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Breakdown of the FTC lawsuit in opposition to Fb

11, 2020

5 min read

This story originally appeared on cheddar

In a landmark lawsuit, the FTC and almost all US states have sued Facebook for allegedly using their dominance in the digital industry to prevent fair competition and demanding the company's liquidation.

But Facebook claims that their acquisitions like Instagram and WhatsApp have only become what they are today because of their investments and strategies, and the breakup of the companies could set a dangerous precedent.

"The main fact on this case, which the Commission failed to mention in its 53-page complaint, is that it approved these acquisitions years ago," said Jennifer Newstead, Facebook's vice president and general counsel, in a statement. "The government now wants a revision and is sending a terrifying warning to American business that no sale is ever final."

The FTC, along with 48 states and territories, sued Facebook on Wednesday, claiming the company had created a monopoly by engaging in anti-competitive practices. In particular, the acquisition of Instagram in 2012 and the acquisition of WhatsApp in 2014 removed threats to its market share. In addition, Facebook is accused of having introduced restrictions on third parties that would only allow them access to their platform and data if they agreed not to work on similar functions or to use the information in connection with competing social platforms.

"We have asked the court to grant whatever facilities are necessary to facilitate competition," added the FTC. "This could include divesting Instagram and WhatsApp as well as an injunction preventing Facebook from pursuing anti-competitive practices like using anti-competitive terms to access APIs."

Dominance of digital advertising

Facebook has dominated the online advertising space and, alongside Google, makes up half of the so-called "duopoly". According to eMarketer, it accounts for about a quarter of total ad spend worldwide. According to the FTC complaint, the company had sales of more than $ 70 billion and profits of more than $ 18.5 billion in 2019. Despite the slowdown in advertising during the pandemic, eMarketer continues to forecast sales growth of 20 percent year over year.

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"Facebook has grown into a strong player in digital advertising over the years, not only because of the growth of Facebook's core social network, but also because of the way Instagram is intertwined with Facebook's ad buying system," said Debra Aho Williamson, eMarketer's principal analyst, in a statement.

Defend acquisitions

Former FTC official Justin Brookman, currently director of technology policy for consumer reports, agreed to the lawsuit.

"For years, Facebook has built its dominance and power by taking over emerging companies that are seen as a threat to its business and imposing undue conditions on third-party developers," Brookman said in a statement. "These measures have limited consumer choice, protected the company from competitive pressures and resulted in a deteriorating online ecosystem."

Facebook argues that people use its services because it has worked hard to make itself the best in the market, fueled by healthy competition from big companies and startups from Apple to TikTok. The company advises that the FTC's lawsuit does not address electoral impairment and other issues related to content moderation that could not be resolved by forcing Facebook to give up control of its acquisitions. It found that more than 200 million companies are using their platform for free, many of which are small businesses.

"This is a revisionist story," said Facebook's Newstead. “Antitrust laws exist to protect consumers and encourage innovation, not punish successful businesses. Instagram and WhatsApp became the incredible products they are today because Facebook has invested billions of dollars and years of innovation and expertise to create new ones To develop features and better experiences for the millions who enjoy these products. "

When Facebook acquired Instagram, it only had 2 percent of today's users, 13 employees, and no sales. Because of its development efforts, Instagram has grown to its size today, the company argued. The breakup of Facebook would send a red flag to any company that is putting money into increasing its footprint.

"This lawsuit carries the risk of sowing doubt and uncertainty about the US government's own merger review process and whether the acquisition of companies can actually rely on the results of the litigation," Newstead added in a written contribution. "It would also penalize companies for protecting their investments and technology from freeriding by those who haven't paid for innovation, making these companies less likely in the long run to expose their platforms to new product growth and drive services forward. ""

Facebook wants to defend itself against the allegations.

"People and small businesses don't choose to use Facebook's free services and advertising because they have to. They use them because our apps and services offer the greatest value," Newstead said. "We will vigorously defend people's ability to continue to do this." Choice."

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