US govt, 48 states sue Facebook for abusing market power to 'crush' smaller competitors



The US government and 48 states have filed parallel lawsuits against Facebook, accusing the social media giant of anti-competitive conduct by abusing its market power to create a monopoly and crushing smaller competitors.

Soon after the Federal Trade Commission (FTC) and 48 state attorney generals on Wednesday sued the company, Facebook's shares dropped significantly at the stock exchanges.

The bipartisan coalition led by New York attorney general Letitia James alleged that Facebook has engaged in a systematic strategy to eliminate threats to its monopoly. This includes its 2012 acquisition of up-and-coming rival Instagram, its 2014 acquisition of the mobile messaging app WhatsApp and the imposition of anti-competitive conditions on software developers.

According to the federal complaint, this course of conduct by Facebook harms competition, leaves consumers with few choices for personal social networking, and deprives advertisers of the benefits of competition.

Opposing the lawsuit, Jennifer Newstead, vice president and general counsel of Facebook, described it as revisionist history.


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Facebook executives, including CEO Mark Zuckerberg, quickly recognised that Instagram was a vibrant and innovative personal social network and an existential threat to Facebook's monopoly power. So the company bought Instagram rather than compete with it. The acquisition for USD 1 billion in April 2012 neutralises the direct threat posed by Instagram as well as makes it more difficult for another personal social networking competitor to gain scale, the complaint alleged.

Around the same time, it said, Facebook perceived that over-the-top mobile messaging apps also presented a serious threat to its monopoly power.

The complaint also alleged that Facebook imposed anti-competitive conditions on third-party software developers' access to valuable interconnections to its platform, such as the application programming interfaces (APIs) that allow the developers' apps to interface with Facebook.

Facebook allegedly made key APIs available to third-party applications only on the condition that they refrain from developing competing functionalities, and from connecting with or promoting other social networking services. (PTI)