For years, Facebook has faced questions about its power and position, amid rising concerns over the company's enormity, and the ways in which it operates, particularly its mass data-gathering business model.
This week, questions turned to court filings. Two momentous lawsuits against the social media company were announced in the United States, reawakening federal antitrust powers that have largely lain dormant since the US department of justice won a case two decades ago against Microsoft. The first, filed by a coalition of 46 states and two US districts, charges Facebook with monopolistic behaviour, wielding its power to quash smaller rivals by limiting their market access, or buying them up and rolling them into the Facebook juggernaut, as happened with WhatsApp and Instagram.
Such actions have suppressed competition and innovation and reduced options for consumers, said New York attorney general, Letitia James, who leads the coalition.
The US Federal Trade Commission (FTC) filed a dovetailing lawsuit which accuses Facebook of executing a "systematic strategy" of undermining rivals through anticompetitive behaviour.
Both lawsuits focus in particular on Facebook’s controversial acquisitions of two former fast-growing rivals, Instagram (for $1 billion in 2012), and WhatsApp (for $19 billion in 2014). The FTC, which approved both acquisitions, is now seeking to unwind them and restore Instagram and WhatsApp as separate companies.
Facebook argues such a step would send a chill through the corporate world, indicating that past approvals might be undone in future. But asking such difficult questions, and scrutinising past decisions, is precisely what politicians and regulators should and must do. A willingness to do so goes to the heart of a functioning antitrust system, one which neither the US nor the EU has had the pluck to fully deploy in recent memory.
For too long, both ignored key lessons of the Microsoft case: first, that theoretically expanding offerings and capabilities and tying them together, internally or through acquisitions, often has the effect of limiting, not growing user choice and markets. And, second, that technology and companies move fast, so regulators must act in a timely way to constrain, when needed, and consider the future market effect of acquisitions made today.
Instead, regulators have gone on to approve a long roster of acquisitions that awarded broad new capabilities to already massive tech companies (Google’s acquisition of powerful advertising technology firm DoubleClick is one egregious example). These two new lawsuits – and more threatened from the US and EU – are a welcome indication that regulators are, at last, inclined to do their jobs.