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Facebook faces US lawsuits that could force sale of Instagram, WhatsApp

Facebook faces US lawsuits that could force sale of Instagram, WhatsApp
(Photo: Gabby Jones/Bloomberg via Getty Images)

With the filing of the twin lawsuits on Wednesday, Facebook becomes the second big tech company to face a major legal challenge this year after the US Justice Department sued Alphabet Inc’s Google in October, accusing the $1 trillion company of using its market power to fend off rivals.

WASHINGTON (Reuters) – Facebook Inc could be forced to sell its prized assets WhatsApp and Instagram after the U.S. Federal Trade Commission and nearly every U.S. state filed lawsuits against the social media company, saying the deals were unfair and ultimately harmed consumers.

With the filing of the twin lawsuits on Wednesday, Facebook becomes the second big tech company to face a major legal challenge this year after the U.S. Justice Department sued Alphabet Inc’s Google in October, accusing the $1 trillion company of using its market power to fend off rivals.

The lawsuits highlight the growing bipartisan consensus to hold Big Tech accountable for its business practices. The complaints on Wednesday accuse Facebook of buying up rivals, focusing specifically on its previous acquisitions of Instagram for $1 billion in 2012 and WhatsApp for $19 billion in 2014. Federal and state regulators said the acquisitions should be unwound.

The FTC said in a statement on Wednesday that it would seek an injunction that “could, among other things: require divestitures of assets, including Instagram and WhatsApp.”

In its complaint, the coalition of 46 states, Washington, D.C. and Guam also asked for Facebook’s acquisitions of Instagram and WhatsApp to be judged to be illegal. Alabama, Georgia, South Carolina and South Dakota did not participate in the lawsuit.

“For nearly a decade, Facebook has used its dominance and monopoly power to crush smaller rivals, snuff out competition, all at the expense of everyday users,” said New York Attorney General Letitia James.

James said the company acquired rivals before they could threaten the company’s dominance. She added that the states will co-operate with the FTC in the litigation process

Facebook said it is reviewing the FTC and state antitrust complaints.

The company said the government “now wants a do-over with no regard for the impact that precedent would have on the broader business community or the people who choose our products every day.”

The FTC approved both the Instagram and WhatsApp deals.

Facebook’s Chief Executive Mark Zuckerberg told employees in July that Facebook would “go to the mat” to fight a legal challenge to break up the company, calling it an “existential” threat, according to audio of internal company meetings published by The Verge.

The lawsuits are the biggest antitrust cases in a generation, comparable to the lawsuit against Microsoft Corp in 1998. The federal government eventually settled that case, but the yearslong court fight and extended antitrust scrutiny prevented the company from thwarting competitors and is credited with clearing the way for the explosive growth of the internet.

Last month, Facebook said it was buying customer service start-up Kustomer, in an acquisition that the Wall Street Journal said valued Kustomer at $1 billion.

Facebook also bought Giphy, a popular website for making and sharing animated images, or GIFs, in May. That acquisition has already drawn scrutiny from the United Kingdom’s competition watchdog.

Facebook shares fell as much as 3% after the news before paring losses and were last down 1.7%. DM

Reporting by Diane Bartz, Nandita Bose and David Shepardson; Additional reporting by Katie Paul in Palo Alto and Elizabeth Culliford in New York; Editing by Chris Sanders and Lisa Shumaker

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  • James Francis says:

    I’m curious if this will become a double standard. There is ample motivation under these principles to go after Google or Apple, both of which tend to push their own services onto users over alternatives. Apple doesn’t even allow you to properly reassign browser redirects on the iPhone, and Android is practically overflowing with Google services you cannot easily remove. Not to mention that, compared to Google’s use of and profits from user data, Facebook is a minnow. But above all, I believe Facebook is the target because we won’t accept our individual responsibilities regarding digital culture and how we provide information. Thus I suspect this action is entirely political and won’t really address the issues that need attention as digital culture emerges. In fact, it seems set to do more damage without actually addressing deeper concerns – but everyone will be happy because we’ve been duped into thinking all-powerful algorithms rule our lives. My Youtube algorithm can’t even keep a straight face after three recommendations. The real problem here is that people won’t take personal responsibility for the power digital gives them. If they don’t get what they want, they blame the technology, not their own choices and behaviour.

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