Facebook has been sued by US antitrust officials and a state coalition that wants to spin off the company by canceling the acquisition of Instagram and WhatsApp. The government said the deal was part of an illegal suppression of competition.

The Federal Trade Commission and the State Attorneys General, led by New York, said on Wednesday that they filed an antitrust complaint against Facebook, accusing the company of stifling competition from competitors in order to protect its monopoly on social media. Based on copies of complaints provided by states and the Federal Trade Commission, these lawsuits seek court orders to terminate Facebook’s acquisition of Instagram and WhatsApp.

These cases are the largest regulatory attacks on Facebook in the company’s history. They follow the lawsuit filed by the Justice Department against Alphabet’s Google in October. Since the U.S. Department of Justice sued Microsoft in 1998, the lawsuits by Google and Facebook together constitute the most important monopoly case in the United States. Unlike Google’s case, Facebook’s complaint seeks a court order to split the company.

Facebook shares fell 1.9% to close at $277.92 (approximately Rs 20,500), after falling more than 4% earlier.

Ian Conner, director of the FTC Competition Bureau, said in a statement: “Personal social networks are essential to the lives of millions of Americans.” “Facebook’s consolidation and maintenance of its monopoly position deprived consumption. To gain the benefits of competition. Our goal is to reduce Facebook’s anti-competitive behavior and restore competition so that innovation and free competition can flourish.”

New York’s Attorney General Letitia James said in an online press conference that Facebook has suppressed or blocked what the company believes is a potential threat.

She said that Facebook used “large amounts of money” to acquire companies that could threaten its dominance, especially Instagram and WhatsApp. This work aims to “squeeze oxygen out of the room.”

In the last two months of his administration, Facebook became President Donald Trump’s main target. Last week, he threatened to veto the US National Defense Authorization Act unless Congress adds a rider to repeal the law that protects technology companies, including Facebook, for most content posted by users. After months of attacks by Trump and other Republicans, they began to blame technology platforms, and after they started flagging misleading and false posts about the pandemic and elections, they suppressed conservative views. These claims are not part of the lawsuit filed on Wednesday.

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Facebook and its technical counterparts face a bipartisan confrontation over its control of digital commerce and its ability to influence users to view and read content.

After the Federal Trade Commission and the Department of Justice agreed on a plan to conduct a careful review of Facebook, Google, Amazon and Apple, the investigation of these companies began in the summer of 2019. The House of Representatives released a report in October after a 16-month investigation that determined that four companies were abusing their market power as gatekeepers of the digital economy.

This will be as high as President-elect Biden’s Ministry of Justice promotes the Google event, while Facebook’s case will fall to anyone who chooses Biden as FTC chairman Joe Simmons, who is the trump card appointed, leaves the agency. Simons, a Republican, voted with two Democrats from the agency to approve Facebook’s complaint. Two other Republicans voted against it.

Facebook called these complaints a “revisionist history” and claimed that Facebook’s investment in Instagram and WhatsApp made it successful. Both acquisitions were investigated and approved by the FTC when they were announced.

Facebook’s general counsel, Jennifer Newstead, said in a statement: “The government now wants to solve the problem and issue a shocking warning to American companies that there will never be a final sale.” “Small businesses and The reason why small businesses choose to use Facebook’s free services and advertising is because our apps and services can bring the most value, and they choose to use them.”

Facebook provided Instagram with US$1 billion (about 74 billion rupees) in 2012. At that time, it had only 25 million users and no revenue, but it had begun to occupy the mobile photo sharing market. The FTC stated that Facebook “quickly realized that Instagram is a dynamic and innovative personal social network and poses an existential threat to Facebook’s monopoly.”

CEO Mark Zuckerberg knows that by buying Instagram, Facebook “not only suppresses the direct threat posed by Instagram, but also severely prevents another company from using the photo-sharing feature on its mobile phone, thereby gaining an individual The visibility of the social network provider.”

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Complaints from various states claim that Zuckerberg was able to persuade former Instagram CEO Kevin Systrom to sell the company, “this is largely due to Zuckerberg’s use of Facebook Sword power is becoming more and more well-known.” Systrom asked Instagram investors if Zuckerberg could “enter destruction mode” if he rejects this proposal. Sestrom later said: “I don’t think we will escape the wrath of the trademark… It depends on how long we avoid using the trademark,” the complaint said.

The US Federal Trade Commission and the states stated that the company reiterated its anti-competitive acquisition strategy when it acquired WhatsApp, a leader in mobile messaging, for US$19 billion (about 14 billion rupees) in 2014. The emails included in Zuckerberg’s and employees’ complaints show that Facebook views direct messaging apps as a major threat. Zuckerberg said in an email in 2012 that messaging apps can be “used as a springboard for building more general mobile social networks.” A Facebook business growth director predicted internally, “[t]He may be the biggest threat facing our company. “

The FTC found that WhatsApp’s global service status is not restricted or constrained by any single platform, which makes it an attractive acquisition.

The FTC said: “Again, Facebook believes that buying is better than competition.” “After Facebook announced the acquisition of WhatsApp, employees celebrated the acquisition internally.’Maybe the only company that can fully grow into the next FB on mobile devices.[.]'”

Unlike Instagram, WhatsApp does not contribute significant revenue to Facebook today, but the company is laying the foundation for the transformation of messaging applications into commercial and payment services in major international markets such as India and Brazil. In recent years, Facebook has been combining the WhatsApp and Instagram networks with its own networks, thereby enhancing its strength in the global communications field and making any future spin-offs more technically difficult.

The lawsuit also accused Facebook of disrupting competition in violation of antitrust laws by preventing applications that are seen as a competitive threat from accessing its platform. The House of Representatives committee investigating Facebook and other technology companies said that Facebook “competed” its platform against competitors by preventing competitors from obtaining the data needed for its growth.

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James’ office said in a statement: “The two most exploited strategies are to acquire smaller competitors and potential competitors so as not to threaten Facebook’s dominance and suffocate and squeeze the third parties that Facebook invites to use the platform. Developer.”

Facebook has long denied that this is a threat to competition. Zuckerberg told Congress in July that the company faces fierce competition worldwide and is constantly innovating to develop products that users like and avoid falling behind.

He told the chairman of the Judiciary Committee that New York Democratic Representative Jerrold Nadler said: “In hindsight, Instagram seems to have reached the scale it is today, but it was far from enough at the time.” “This is an American success. story.”

The Facebook complaint is the most significant antitrust lawsuit since Simons took over the agency in 2018. Last year, Simons and Facebook reached a $5 billion (approximately 36.9 billion rupees) privacy infringement settlement agreement, which was widely criticized. Privacy advocates, Democratic lawmakers, and two Democratic members of the agency, they did not ensure that Facebook’s operations changed.

The US Federal Trade Commission (FTC) is dealing with Facebook, just as it suffered heavy losses in the monopoly case against Qualcomm. The Federal Court of Appeals in August ruled that the chip manufacturer prevailed and reversed a lower ruling that the court abused the company’s dominant position in the mobile phone chip market. Facebook was sued by US antitrust officials and a state that wanted to merge. The government stated that it was splitting the company by canceling its acquisitions of Instagram and WhatsApp as part of an illegal suppression of competition.

©2020 Bloomberg (Bloomberg LP)


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