Photo: Gerd Altmann/Pixabay
New antitrust claims against Facebook could change the power balance in the social media market. What is actually going on?
Legal suits brought last week against the largest social platform Facebook are the result of a long investigation not only of Mark Zuckerberg's company activities, but also other Big Tech.
A document published by the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights back in early October referred to IT giants misusing their monopoly position to increase their market share.
Almost two months after the first conclusions were published, the first real steps were taken to change the situation.
And Facebook was the first to "get in the hot water". It will have to be judged by court, in fact, explaining why this company owns two popular social platforms and an equally popular messenger.
Legal hearings regarding suits against Facebook may take a very long time, possibly more than one year. For now, experts are cautiously predicting what the trial will lead to.
However, most are confident that the decision, either in favor of the claimants or in defense of Facebook, will affect the technology market in general and the social media market landscape in particular.
Who is suing Facebook
The US Federal Trade Commission (FTC) and authorities of 48 states have filed a lawsuit against Facebook, accusing the company of antitrust legislation violations.
The claimants are demanding to force the company to sell Instagram and WhatsApp, to make the company's products available to third-party developers without additional conditions, as well as to strengthen oversight of future Facebook deals, as the company has become a monopolist in the social media and online advertising market.
The purchases of Instagram in 2012 (for $1 billion) and WhatsApp in 2014 (for $19 billion), according to the claimants, were nothing more than takeovers to neutralize competitors.
As for third-party developers, the lawsuit authors allege that Facebook made the main APIs (developer tools) available only when third-party companies refused to create competing services.
And the company disconnected competitors from the API access to the API, for example, by blocking such access to the short video service Vine, owned by Twitter.
What does Facebook answer
Facebook regards the lawsuit as the antitrust regulator's incorrect work and calls it "history revision."
Vice President Jennifer Newstead emphasizes that Facebook "actively competes with many services around the world."
In addition, the top manager emphasizes that at one time (in 2012 and 2014) the FTC approved the takeover of both Instagram and WhatsApp.
The purchase of the latter was also studied by the European Commission that also did not find any violations in the deal.
Facebook's look at competition
Facebook buys promising startups quite often, and the fact that regulators paid attention to only Instagram and WhatsApp is because these companies are probably the largest among those absorbed by it.
For example, earlier this year, Facebook bought GIF search engine Giphy for $400 million. This takeover can increase the social network's share on the digital ad market.
In 2014, Facebook carried out another successful takeover. For more than $2 billion, the company bought the virtual reality headsets developer Oculus.
Although Oculus still exists as a separate project in the structure of Facebook, the company has already become a defendant in an antitrust investigation related to Oculus, but in Germany.
This country's antitrust authorities have accused Facebook of violating fair competition by forcing Oculus VR headset owners to use their Facebook account for authorization.
In other words, in order to use a virtual reality helmet, you first need to register on a social network.
In 2013, Facebook tried to buy the developer of another popular social service—Snapchat for $3 billion.
And after the refusal, the social network effectively turned Instagram into a Snapchat "killer" by cloning the popular disappearing message feature known today as "Stories."
Later, the company banned Instagram profiles from adding links to profiles in other social networks, in particular, Snapchat and Telegram. Moreover, this ban was clearly mentioned in the user agreement.
At the same time, the company blocked the hashtag #snapchat search and banned showing any content with a mention of Snapchat on trending pages. In other words, Facebook and Instagram have gone to great lengths to destroy the rival Snapchat they failed to buy.
Instagram and WhatsApp: from standalone companies to the Facebook-verse element
With the takeover of Instagram and WhatsApp, both projects initially remained standalone products. However, the parent company has not abandoned the integration of these services with the main social network.
The protests of these projects’ founders who remained to work at the parent company Facebook became known after their departure. The creators of both Instagram and WhatsApp not only left the company, but also publicly expressed their opposition to Facebook's policies regarding the products it absorbed.
For example, Brian Acton said in a notorious Forbes interview
"I sold my users’ privacy to a larger benefit. I made a choice and a compromise. And I live with that every day".
Instagram founder Kevin Systrom, in turn, feared that Zuckerberg would go into "destruction mode" if he abandoned the deal to sell his social networking project.
The investigation into Facebook's monopoly on the social media and online advertising market lasted over a year. And the outcome, announced in October, and then resulting in a lawsuit for the forced sale of Instagram and WhatsApp, hardly came as a surprise to Mark Zuckerberg's company.
An additional argument in the Facebook rhetoric can be the alleged concern for users.
Throughout 2020, at least, Facebook has been actively engaged in what could be called "pre-monopoly" or "pre-investigative" preparations.
The social network has made several important announcements about the merger of its three main products—Facebook, Instagram and WhatsApp, first at the level of technical infrastructure, then at the level of user interaction with them.
As early as last year, the company announced the integration of users’ advertising profiles of its services into one, that, allegedly, will allow it to offer even better targeted advertising to its customers.
And already this year, the company merged messengers. Instagram users were able to connect their messages to Facebook Messenger. This means that messages to both Facebook and Instagram can be sent through the same service.
Although the company emphasized that this merger is optional, a few weeks after the announcement, this merger was carried out for the business pages owners.
Then it became known that Facebook was testing a "single account center" for all its products, and it was rumored about the imminent possible viewing of Instagram "stories" in the Facebook interface.
All of these changes carried out under the banner of a struggle for user friendliness actually look like preparations for the current lawsuit.
The company actually merges three platforms into one, so that, in the worst-case scenario for it around the lawsuit on the separation of Facebook, Instagram and WhatsApp, to complain that, alas, it is impossible to do this. And that is because, alas, this is already a single product, with a single technical infrastructure, profiles, messenger and so on.
Moreover, an additional argument in Facebook's rhetoric can be the alleged concern for users who already feel comfortable and are accustomed to using the triune product.
Can triune Facebook become three separate projects again?
Most market experts are confident that this lawsuit is unlikely to result in Facebook separation.
Casey Newton, author of one of the most popular technology publication, The Platformer, is confident that the government is likely to fail in its attempt to destroy Facebook.
But I think the authorities will be able to prevent Facebook from committing anti-competitive mergers in the future.
And the continued growth of TikTok and everything that happens after TikTok will begin to rebalance the economic sector where Facebook has dominated for a decade.
author of the technology publication The Platformer
Peter Adams, @marketingdive reporter, quoted several experts in his post on the potential prospects for this lawsuit.
They all point to this investigation impact not so much on previous Facebook takeovers, but on future deals of the company.
The result could be that Zuckerberg's company will have less room to negotiate and deals’ consummation.
In the long term
This investigation and antitrust suits against both Facebook and other BigTechs are likely to have an impact in the long run.
The United States has entered a much bolder new era of antitrust law, Casey Newton thinks.
In his opinion, this will have a good effect on competition and will benefit consumers, even if specific cases do not achieve their most ambitious goals.
It's tempting to imagine a world where Instagram and WhatsApp are working independently again, forcing Facebook to innovate more and copy less. Perhaps we will then find that this also requires compromises.
author of the technology publication The Platformer
There is also a hope that Facebook will be distracted by its perennial antitrust case and miss the next competitive threat.
Context. Previously, wrote about what awaits Silicon Valley awaits Silicon Valley under Joe Biden, and how Donald Trump decided to annoy social media one last time.