Nearly Every State Suing Facebook for Monopolistic Behavior

by Josh Russell, Court House News, December 9, 2020

MANHATTAN (CN) — A coalition of 48 attorneys general hit Facebook with a massive antitrust suit Wednesday over the Silicon Valley giant’s acquisitions of online messaging competitors Instagram and WhatsApp.

Led by New York but filed in Washington, the 123-page federal complaint describes Facebook’s purchases of the photo-sharing social media app Instagram for $1 billion in 2012 and the global messaging platform WhatsApp for $19 billion in 2014 as part of a practice of using anticompetitive tactics to entrench its monopoly. 

“Facebook illegally maintains that monopoly power by deploying a buy-or-bury strategy that thwarts competition and harms both users and advertisers,” the complaint states.

Such a challenge has been long coming amid growing bipartisan scrutiny and hostility toward Facebook as well as other major U.S. tech companies including Google, Amazon and Apple. 

Facebook, which is worth roughly $720 billion as of August 2020, according to Forbes, has more than 2.7 billion users. 

New York Attorney General Letitia “Tish” James announced the lawsuit at a remote press conference Wednesday afternoon. 

“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,” James said. 

“By using its vast troves of data and money, Facebook has squashed or hindered what the company perceived as potential threats,” she added. “They’ve reduced choices for consumers. They stifled innovations and they degraded privacy protections for millions of Americans.”

James said that the suit seeks whatever remedy a federal judge deems appropriate, including the possible divestiture or reconstruction of illegally acquired businesses, as well as the possible divestiture of Facebook assets or business lines.

According to the complaint, Facebook, which generates revenue by monetizing user data and engagement through advertising, has degraded users’ control over their private information by deploying privacy policy updates that steadily broadened “the richness of the user data it allowed itself to collect and retain, and expanded what it could do with the data.”

“Personal social networking providers typically monetize through the sale of advertising; thus, more competition in personal social networking is also likely to mean more competition in the provision of advertising,” the complaint states. “By monopolizing personal social networking, Facebook thereby also deprives advertisers of the benefits of competition, such as lower advertising prices and increased choice, quality, and innovation related to advertising.” 

The three-count complaint seeks an order enjoining and restraining Facebook from continuing to engage in any anticompetitive conduct or adopting any future practice and plan with anticompetitive effects, along with an order that the company provide notice to the plaintiff states ahead of any acquisition greater than $10 million.

The Federal Trade Commission, which vetted Facebook’s deals with Instagram and WhatsApp, brought a separate suit Wednesday that demands Facebook divest or reconstruct business assets including, but not limited to, Instagram and WhatsApp. 

James announced last year that a group of eight states and the District of Columbia had launched a bipartisan probe into Facebook investigating the social media giant’s “dominance in the industry” and whether that dominance has had an anticompetitive effect.  

Facebook general counsel Jennifer Newstead called the antitrust allegations a “revisionist history,” and said the government is asking for “do over” after the FTC already cleared Facebook’s acquisitions of Instagram and WhatsApp years ago.

“Antitrust laws exist to protect consumers and promote innovation, not to punish successful businesses,” Newstead said in a statement Wednesday afternoon. “Instagram and WhatsApp became the incredible products they are today because Facebook invested billions of dollars, and years of innovation and expertise, to develop new features and better experiences for the millions who enjoy those products.”

In July 2020, a House Judiciary subcommittee grilled the CEOs of Amazon, Apple, Facebook and Google over their companies’ competitive reach. 

Facebook CEO Mark Zuckerberg admitted at that hearing that Instagram had been a competitor in the space of mobile photos and camera applications, but said the company was a “subset of the overall space of connecting that we exist in.”  

In defense of that acquisition, Zuckerberg noted that the FTC concluded its investigation into that acquisition in 2012 without any action taken against Facebook. “And by having them join us, they certainly went from being a competitor in the space of being a mobile camera, to an app that could help grow and help get more people to be able to use and be on our team and I think that’s been valuable and successful,” he said. 

In October, the U.S. Department of Justice hit Google’s parent company, Alphabet, with a federal antitrust action in Washington. Joined by 11 states, the DOJ’s suit accused the Silicon Valley giant of using its dominance over online searches to stifle competition and harm consumers. 

Google has also come under fire for its reliance on targeted advertising. The company offers many of its services, like Gmail and its iconic search engine, for free. It makes its money by collecting information about its users for targeted advertising purposes. 

New York is joined in the suit by Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, the territory of Guam, Hawaii, Idaho, Illinois, Iowa, Indiana, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin and Wyoming. 

The four states not participating in the suit are Alabama, Georgia, South Carolina and South Dakota.

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12/09/2020: Hawaii Attorney General Joins Multistate Lawsuit Seeking to End Facebook’s Illegal Monopoly