December 10, 2020 1:23 PM | By Mario Villar – EFE
15 minutes. The authorities of the United States (USA) sued Facebook on Wednesday for allegedly operating an “illegal monopoly” and asked the courts to force the social network to get rid of Instagram and WhatsApp, two of its star applications.
The attack against Facebook represents a new step in the open battle by the US authorities against the Internet giants, after the lawsuit filed in October against Google for alleged monopolistic practices of its search engine.
Concerns about the power that some Silicon Valley companies have accumulated have grown in recent years. It’s one of the few areas where Democrats and Republicans seem to agree.
This Wednesday, after more than a year and a half of investigations, attorneys general from 46 states and two territories – governed by both parties – came together to file a joint lawsuit, filed in parallel to another from the Federal Trade Commission (FTC, for its acronym in English).
The two actions, although different, are based on the same idea. They claim that Facebook has violated antitrust rules with its aggressive acquisition strategy. This has allowed it to control potential competitors and completely dominate the market.
“For nearly a decade, Facebook has used its dominance and monopoly power to crush smaller rivals. and ending competition, all to the detriment of everyday users, “said New York State Attorney General Letitia James, who is leading the state lawsuit.
According to James, “instead of competing on merit, Facebook used its power to suppress competition.” He adds that in this way he took advantage of users to “earn billions by turning personal data into a dairy cow.”
Instagram and Whatsapp
The two emblematic cases of this strategy are the acquisitions of Instagram and WhatsApp. With their rapid takeoffs, they became major threats to Facebook in the realm of social media and instant messaging.
In 2012, Mark Zuckerberg’s company spent about $ 1 billion to take over Instagram. Two years later, he paid 19,000 million for WhatsApp.
Now, the US authorities – which once approved the acquisitions – want Facebook to be forced to ditch the applications, which are among the most used in the world.
The FTC said in a statement that it is seeking federal courts to force the company to sell assets, including Instagram and WhatsApp. They also ask that you stop imposing anti-competitive conditions on developers who use your platforms and have to receive prior approval for all their acquisitions.
In the lawsuits, the US authorities point out that the rapid growth of Instagram – founded in 2010 and which perfectly took advantage of the spread of smartphones with better cameras – was seen by Facebook as an “existential threat” to its monopoly power.
After initially trying to compete, Zuckerberg decided he was “way behind” Instagram on its turf and that it was a better strategy to “consider paying big bucks” for the photo-sharing app in an effort to “neutralize a potential competitor.”
Ultimately, Facebook paid $ 1 billion for the business, which was roughly half valued and had no revenue at the time.
In 2014, the Californian company used a similar strategy with WhatsApp. The application, which had already accumulated millions of users, threatened its position in the instant messaging market, and which it became its largest acquisition.
A priori, the lawsuits presented this Wednesday will be only the first step in a legal battle that is expected to be long. Facebook will have almost infinite economic resources to be able to mount an effective defense.
Between January and September, the US company had a turnover of almost 58,000 million dollars, with profits of practically 18,000 million. This is 61% more than the previous year thanks to the increase in online advertising during the pandemic.
The company has always denied monopolistic behavior. This Wednesday, in a first reaction, Facebook already showed his intention to stand up to the federal government of the United States and the states.
“Having approved our acquisitions years ago, now the government wants a second attempt regardless of the impact that such a precedent would have for the entire business community or for people who choose to use our products every day, “the social network said in a statement.
The case threatens to mark technology mergers, which have continued apace in recent years, especially if US authorities succeed in forcing Facebook to ditch some of its most popular apps.
After hearing the lawsuits, the Internet giant’s shares fell sharply on Wall Street. They ended the session with a decrease of 1.93%