US says Facebook illegally crushed competition

New lawsuits are setting up a confrontation that could lead to major disruption of the world's most popular social networking services. Photo / Jim Wilson, The New York Times

Regulators are accusing the company of buying up rising rivals to cement its dominance over social media.

The Federal Trade Commission and more than 40 states accused Facebook on Wednesday Thursday NZ time) of becoming a social media monopoly by buying up its rivals to illegally squash competition, and said the deals that turned the social network into a behemoth should be unwound.

Federal and state regulators, who have been investigating the company for over 18 months, said in separate lawsuits that Facebook's purchases, especially Instagram for US$1 billion in 2012 and WhatsApp for US$19 billion two years later, eliminated competition that could have one day challenged the company's dominance.

Since those deals, Instagram and WhatsApp have skyrocketed in popularity, giving Facebook control over three of the world's most popular social media and messaging apps. The applications have helped catapult Facebook from a company started in a college dorm room 16 years ago to an internet powerhouse valued at more than $800 billion.

The prosecutors called for Facebook to break off Instagram and WhatsApp and for new restrictions on future deals.

"For nearly a decade, Facebook has used its dominance and monopoly power to crush smaller rivals and snuff out competition, all at the expense of everyday users," said Attorney General Letitia James of New York, who led the multistate investigation into the company in parallel with the federal agency.

The lawsuits, filed in the US District Court of the District of Columbia, underscore the growing bipartisan and international tsunami against Big Tech. Lawmakers and regulators have zeroed in on the grip that Facebook, Google, Amazon and Apple maintain on commerce, electronics, social networking, search and online advertising, remaking the nation's economy. President Donald Trump has argued repeatedly that the tech giants have too much power and influence, and allies of President-elect Joe Biden make similar complaints.

The investigations already led to a lawsuit against Google, brought by the Justice Department two months ago, that accuses the search giant of illegally protecting a monopoly. At least one more suit against Google, by both Republican and Democratic officials, is expected by the end of the year. In Europe, regulators are proposing tougher laws against the industry and have issued billions of dollars in penalties for the violation of competition laws.

The lawsuits against Facebook are expected to set off a long legal battle. The company has long denied any illegal anticompetitive behavior and is expected to use its deep well of money to defend itself. Few major antitrust cases have centered on mergers approved years earlier. The FTC signed off on Facebook's deals for Instagram and WhatsApp during Barack Obama's administration.

If the prosecutors succeed, the cases could remake the company, which has experienced only unfettered growth. Mark Zuckerberg, Facebook's chief executive, has described a breakup of the company as an "existential" threat.

The case is also being widely watched as a gauge for future mergers within the technology industry, which have continued to boom during the pandemic. Last month, Facebook said it was buying Kustomer, a customer relationship management startup, for close to US$1 billion.

Facebook did not immediately respond to a request for comment, but it has argued in the past that the market for social media remained competitive. The skyrocketing growth of TikTok, the Chinese short-video sharing app, and new growth in Parler, a social media firm popular among conservatives, shows that Facebook doesn't have a lock on social networking, the company has said.

Written by: Cecilia Kang and Mike Isaac
Photographs by: Jim Wilson
© 2020 THE NEW YORK TIMES