power to fend off rivals.

The complaints on Wednesday accuse Facebook of buying up rivals, focussing specifically on its previous acquisitions of photo-sharing app Instagram for $1 billion in 2012 and messaging app WhatsApp for $19 billion in 2014.

Federal and state regulators said the acquisitions should be unwound -- a move that is likely to set off a long legal challenge as the deals were cleared years earlier by the FTC.

Facebook's general counsel Jennifer Newstead called the lawsuits "revisionist history" and said antitrust laws do not exist to punish "successful companies." She said WhatsApp and Instagram have succeeded after Facebook invested billions of dollars in growing the apps.

"The government now wants a do-over, sending a chilling warning to American business that no sale is ever final," Newstead said.

Newstead also raised doubts about alleged harms caused by Facebook, arguing that consumers benefited from its decision to make WhatsApp free, and rivals like YouTube, Twitter and WeChat did "just fine" without access to its developer platform.

In a post on Facebook's internal discussion platform, Chief Executive Mark Zuckerberg told employees he did not anticipate "any impact on individual teams or roles" as a result of the lawsuits, which he said were "one step in a process which could take years to play out in its entirety."

Zuckerberg told employees in July that Facebook would "go to the mat" to fight a legal challenge to break up the company, calling it an "existential" threat, according to audio of internal company meetings published by The Verge.

The lawsuits are the biggest antitrust cases in a generation, comparable to the lawsuit against Microsoft Corp in 1998. The federal government eventually settled that case, but the yearslong court fight and extended scrutiny prevented the company from thwarting competitors and is credited with clearing the way for the explosive growth of the internet.

Last month, Facebook said it was buying customer service start-up Kustomer, in an acquisition that the Wall Street Journal said valued Kustomer at $1 billion.

Facebook also bought Giphy, a popular website for making and sharing animated images, or GIFs, in May. That acquisition has already drawn scrutiny from the United Kingdom's competition watchdog.

Facebook shares fell as much as 3% after the news before paring losses to close down 1.9%.

(with inputs)

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