Instagram and WhatsApp away from Facebook : Facebook has been hit by lawsuits by the US government and nearly every US state, in a development that could fundamentally change how the company works. The lawsuits relate to the running of Facebook, accusing it of using its purchase of Instagram and WhatsApp to unfairly dominate the tech industry. It suggests that the three different apps should be broken up, in what would amount to one of the most substantial alterations to the technology industry ever.
But such a change would also have a profound impact on anyone who uses Facebook, WhatsApp or Instagram. And, in recent times, Facebook has made changes that mean the significance of any change is always getting higher.
Facebook boss Mark Zuckerberg is reported to have said that an attempt to break up the company could be an “existential” threat, and that it would “go to the mat” to fight it, in comments that make clear just how much is at stake in the new lawsuits.
The federal and state regulators have said acquisitions should be unwound – a move that could pose a long legal challenge because the transactions were approved by the FTC several years ago.
“For almost a decade, Facebook has used its dominance and monopolized power to crush smaller rivals, take out the competition, all at the expense of regular users,” said the Attorney General of New York, Letitia James, on behalf of the 46-state alliance, Washington, D.C. And Guam. And Guam. Alabama, Georgia, South Carolina, and South Dakota have not been included in the trials.
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James said the company got rivals before they could challenge the supremacy of the company.
Jennifer Newstead, Facebook’s general counsel, called litigation “revisionist history” and said there are “successful companies.” She told WhatsApp and Instagram after Facebook spent billions of dollars in expanding their apps.
“Right now, the government now wants a do-over, sending a chilling warning to American business that no sale is ever final,” Newstead said.
FIGHT PROTRACTED
Mark Zuckerberg, Facebook’s CEO, told his workers in July that Facebook must go to the mat,” which was claimed by The Verge to be an “existential threat, to battle a legal challenge to disintegrate the company.
Seth Bloom of the Bloom Strategic Lawyers, antimonopoly experts, said that the FTC case is “significantly weaker” than the DOJ’s Google lawsuit against him.
“Discussing acquisitions that are six or eight years old, and it will be difficult for a court to order divestitures of many years ago,” said Bloom. Similar concerns were raised by investors.
“I am not if the FTC or DOJ will be successful in breaking Facebook up. I’m assuming this will be dragged out in the courts as F.B. defends itself,” said Daniel Morgan, Synovus Trust’s portfolio manager in Atlanta, Georgia.
The cases are the largest in a decade, equivalent to the 1998 case against Microsoft Corp. Eventually, the federal government solved the case, but the lengthy legal battle and extended counter-trust scrutiny stopped the corporation from thwarting rivals and led to the proliferation of the internet.
Facebook reported last month to purchase a customer service start-up customer when the Wall Street Journal reported that the customer valued $1 billion.
In May, Facebook also purchased Giphy, a popular website for animated images or GIFs. This purchase has also been investigated by the U.K. competition watchdog.
What is Facebook accused of?
In the lawsuits, lawyers argue that Facebook has used a “buy or bury” strategy when it comes to acquisitions. As it has grown, and as other companies have come to threaten them, it is able to use its vast power to bully out its competitors, the new lawsuits argue.
“For nearly a decade, Facebook has used its dominance and monopoly power to crush smaller rivals, snuff out competition, all at the expense of everyday users,” said New York Attorney General Letitia James on behalf of the coalition of 46 states, Washington, D.C. and Guam. Alabama, Georgia, South Carolina and South Dakota did not participate in the lawsuit.
What could happen?
Regulators argue that the acquisitions of WhatsApp and Instagram should be “unwound” – that they should be split back off from Facebook and allowed to run again as separate companies.
Such a solution would be a rare and profound proposal for any company, and would fundamentally alter the way the technology industry works.
In comments posted on Facebook’s internal chat, Mr Zuckerberg said that he did not anticipate “any impact on individual teams or roles” as a result of the lawsuits, which he said were “one step in a process which could take years to play out in its entirety.”
But even if a breakup is unlikely, and a long time away even if it does happen, it is still possible and would be vastly significant if it did.
What does it mean for users?
On the one hand, even the most dramatic breakup could be insignificant for users. For now, the companies still run as largely independent entities, sometimes even competing with each other, and there are no obvious things that would change between them.
However, recent changes by Facebook mean that this is becoming less and less the case with time. The company has been looking to integrate the apps more closely – if only on their back end – so that they are more tightly integrated.
This allows for more interoperability, so that people can share messages between Facebook and Instagram’s messaging platforms, for instance. It should in theory also allow for new features to arrive in all the apps at once, since they will share an infrastructure.
But it does also mean that any breakup is more difficult – a fact that some critics have argued is not a coincidence. As the apps become more tightly integrated, they will also become harder to break up, which would make any possible regulatory action more difficult to justify and fulfill.
It also means that if the acquisitions are unwound, the future for the three apps will be more uncertain. By the time of any theoretical breakup, it’s not clear what position the apps will be in, or whether it will be even technically possible for them to be split apart and still retain whatever features they have at that point.
An even more unknown quantity is how those apps will function after they are sold, if they are. Whether they are run independently or passed onto other large companies, their policies will presumably change under new ownership – as already happened, notably, with WhatsApp, which had more of a strident pro-privacy policy before it was acquired by Facebook.
Facebook shares have fallen to 1.9 percent after the news before paring losses.