California, along with 45 other states, the District of Columbia, and Guam, filed a federal antitrust lawsuit against Facebook on Wednesday, claiming the social media giant maintains a monopoly in the U.S. by purchasing emerging competitors, which degrades the quality and variety of users’ social networking experiences and privacy options.
The 48 attorneys general claim in the suit, filed in the U.S. District Court for the District of Columbia, that Facebook has held monopoly power in the U.S. social media market for more than a decade and illegally maintains that power “by deploying a buy-or-bury strategy that thwarts competition and harms both users and advertisers.”
“Facebook leveraged its market power to squash competition and monopolize the market, enabling greater collection and control of data and squandering innovation,” California Attorney General Xavier Becerra said in a statement accompanying the lawsuit. “Rather than outcompete or outperform, Facebook simply bought the competition. Innovation in Silicon Valley and elsewhere depends on a fair and competitive marketplace. California consumers deserve options — not oppressive monopolistic behavior.”
The 123-page suit singles out Facebook’s 2012 acquisition of the photo-sharing platform Instagram and its 2014 purchase of the mobile messaging app WhatsApp, both companies the attorneys general say “posed a unique and dire threat to Facebook’s monopoly.”
“Each had enormous and rapidly growing user networks, and each was well positioned to encroach on Facebook’s dominant market position,” the suit claims. “Facebook kept both services running after the acquisitions to fill the void, so they would not be replaced by another app with the potential to erode Facebook’s dominance.”
The attorneys general claim Facebook’s practices come at the expense of both users and advertisers. Users, the suit alleges, have “less choice in personal social networks, suppressed innovation, and reduced investment in potentially competing services,” and Facebook’s monopoly power also gives the company “wide latitude” to set the terms for how users’ private information is collected, used, and protected.
Meanwhile, Facebook’s conduct harms advertisers by creating “less transparency to assess the value they receive from advertisements, and harm to their brand due to offensive content on Facebook services,” according to the complaint.
The suit asks the court to prevent Facebook from continuing to engage in allegedly anticompetitive conduct, and from making further acquisitions valued at $10 million or more without notifying the plaintiff states.
The Federal Trade Commission filed a separate lawsuit against Facebook on similar grounds in the same court, asking the court to require the company to divest from Instagram and WhatsApp.
In a tweet, spokespeople for Facebook said the company is reviewing the complaints and “will have more to say soon.”
“Years after the FTC cleared our acquisitions, 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 company wrote in the tweet.
The complaints come on the heels of a landmark antitrust lawsuit by the U.S. Department of Justice against Google, filed in October in D.C. federal court.
Curious about CEB? Please visit our website to learn more about our products, our free webinars and guidebooks, and our public service mission.
© The Regents of the University of California, 2020. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.