Facebook has motioned to dismiss two lawsuits that aim to break up the tech giant.
The firm filed motions asking to dismiss lawsuits filed by the Federal Trade Commission and 48 state attorneys general on December 9. The suits alleged Facebook neutralizes competitors – like by buying WhatsApp and Instagram – before they can threaten the social media giant’s dominance.
Facebook argued the suits fail to provide enough evidence that the tech giant engaged in anticompetitive practices. For instance, the social media giant does not have monopoly power over prices because it offers products for free, the motion argues.
Regarding the attorney general suit, Facebook argues the states waited too long to act, and cannot prove that Instagram and WhatsApp would have been competitors to the social media giant.
“Over the many years since the government cleared the Instagram and WhatsApp mergers, this competition has only gotten more fierce, and consumers have benefitted enormously from Facebook’s investments in these free apps,” a Facebook spokesperson said in a statement to Insider. ” The government ignores these realities and attempts to rewrite history with its unprecedented lawsuit.”
The US has threatened to break up tech giants, including Facebook, Apple, Amazon, and Google, for years. The Department of Justice filed an anticipated lawsuit against Google’s alleged exclusionary business deals in October.
Experts previously told Insider the suits are unlikely to lead to a break up of WhatsApp and Instagram from Facebook but will pave the way for greater tech oversight.
President Joe Biden is planning on stacking his administration with antitrust advocates as insiders expect him to strengthen tech regulation.
Slaughter began her term at the FTC in May 2018, after being nominated by President Donald Trump. Rosenworcel was first nominated to serve on the FCC by President Barack Obama in 2012, and is the longest-serving Democratic commissioner at the agency.
The appointments signal that Biden’s administration will likely continue to get tougher on regulating tech and telecom companies, building on the Trump administration’s mix of increasing antitrust enforcement, attempts to roll back Section 230’s legal protections for internet companies, and laissez-faire approach to telecom regulations.
Slaughter has supported the FTC’s increasingly hard line on antitrust issues as well as privacy, but she has also argued the agency should have taken action earlier and issued harsher penalties more likely to deter companies from future law-breaking, including holding executives personally liable for their companies’ privacy violations.
Slaugher has also said that the FTC’s enforcement efforts should be “anti-racist” through ensuring markets aren’t racially discriminatory and protecting consumers from algorithmic bias.
Rosenworcel’s appointment to the FCC, however, marks an even greater departure from her predecessor, the outgoing Chairman Ajit Pai.
Rosenworcel has pushed for the FCC to use its authority and resources to expand internet access, particularly to students whose lack of home internet has prevented them from keeping up in school while participating in remote learning during the pandemic – the so-called “homework gap.” She has also voiced support for net neutrality in the past, and will likely face pressure to reinstate the policy.
Slaughter and Rosenworcel will likely play a key role in any efforts to modify Section 230, which some Democrats say lets tech companies off the hook for not doing enough to disincentivize hate speech, harassment, and violence on their platforms.
The appointments aren’t final, as Biden will still need to decide whether to nominate Slaughter and Rosenworcel as permanent chairs. They will also likely face delays implementing their more ambitious plans until Biden nominates additional commissioners to break the current 2-2 split between Democrats and Republicans at both agencies.
Both the FTC and FCC are led by as many as five commissioners, appointed by the president, and neither is allowed to have more than three members of one party. Biden’s appointments will need to be confirmed by the Senate, a likely prospect as Vice President Kamala Harris could break any tie between the evenly divided upper chamber.
Facebook was slammed with two antitrust lawsuits this week — one from the FTC and one from a group of 48 attorneys general — that take aim at the company’s practices of stifling market competition.
They also seek to force Facebook’s spin-off of WhatsApp and Instagram, but experts told Business Insider that that’s unlikely to happen, and the suits will likely stretch out for years.
What the lawsuits really represent, experts said, is an indication that the government will no longer look the other way when it comes to how Facebook operates.
“Every acquisition they try to make from here on will be met with such a level of inspection and skepticism associated with it,” one expert told Business Insider.
The lawsuits are the cherry on top of a rocky few months for Facebook as a reckoning in tech looks to be on the horizon.
Congress has been investigating Facebook over antitrust concerns, the public has accused the company of allowing the spread of misinformation and hate speech, and Republicans are convinced that the platform is one of many that discriminates against the right.
Here’s what the lawsuits mean for Facebook and what they could change.
Why? Because the commission alleges that when Facebook acquired the two companies, it did so to neutralize them as competitors. As Facebook CEO Mark Zuckerberg said in a 2008 email, unearthed for the first time in the FTC’s lawsuit, “it is better to buy than compete.”
That would be illegal, according to US antitrust laws. (This also isn’t a new accusation – Zuckerberg faced questioning over the same topic in front of Congress in July as part of its investigation into online competition.)
Antitrust laws are designed to prevent firms from using anticompetitive business practices that stifle competition, thereby allowing the companies to dominate the market and hold monopoly power.
In addition to the divestitures, the filings are also seeking to keep Facebook from engaging in anticompetitive conduct. Such conduct could include Facebook preventing competing services from gaining access to its customer base, David Dinielli – an antitrust lawyer and a former special counsel with the antitrust division of the Department of Justice – told Business Insider. The ultimate goal, he said, is to restore competition in the market.
“This is the incredibly strong opening salvo of what could be a multi-year battle,” Dinielli said.
Why is the FTC lawsuit a big deal?
The lawsuit represents a major legal action taken by the US government against Facebook. It also coincides with a separate lawsuit filed by 48 attorneys general that includes similar allegations.
Dinielli also said an important fact about these filings is that they aren’t political documents but are rather explanations that anyone, regardless of political affiliation, will understand. Regulation of the tech industry has been largely politicized this year, especially as platforms like Facebook began fact-checking President Donald Trump’s online posts.
The suit’s demands that WhatsApp and Instagram be spun off are notable.
Divesting WhatsApp could have a dire impact on the future of the social media company, as Bloomberg’s Kurt Wagner reported. Facebook bet big bucks on the popular mobile messaging platform, and as those types of services continue to veer into the social networking world, a company like WhatsApp will be an invaluable asset. Zuckerberg and Facebook leadership recognized as much, according to internal emails made public as part of the FTC lawsuit.
Facebook also recognized Instagram as a formidable challenger before it acquired the platform – Zuckerberg wrote in 2012 that it would be “really scary” for Facebook if Instagram remained a standalone competitor.
“It’s kind of ridiculous in and of itself that they bought Instagram in 2012 and now, eight years later, [regulators are] saying, ‘Oh, you shouldn’t have done that,'” Ari Lightman, professor of digital media at Carnegie Mellon and social media expert, told Business Insider.
But that doesn’t mean that investigators will get their way with a WhatsApp-Instagram spin-off.
Will anything change because of the lawsuit?
Experts say, not really.
Wall Street analysts told Business Insider’s Martin Coulter that the lawsuit might not actually have legs to hold up in court, and a spinoff of Instagram and WhatsApp is unlikely to happen, Lightman said.
“If you break them up now, are you going to give them a refund check?” Lightman said. There are so many integrated assets, from engineers and executives to user data, so the question is how does that even begin to be unraveled, according to Lightman.
Experts said what the lawsuit really represents is being part of a series of governmental actions signaling the broader consensus that the industry needs oversight.
“It’s time to take all of these companies seriously, both in terms of the incredible benefits they’ve provided to our economy, to the marketplace of ideas and to our personal lives, but also the problems that they pose for those same things,” Dinielli said.
And Lightman said “every acquisition they try to make from here on will be met with such a level of inspection and skepticism associated with it.” What Facebook needs is better legislation that applies to them specifically as internet platforms, according to Lightman.
He also said Facebook will spend “a lot of money, a lot of resources, a lot of time, a lot of energy fighting this thing,” leaving the door open for other competitors to catch up with their own innovations.
The lawsuits come after a tumultuous year for Facebook
Both the FTC’s suit and that filed by 48 attorneys general come on the heels of a rocky few months for Facebook, as a reckoning in tech looks to be on the horizon.
Antitrust scrutiny, accusations surrounding the proliferation of misinformation and hate speech on its platform, election interference, a vendetta against Republicans – it has not been smooth sailing for Facebook this year. Though its problems, of course, stretch back years, when the Cambridge Analytica scandal really kicked off a “techlash” against the company and its industry.
The House antitrust subcommittee has investigated Facebook, the Senate judiciary subcommittee is mulling over tweaking Section 230 protections, and a greater public discourse around tech regulation has taken hold as online consumers become more aware of the platforms they use every day.
“Running unregulated, unchecked, unsupervised – it’s great for growth in the early days, but now it doesn’t fit the model, and trying to use a blunt hammer, which is 120-year-old piece of legislation, is the wrong answer as well,” Lightman said.