Facebook’s acquisitions of one-time rivals Instagram in 2012 and WhatsApp in 2014 drew a great deal of criticism from pro-competition experts. And now, just when the government was poised to revisit those deals with a fresh round of litigation, the transition to a new presidential administration has stalled the suit.
State and federal investigators had been preparing to bring antitrust charges against Facebook that would challenge the social platform company’s acquisitions, alleging the deals helped create an anti-competitive powerhouse that has left users few options. The Washington Post cited three sources who said the charges would be part of a broader litigation assault by the government. This would give Facebook its most serious legal challenge yet.
This is in line with Reuters’ reporting that the Federal Trade Commission and a bipartisan group of state attorneys general were in the final stages of filing one or more antitrust complaints against Facebook in early December. Citing sources, the news agency said FTC staff probing of the company recommended the commissioners sue Facebook in federal court. This would enable states, led by New York, to join the lawsuit. As many as 41 states may sign on to the lawsuit, sources said. The filing of the lawsuit or lawsuits could slip into next year, sources told Reuters.
In the meantime, Politico has reported the action has hit a snag. FTC commissioners are now in a quandary over Republican Chairman Joseph Simons’ likely departure before President-Elect Biden takes office. Simon’s vacancy would lead to 2-2 splits in future votes, Politico notes.
Facebook acquired Instagram in 2012 for $1 billion and WhatsApp in 2014 for $19 billion. The FTC levied a $5 billion penalty against Facebook in 2019, requiring it to submit to new restrictions and a modified corporate structure to hold the company accountable for the privacy decisions it makes about user privacy. Some say the $5 billion was like a parking ticket for a company making $60 billion a year, while others say the company did make meaningful changes after the fine that achieved better privacy controls for users.
A “merger retrospective” can yield exceptional evidence of anticompetitive effects, as when the FTC under former Chairman, Tim Muris, examined the consummated merger of Evanston Northwestern Healthcare with Highland Park Hospital in 2008. The Commission amassed clear evidence of price increases following the merger.
To the extent a case brought by the FTC or the states against Facebook focuses on the company’s consummated mergers with Instagram and WhatsApp, similar evidence is not likely to be readily available. The anticompetitive effects of those transactions will not show up as price increases because the benefits of the acquisitions for Facebook were much more subtle and difficult to analyze under existing competition law.
Even without the merger retrospective piece, the enforcers will have to grapple with forms of market power and anticompetitive dynamics that challenge the existing framework, so it will be interesting indeed to discover precisely how the antitrust laws will be used to curb the social media juggernaut.