US Lawmakers Sue Facebook Over Anti-Competition Business Practices

The largest social media company Facebook has been sued by federal regulators of the United States and more than 45 state prosecutors over charges that the company had illegally purchased rivals to muzzle competition.  

These lawsuits are amongst the most notable measures that have been taken by the US government against the social media company.

Breaking up Facebook, which is also the owner of Instagram and WhatsApp, is being asked of the court by the officials.

Those deals that are being indicated had got regulatory approvals years ago, Facebook said.

“The government now wants a do-over, sending a chilling warning to American business that no sale is ever final,” Facebook general counsel Jennifer Newstead said. Millions had been invested in Instagram and WhatsApp to make them successful by Facebook, she said and added that the lawsuit would be defended “vigorously” by the company.

“Antitrust laws exist to protect consumers and promote innovation, not to punish successful businesses,” Facebook said, and described the arguments of the US government as “revisionist history”.

Acquisitions of Instagram in 2012, and of Whatsapp in 2014 by Gacebook as well as the rules and practices of the company governing outside software developers are the focus of the lawsuits filed by the states and Federal Trade Commission (FTC).

Facebook has taken a “buy or bury” approach to wipe out potential rivals which has hurt competitors and users as these stakeholders have lost control of their own, officials accused the company, and added that these practices were undertaken to augment the advertising revenue of the company.

Internal messages from Facebook chief Mark Zuckerberg, such as one 2008 email that said it was “better to buy than compete”, were cited in the legal filings.

“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 New York Attorney General Letitia James, who is leading the legal fight by the states. “No company should have this much unchecked power over our personal interaction and social interactions. That’s why we are taking action today.”

For many, it is quite difficult to understand the size of Facebook.

There are more than a billion monthly users of Facebook, Facebook Messenger, WhatsApp and Instagram – all of which are owned by the social media giant. More than two billion monthly users are present with WhatsApp and Facebook alone.

The reason why Facebook managed to dominate this highly lucrative sector in the manner it does is because of illegally acquiring competitors, argued the Federal Trade Commission (FTC).

Facebook was worried by the rapid growth of Instahtram in 2012. Previously, Instahram was identified as a competitor to Facebook by Zuckerberg himself. Instaggram was acquired by Facebook for $1 billion which now seems a ridiculously low deal value.

Similarly, incredible growth was being enjoyed by WhatsApp in 2014 and many believed it would threaten the messaging service of Facebookm which acquired WhatsApp also.  

The FYC had previously examined these two acquisitions and approved the deals.

(Adapted from BBC.com)



Categories: Creativity, Entrepreneurship, Regulations & Legal, Strategy, Sustainability

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