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Lawsuit against Facebook seeks division of Instagram and WhatsApp

(Bloomberg) – Facebook Inc. was sued by U.S. antitrust officials and a coalition of states seeking to dissolve the company by undoing its acquisitions of Instagram and WhatsApp, deals the government says were part of a campaign to illegally crush competition. The Federal Trade Commission (FTC) and New York-led state attorneys general said they filed antitrust complaints against Facebook on Wednesday, alleging conduct that thwarted competition from rivals to protect their monopoly. The lawsuits seek court orders to undo Facebook’s takeover of Instagram and WhatsApp, according to copies of the complaints provided by the agencies. The cases represent the largest regulatory attack against Facebook in the company’s history. They follow the October Justice Department lawsuit against Alphabet Inc.’s Google. Together, the actions of Google and Facebook mark the most significant monopoly cases filed in the United States since the Department of Justice sued Microsoft Corp. in 1998. Unlike Google’s case, the lawsuits against Facebook seek a court order to split the company. Facebok’s shares fell 2.4% to $ 276.74 at 4:09 p.m. in New York, after falling more than 4% earlier “Personal social media is critical to the lives of millions of Americans,” said Ian Conner, director of the FTC’s Office of Competition, in a statement. “Facebook’s actions to entrench and maintain its monopoly deny consumers the benefits of competition. Our goal is to reverse Facebook’s anti-competitive behavior and restore competition so that innovation and free competition can flourish. ”Facebook has crushed or hindered what the company sees as potential threats, said New York Attorney General Letitia James, during an online press conference. Facebook used “large amounts of money” to acquire companies that could threaten its dominance, particularly Instagram and WhatsApp, he said. Facebook has become a prime target for President Donald Trump in the past two months. of its Administration. Last week, he threatened to veto America’s annual defense authorization bill unless Congress adds an additional clause to abolish the law that protects tech companies, including Facebook, from liability over most of the content posted by users. The lawsuit followed months of attacks by Trump and other Republicans, who claim that tech platforms suppress conservative views. Facebook and its tech peers face a wave of bipartisan antagonism over their control of digital commerce and their ability to influence it. The investigations into the companies began in the summer of 2019, after the FTC and the Justice Department agreed on a plan to split scrutiny from Facebook, Google, Amazon.com Inc. and Apple Inc. A House report released in October following a 16-month investigation found that the four companies are abusing their market power as guardians of the digital economy. It will be up to Biden’s Justice Department to pursue Google’s case, while the Facebook’s case will fall to who Biden chooses as FTC chair if Joe Simons, who was appointed by Trump, leaves the agency. Simons, a Republican, voted with the agency’s two Democrats to approve the complaint to Facebook. Facebook said on Twitter that the company was reviewing the complaints. He noted that the FTC investigated and approved the Instagram and WhatsApp acquisitions when they were proposed. “Years after the FTC authorized our acquisitions, the government now wants a revamp regardless of the impact the precedent would have on the broader business community. or people who choose our products every day, ”he says. Facebook offered $ 1 billion for Instagram in 2012, when it had only 25 million users and had no income, but it had already begun to capture the market for sharing photos on devices. mobiles. Facebook “quickly recognized that Instagram was a vibrant and innovative personal social network and an existential threat to Facebook’s monopoly power,” says the FTC. The deal “would not only stifle the direct threat posed by Instagram, but would also significantly hamper another company uses photo sharing on mobile phones to gain popularity as a provider of personal social networks. ”The company repeated the anti-competitive exercise by acquiring WhatsApp, the leader in mobile messaging, in 2014 for US $ 19 billion, according to the agency. Employees viewed direct messaging apps as a threat to social media companies, especially if they started to create their own competing features. In a 2012 email, Zuckerberg said that messaging apps could be used “as a stepping stone to build more general mobile social networks.” WhatsApp’s position as a global service with no links or restrictions to work with a single platform made it an attractive acquisition, according to the FTC. “Once again, Facebook decided it was better to buy than compete,” the FTC said. “After Facebook announced the acquisition of WhatsApp, employees internally celebrated the acquisition of ‘probably the only company that could have become the next purely mobile FB.'” WhatsApp, unlike Instagram, does not bring significant revenue to Facebook today, but the company is setting the stage to turn the messaging app into a commerce and payments service in key international markets, including India and Brazil. In recent years, Facebook has been combining the WhatsApp and Instagram networks with its own, strengthening its power over global communication and making any future break-ups technically more difficult. The lawsuits also accuse Facebook of thwarting competition in violation of antitrust laws by preventing applications that were considered competitive threats from accessing its platform. The House committee that investigated Facebook and other tech companies said Facebook has “armed” its platform against rivals by preventing them from having access to the data they need to grow. According to the FTC, Facebook allowed outside developers connect to the platform only on the condition that they do not build competing functionalities and connect or promote other social media services. “The two most used strategies have been to acquire smaller rivals and potential rivals before they could threaten Facebook’s dominance and stifle and crush third-party developers Facebook invited to use its platform, ”James’s office said in a comment. Facebook has long denied that it is a threat to competition. Zuckerberg told Congress in July that the company faces intense competition around the world and is constantly innovating to develop products that users like and to avoid being left behind. Instagram’s success was far from guaranteed, he told lawmakers. . It was Facebook’s investments in the company that made it successful, he said. “In retrospect, it probably seems obvious that Instagram would have reached the scale it has today, but at the time it was far from obvious,” he told Rep. Jerrold Nadler, the New York Democrat who chairs the Judiciary Committee. “This has been an American success story.” Original Note: Facebook Sued by US, States Seeking Instagram-WhatsApp BreakupFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source. © 2020 Bloomberg LP

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