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Face-break? Breaking up Facebook

Disclaimer: The views expressed are that of the individual author. All rights are reserved to the original authors of the materials consulted, which are identified in the footnotes below.


By Francesca Foster


Facebook is certainly well acquainted with lawsuits. As documented in ‘The Social Network’, the controversy surrounding Zuckerberg’s supposedly original creation is intriguing; when first starting up ‘The Facebook’ as a Harvard Student in 2004, Zuckerberg faced claims from the Winklevoss twins that Zuckerberg had stolen their idea, resulting in a $65m legal settlement. [1] Although Facebook is not the first social network to exist, it has become the world’s 3rd most visited website, with the purchase of both Instagram (2012) and WhatsApp (2014) further enabling Facebook to dominate the social media landscape. [2] However this has not been without ample controversy; On December 9th, 2020, twin antitrust suits were filed against this tech behemoth, accusing the company of taking illegal actions to crush competition. [3] These lawsuits arguably represent the most serious legal action the US government has taken against Facebook since its conception. [4]

What is particularly of note is that both acquisitions have previously been investigated by the Federal Trade Commission (FTC) and were subsequently approved, indicating perhaps that no deals are final. The basis of Facebook’s rebuttal is that, although both Instagram and WhatsApp were becoming increasingly popular from 2012 to 2014 that both companies were acquired when they were a lot smaller, thus their current success was not predestined. Calling the suits ‘Revisionist History’, Facebook’s General Counsel Jenifer Newstead posits that Instagram and WhatsApp’s global success can purely be attributed to Facebook investing billions of dollars and time into innovating and improving their respective features. [5] The company website has a dedicated page to ‘Building competition’, outlining how it plans to stay competitive amongst the exponential number of apps now available. However, the question is: Is Facebook truly building competition? Or simply eliminating competition unfairly, and at the expense of a social networking marketplace lacking options and consumer privacy? [6]


According to Fast Company Senior Writer Mark Sullivan, the Federal Trade Commission (FTC), alongside attorneys general from 48 states, have a fairly good chance of proving that Facebook should be dismantled. [7] However, not without ample time and money. We are all aware of the rapid rate of change in global media trends, and that social media as a whole will undeniably develop and become extremely differentiated over the next decade. Despite this, whether or not Facebook will cease to exist will be dependent on the FTC creating a hugely compelling case, not merely as only TikTok currently reigns ahead of Facebook for the most downloaded app, highlighting the gravity of the case.


Convincing the court that Facebook made its acquisitions of Instagram and WhatsApp primarily to eliminate potential challenges to Facebook’s dominance over social networking will not be an easy feat. According to George Washington University law professor William Kovacic, the key to deciding antitrust cases such as this one is by letting Facebook tell the story through their own words. [8] For example, by referencing an internal statement made by Zuckerberg himself in 2008, who said “it’s better to buy than compete”.[9] This missive is suggestive of how Facebook targeted potential competitive threats to its power, such as Instagram, which was recognised as an up-and-coming innovative personal social network.

Whilst the plaintiffs may succeed in proving that Facebook acted defensively, it may be more difficult to prove that real consumer harm has been caused by the company’s actions, as they will need to persuade the court that consumers would have been better off if Instagram and WhatsApp had been able to develop on their own. The ultimate outcome of the case would be divesture, whereby Facebook would be forced to renounce Instagram and WhatsApp, in the hope that both companies will then become true competitive alternatives to Facebook. Nevertheless, there is concern as to whether antitrust is the correct form of action, as it has been argued that forcing the breakup of Facebook cannot fix the company’s underlying economics.[10] Additionally, courts have previously been hesitant to break up companies, for fear of not achieving the desired aim of creating a better marketplace for consumers.


Yet it is not only the acquisitions of WhatsApp and Instagram causing issues. This January, the UK competition regulator launched a formal investigation into Facebook’s acquisition of Giphy, due to concerns over the potential impact on consumers, stating that the $400m deal could result in a “substantial lessening of competition in markets in the United Kingdom”. [11] Although Facebook is co-operating with the investigation, they have responded with a statement arguing that the merger is in fact pro-competitive. This investigation further contributes to the growing case against Facebook’s monopoly.

In 2019 Nick Clegg, current vice-president of Global Affairs and Communications at Facebook, counteracted co-founder of Facebook Chris Hughes's view that Facebook should be dismantled. [12] Clegg is instead of the opinion that Facebook’s success has enabled billions globally to communicate in novel ways and believes that Facebook should instead be held to account through more stringent internet rules. Although the Company and Markets Authority (CMA) is planning to launch a digital regulator to police big tech this year, it is debatable as to whether more stringent internet regulation is enough to combat the issues caused by Facebook in its current form, such as privacy concerns and the spreading of misinformation.

In the 17 years since its conception, Facebook’s platform has undoubtedly remained firmly at the centre of where we communicate, receive news, and learn. But the evidence against Facebook is quickly mounting. As the only social platform reaching more than half (59%) of all social media users, the profound prevalence of Facebook resonates in our day-to-day lives. [13] Combining the fact that lawsuits can notoriously take decades with the potential for lots of opportunities for appeals means that this will be an extremely drawn-out process. Yet it is guaranteed that the eventual outcome of the accused anticompetitive acquisitions will set the precedent for the way in which other Big Tech companies operate for years to come.


 

[1] John Naughton, 'Facebook legal battle: Why the two heads of the Winklevoss twins weren't better than one' (The Guardian, 16 January 2011 ) <https://www.theguardian.com/technology/2011/jan/16/facebook-zuckerberg-winklevoss-legal-battle> accessed 13 February 2021

[2] Christina Newberry, '47 Facebook Stats That Matter to Marketers in 2021' (Hootsuite, 11 January 2021 ) <https://blog.hootsuite.com/facebook-statistics/> accessed 13 February 2021

[3] Natalie Sherman, 'Facebook facing US legal action over competition ' (BBC News, 9 December 2020 ) <https://www.bbc.co.uk/news/business-55250366> accessed 13 February 2021

[4] Ibid.

[5] Jenifer Newstead, 'Lawsuits Filed by the FTC and the State Attorneys General Are Revisionist History ' (Facebook, 9 December 2020) <https://about.fb.com/news/2020/12/lawsuits-filed-by-the-ftc-and-state-attorneys-general-are-revisionist-history/> accessed 13 February 2021

[6] Mark Sullivan, 'These are the key arguments in the antitrust case against Facebook' (Fast Company, 12 November 2020) <https://www.fastcompany.com/90585338/facebook-antitrust-breakup-instagram-whatsapp#:~:text=Breaking%20up%20Facebook%20would%20likely,look%20very%20different%20in%202031> accessed 8 February 2021

[7] Ibid.

[8] Ibid.

[9] Katie Canales, ''It's better to buy than compete': The FTC is using Mark Zuckerberg's own words against him Read the Facebook CEO's crucial emails here' (Insider, 10 December 2020 ) <https://www.businessinsider.com/ftc-facebook-lawsuit-makes-zuckerberg-emails-public-instagram-whatsapp-competition-2020-12?r=US&IR=T#:~:text='It's%20better%20to%20buy%20than,Zuckerberg's%20own%20words%20against%20him.&text=The%20Federal%20Trade%20Commission%20filed,services%20to%20compete%20against%20them.> accessed 16 February 2021

[10] Ibid.

[11] Kate Beioley , 'UK competition watchdog launches probe into $400m Facebook-Giphy deal' (Financial Times , January 28 2021) <https://www.ft.com/content/5ce8d87a-782a-44d5-942e-6155c1753c5d> accessed 13 February 2021

[12] Nick Clegg , 'Breaking Up Facebook Is Not the Answer ' (Facebook, May 11 2019 ) <https://about.fb.com/news/2019/05/breaking-up-facebook-is-not-the-answer/> accessed 13 February 2021

[13] Christina Newberry , '47 Facebook Stats That Matter to Marketers in 2021' (Hootsuite, 11 January 2021) <https://blog.hootsuite.com/facebook-statistics/> accessed 13 February 2021 /// ibid 2???




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