The FTC drops the anti-monopoly hammer on Facebook

After months of behind the scenes work, the FTC today launched their long-awaited suit against Facebook, accusing the company of illegally maintaining its social networking monopoly through a years-long course of anticompetitive behaviour, mainly by purchasing upcoming rival social networks before they could offer serious competition.

The suit is being led by a coalition of attorneys general of 46 states, the District of Columbia, and Guam, and the complaint alleges that Facebook has engaged in a systematic strategy—including its 2012 acquisition of up-and-coming rival Instagram, its 2014 acquisition of the mobile messaging app WhatsApp, and the imposition of anticompetitive conditions on software developers—to eliminate threats to its monopoly.

The FTC says this course of conduct harms competition, leaves consumers with few choices for personal social networking, and deprives advertisers of the benefits of competition.

“Personal social networking is central to the lives of millions of Americans,” said Ian Conner, Director of the FTC’s Bureau of Competition. “Facebook’s actions to entrench and maintain its monopoly deny consumers the benefits of competition. Our aim is to roll back Facebook’s anticompetitive conduct and restore competition so that innovation and free competition can thrive.”

Anticompetitive Platform Conduct

The complaint also alleges that Facebook, over many years, has imposed anticompetitive 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. In particular, Facebook allegedly has 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.

The complaint alleges that Facebook has enforced these policies by cutting off API access to blunt perceived competitive threats from rival personal social networking services, mobile messaging apps, and other apps with social functionalities. For example, in 2013, Twitter launched the app Vine, which allowed users to shoot and share short video segments. In response, according to the complaint, Facebook shut down the API that would have allowed Vine to access friends via Facebook.

FTC notes Facebook is the world’s dominant personal social networking service and has monopoly power in a market for personal social networking services.  This unmatched position has provided Facebook with staggering profits. Last year alone, Facebook generated revenues of more than $70 billion and profits of more than $18.5 billion.

The FTC is seeking a permanent injunction in federal court that could, among other things: require divestitures of assets, including unwinding the purchase of Instagram and WhatsApp; prohibit Facebook from imposing anticompetitive conditions on software developers; and require Facebook to seek prior notice and approval for future mergers and acquisitions.