Facebook's Social Media Monopoly and Why Privacy Is an Antitrust Issue

• The U.S. Federal Trade Commission (FTC), along with 48 state Attorney Generals, filed twin antitrust lawsuits against Facebook on Wednesday, alleging its purchases of Instagram and WhatsApp were made to stifle competition, and that it engaged in unlawful, anticompetitive tactics to buy or kill off its rivals and solidify its dominance in social networking.
• "Over the last decade, the social networking giant illegally acquired competitors in a predatory manner and cut services to smaller threats — depriving users from the benefits of competition and reducing privacy protections and services along the way — all in an effort to boost its bottom line through increased advertising revenue," according to the lawsuit.
• "Facebook has engaged in a systematic strategy—including its 2012 acquisition of up-and-coming rival Instagram, its 2014 acquisition of the mobile messaging app WhatsApp, and the imposition of anticompetitive conditions on software developers—to eliminate threats to its monopoly," the FTC said in its complaint. "This course of conduct harms competition, leaves consumers with few choices for personal social networking, and deprives advertisers of the benefits of competition."
• Specifically, the lawsuits seek to unwind the acquisitions of Instagram and WhatsApp (which it acquired in 2012 and 2014), spinning off both platforms into independent companies, prohibit Facebook from imposing anticompetitive conditions on software developers, and require the company to seek prior notice and approval for future mergers and acquisitions.
• The consumer protection organisation alleged that Facebook initially tried to compete with Instagram on the merits by improving its own offerings, but Facebook ultimately chose to buy Instagram rather than compete with it, thereby neutralising the direct threat posed by Instagram and making it more difficult for other social networking competitors to gain scale.
• The FTC also contended the company imposed anticompetitive conditions on third-party software developers' access to Facebook APIs, forcing them to refrain from developing competing functionalities, and from connecting with or promoting other social networking services.
• It cited the example of Twitter's now-defunct short-form video app Vine, which had its access to Facebook's friend-finding feature API cut off on the same day the service launched on iOS following CEO Mark Zuckerberg's stamp of approval. (Unsurprisingly, quoted as evidence throughout the lawsuit are Zuckerberg's own private communications to his staff over the past decade that identify Instagram and WhatsApp as threats, making it clear the acquisitions were more about killing potential competitors than improving Facebook's products.)
• In response to the lawsuits, Facebook said the case would set a dangerous precedent. "Years after the FTC cleared our acquisitions, the government now wants a do-over with no regard for the impact that precedent would have on the broader business community or the people who choose our products every day," the company said.
• "In addition to being revisionist history, this is simply not how the antitrust laws are supposed to work. No American antitrust enforcer has ever brought a case like this before, and for good reason," Facebook's Jennifer Newstead said in a Newsroom post.

• Does Facebook monopolise the "personal social networking" market? (TikTok says hello!) Did the company systematically buy off its nascent rivals to establish its dominance? Did Facebook slide back on its privacy commitments as it grew more dominant? Is Facebook really free, or do users pay for the site with their data and attention? These are some of the core questions at the heart of the sweeping antitrust cases filed by the U.S. government.
• Proving that consumers were harmed as a consquence of Facebook's monopoly could be a lot trickier, and more so to establish the fact that the purchases deprived users of better privacy alternatives. After all, how do you demonstrate people are being harmed by a product that's offered for free?
• Clues may lie in a paper titled "The Antitrust Case Against Facebook," where legal scholar Dina Srinivasan argued last year that privacy is an antitrust issue, and that by forcing users to accept less-than-adequate privacy settings, Facebook's monopoly power harmed consumers by charging them ever-increasing amounts of personal data in exchange for using its platform.
• "The price of using Facebook has stayed the same over the years (it's free to join and use), but the cost of using it, calculated in terms of the amount of data that users now must provide, is an order of magnitude above what it was when Facebook faced real competition," Srinivasan said.
• When Facebook acquired WhatsApp for $19 billion in 2014, the latter's co-founder Jan Koum said, "If partnering with Facebook meant that we had to change our values, we wouldn't have done it," adding "Respect for your privacy is coded into our DNA, and we built WhatsApp around the goal of knowing as little about you as possible." Facebook, for its part, assured users and regulators that it would be unable to link the profiles of WhatsApp and Facebook users.
• Then, in 2016, it did exactly that, tying individuals' phone numbers as a means to offer better friend suggestions by mapping users' social connections across the two services, and deliver more relevant ads on the social network. WhatsApp co-founder Brian Acton later admitted he was "coached" to tell regulators it would be hard to merge the two systems.
• This combinatorial approach to user tracking and Facebook's larger plans to merge the backends of Facebook, Instagram, and WhatsApp have already landed it in hot water, raising further questions about end-to-end encryption (of the three, only WhatsApp is protected by encryption) and how user data is shared across its services. It also led Germany's competition regulator Bundeskartellamt (FCO) to require Facebook from combining user data from different sources without voluntary consent, including those from third-party sources that Facebook uses to flesh out its advertising profiles (called shadow profiles) of users and non-users alike.
• Facebook's strategy has always been: Copy, acquire, and kill. Beyond buying Instagram and WhatsApp, Facebook has a history of ripping off popular features from its rivals to drive engagement to its social media empire. Stories on Facebook, Instagram, WhatsApp were a direct response to Snapchat Stories (after repeated failed attempts to buy the company), and the newly debuted Instagram Reels is a clone of TikTok.
• But the answers (read: privacy or lack thereof) could mark a turning point when it comes to antitrust enforcement in the U.S. and elsewhere, reshaping once and for all the way tech giants treat acquisitions as a quick route to enter new markets and solidify their power.