Mark Zuckerberg, chairman of Facebook, WhatsApp and Instagram owner Meta. Photo / AFP
The tech giant went to court on Monday (Tuesday NZT) in an antitrust trial focused on its acquisitions of Instagram and WhatsApp. The case could reshape its business.
The Federal Trade Commission on Monday accused Meta of creating a monopoly that squelched competition by buying startups that stood in its way, kicking off a landmark antitrust trial that could dismantle a social media empire that has transformed how the world connects online.
In a packed courtroom in the US District Court of the District of Columbia, the FTC opened its first antitrust trial under the Trump administration by arguing that Meta illegally cemented a monopoly in social networking by acquiring Instagram and WhatsApp when they were tiny startups. Those actions were part of a “buy-or-bury strategy”, the FTC said.
Ultimately, the purchases coalesced Meta’s power, depriving consumers of other social networking options and edging out competition, the government said.
“For more than 100 years, American public policy has insisted firms must compete if they want to succeed,” said Daniel Matheson, the FTC’s lead litigator in the case, in his opening remarks. “The reason we are here is that Meta broke the deal.”
“They decided that competition was too hard and it would be easier to buy out their rivals than to compete with them.”
Meta’s lawyers denied the allegations in opening arguments, countering that the company faces plenty of competition from TikTok and other social media platforms. The FTC approved the acquisitions of Instagram and WhatsApp more than a decade ago, and it would set a dangerous precedent for the business world to try to unwind the mergers, the lawyers added.
“This case is a grab bag of FTC theories at war with fact and at war with the law,” said Mark Hansen, the company’s litigator and a partner at the law firm Kellogg, Hansen, Todd, Figel & Frederick. “The facts are going to prove that the FTC’s theories are all wrong.”
The trial – Federal Trade Commission v. Meta Platforms – poses the most consequential threat to the business empire of Mark Zuckerberg, the company’s co-founder. If the Government succeeds, the FTC would most likely ask Meta to divest Instagram and WhatsApp, potentially shifting the way that Silicon Valley does business and altering a long pattern of big tech companies snapping up younger rivals.
Still, legal experts cautioned that it might be challenging for the FTC to win. That’s because the Government must prove something unknowable: that Meta, formerly known as Facebook, wouldn’t have achieved the same success without the acquisitions. It is also extremely rare to try to unwind mergers approved years ago, legal experts said.
“One of the most difficult things for antitrust laws to deal with is when industry leaders purchase small potential competitors,” said Gene Kimmelman, a former senior official in the Obama administration’s Department of Justice. Meta, he added, “bought many things that either didn’t pan out or were integrated. How are Instagram and WhatsApp different?”
The efforts continue a years-long bipartisan pursuit to curtail the vast power that a handful of tech companies have over commerce, the exchange of ideas, entertainment and political discourse. Despite attempts by tech executives to court President Donald Trump, his antitrust appointees have signalled that they will continue the course.
The FTC’s case against Meta is the third major tech antitrust lawsuit to go to trial in the past two years. Last year, the DOJ won its antitrust case against Google for monopolising internet search. A federal judge is set to hear arguments over remedies, including a potential breakup, next week. The DOJ also completed a separate trial against Google for monopolising ad technology, which is still being decided by a federal judge.
The Justice Department has also sued Apple, and the FTC has sued Amazon, accusing the companies of antitrust violations. Those trials are expected to begin next year.
The case against Meta could affect its 3.5 billion users, who on average log on to Facebook, Instagram or WhatsApp multiple times a day for news, shopping and texting. Instagram and WhatsApp have attracted more users in recent years as Facebook, Meta’s flagship app, has stopped growing.
FTC Chair Andrew Ferguson was in the courtroom to listen to the Government’s opening statement. Meta’s chief legal officer, Jennifer Newstead, and Joel Kaplan, its chief global affairs officer, also attended. Alex Schultz, Meta’s chief marketing officer, sat at the litigator’s table and will serve as the company’s executive at the trial.
Presiding over the case is Judge James Boasberg, 62, the senior judge in the federal court.
The FTC argued that Zuckerberg said in 2006 that Facebook was used to connect “actual friends”. The FTC has argued that Meta has had a monopoly in social networking since 2011 and that Snapchat was among the only comparable platforms to Facebook and Instagram.
Meta rejected the FTC’s definition of social networking, saying it faces competition from TikTok, LinkedIn, YouTube and other platforms. Hansen said it competed with messaging apps for sharing content between friends and family.
He said more than half of all engagement on Facebook and Instagram is with videos, which put Meta squarely in competition with TikTok, the fast-growing short-video app. When TikTok was momentarily shut down in January, Meta saw a surge of usage of Facebook, Instagram and YouTube, which shows the company has plenty of competition.
“Meta has no monopoly,” Hansen said.
During what is projected to be an eight-week trial, the Government and Meta are expected to tell competing versions of the company’s 20-year growth story.
The FTC’s argument hinges on Section 2 of the Sherman Antitrust Act of 1890, which forbids a company from maintaining a monopoly through anticompetitive practices.
The FTC accused Facebook, as the company was previously known, of struggling to build a mobile app and fearing that Instagram would rapidly outpace it in popularity. The company overpaid when it purchased Instagram in 2012 for $1 billion, the FTC argued.
In 2014, as WhatsApp grew, Meta offered to buy the company for $19 billion – also far above its market value, the Government said.
The FTC plans to highlight a paper trail of emails between Meta executives, alongside other evidence, to argue that the company bought the startups because they were threats.
In his opening remarks, Matheson mentioned documents, including what he described as a “smoking gun” February 2012 email by Zuckerberg, in which the CEO discussed the rise of Instagram and the importance of “neutralising a potential competitor”. In another email in November 2012 to the former chief operating officer, Sheryl Sandberg, Zuckerberg wrote, “Messenger isn’t beating WhatsApp, Instagram was growing so much faster than us that we had to buy them for $1 billion”.
The FTC lawyer said Meta bought WhatsApp to keep it from being acquired by competitors like Google, which were trying to use a messaging service to launch a competing social network. Meta’s acquisition of WhatsApp was intended to build a “moat” around the company’s monopoly in social networking, Matheson said.
The Government is set to call witnesses from Meta, as well as competitors, venture capitalists, economists and media industry executives. Zuckerberg was expected to be called as the first witness as soon as Monday. The FTC said Sandberg, and Kevin Systrom, co-founder of Instagram, would testify this week.
Written by: Cecilia KangMike Isaac and David McCabe
Reporting from the E. Barrett Prettyman U.S. Courthouse in Washington
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