Mark Zuckerberg, CEO of Facebook, testifying remotely during a Senate Judiciary Committee hearing in November 2020.
Mark Zuckerberg, CEO of Facebook, testifies remotely during a Senate Judiciary Committee hearing in November 2020.

The government wants to cut Facebook down to size.

The Federal Trade Commission and the attorneys general of 48 states have filed parallel antitrust lawsuits against the social media giant, claiming it abused its market dominance to stop the emergence of potential rivals.

The main accusation is that Facebook unlawfully attempted to stave off future competition through its $1 billion acquisition of the photo-sharing app Instagram in 2012 and its $19 billion acquisition of the messaging platform WhatsApp in 2014.

Among other remedies, the suits call for Facebook to divest itself of both Instagram and WhatsApp.

"For nearly a decade, Facebook has used its dominance and monopoly power to crush smaller rivals and snuff out competition, all at the expense of everyday users,” said Attorney General Letitia James of New York in announcing the state's suit. “Today we are taking action to stand up for the millions of consumers and many small businesses that have been harmed by Facebook’s illegal behavior."

Consumer advocates applauded today's action.

"Facebook has a central presence in the lives of many millions of consumers," says George Slover, senior policy counsel at Consumer Reports. "This antitrust enforcement action by the FTC and the states will help ensure that Facebook won't continue to abuse its dominant position to deny consumers other choices that could offer them a better user experience."

More on Big Tech Antitrust

The states' complaint argues that "the driving motivation for Facebook’s decision to acquire some companies was to harm competition rather than strengthen the quality of its products and services."

In other instances, Facebook is said to have quashed potential competitors by denying them access to the company's network.

In addition to shedding Instagram and WhatsApp, the states asked the court to compel Facebook to change its business practices to avoid anticompetitive acquisitions in the future, including approval by the plaintiff states of deals in excess of $10 million.

In an e-mailed statement, Facebook pushed back against the charges.

"Instagram and WhatsApp became the incredible products they are today because Facebook invested billions of dollars, and years of innovation and expertise, to develop new features and better experiences for the millions who enjoy those products," wrote Jennifer Newstead, Facebook's general counsel. "The most important fact in this case, which [the FTC] does not mention in its 53-page complaint, is that it cleared these acquisitions years ago."

Today's filing is the latest in a series of recent antitrust actions against U.S. tech companies. Over the past year Congress has held a number of antitrust hearings, including one this summer in which the CEOs of the four dominant tech companies—Apple, Amazon, Facebook, and Google—testified. The report resulting from those hearings concluded that those companies had too much market power and were abusing it to stifle competition and harm consumers. In October the Justice Department filed antitrust charges against Google.

Here's what the lawsuits mean for consumers.

One potential result of those hearings is federal legislation that places restrictions on Facebook (and the other tech companies) and/or increases the ability of government agencies like the Federal Trade Commission and the Justice Department to enforce antitrust laws against tech companies."the driving motivation for Facebook’s decision to acquire some companies was to harm competition rather than strengthen the quality of its products and services," said the complaint. 
 

"the driving motivation for Facebook’s decision to acquire some companies was to harm competition rather than strengthen the quality of its products and services," said the complaint. 
 

"the driving motivation for Facebook’s decision to acquire some companies was to harm competition rather than strengthen the quality of its products and services," said the complaint. 
 

What Are Antitrust Laws?

In its simplest form, antitrust laws protect competition by preventing a big company from taking unfair advantage of its size to keep smaller companies on their heels. In extreme cases, the big company can become a monopoly.

"The most notable examples of antitrust actions in the U.S. were measures taken against the railroads in the early 1900s, telephone companies in the 1980s, and Microsoft at the turn of the millennium," says Sumit Sharma, a senior researcher in tech competition at Consumer Reports. "The moves against Facebook and other Big Tech companies are the latest rounds in an ongoing fight." 

Why Should You Care?

When there's more competition, according to advocates, consumers benefit.

"You want Facebook to have to compete for your business," says Charlotte Slaiman, competition policy director at the advocacy group Public Knowledge in Washington, D.C. "That competition might take the form of protecting your privacy. Or it might take the form of investing more in content moderation so that you're not facing harassment on the platform or that you're not exposed to misinformation or disinformation."

Another upside, she suggests, is that Facebook may have to make it easier for consumers to move their photos, contact lists, and other content to a rival platform.

Other advocates suggest that many of Facebook's current problems would be ameliorated if the platform faced stronger competition.

"Everything that is wrong with Facebook from a consumer or societal perspective—invasive ads, harvesting and selling of data, threatening democracy through election misinformation, even the spread of conspiracy theories—all of it could be avoided if there were viable competitors who could offer a better, safer, or tailored experience," says Alex Harman, competition policy advocate at the advocacy group Public Citizen. 

Facebook Is Free, So Is It Competing Unfairly?

"Facebook doesn't charge consumers, but it is not free," says CR's Sharma. "You pay Facebook with your attention and your data."

The company has become one of the world's richest firms by collecting consumer data and selling targeted ads based on that information, he explains, logging $69.7 billion in ad revenue in 2019. So if Facebook were forced to compete, it might, for example, change its data collection policies. In a document cited in the complaint, the company acknowledged that consumers do care about the privacy of their data when given the choice. 

What May Happen and When?

If a judge determines that the company acted improperly when it acquired Instagram and WhatsApp, fledgling competitors at the time, one outcome could be to "unwind" those acquisitions and turn the two platforms into competitors.

"However, Facebook has attempted to head off this option by tightening the integration among the companies," Sharma says.

Whatever the final outcome, don't expect to see big changes anytime soon. This is just the first step in what will probably be a long legal battle, one that Facebook has plenty of motivation and resources to wage.

While there's always a possibility the case could be settled, most experts predict that it's headed for trial, potentially pushing the resolution off by years, not weeks.