Meta has prevailed over an existential challenge to its business that could have forced the tech giant to spin off Instagram and WhatsApp after a judge ruled that the company does not hold a monopoly in social networking.
TL;DR
- Meta has won a major antitrust case, avoiding a potential breakup of Instagram and WhatsApp.
- A judge ruled Meta does not hold a monopoly in social networking, despite FTC claims.
- The social media landscape has significantly changed, with TikTok now a fierce rival.
- The FTC failed to prove Meta currently holds monopoly power in the evolving market.
On Tuesday, U.S. District Judge James Boasberg released his judgment, concluding the significant antitrust trial that finished in late May. This ruling comes after two prior decisions that labeled Google as an illegal monopoly in both search and online advertising, delivering another regulatory setback to the technology sector, which had experienced largely unrestricted expansion for many years.
The Federal Trade Commission “continues to insist that Meta competes with the same old rivals it has for the last decade, that the company holds a monopoly among that small set, and that it maintained that monopoly through anticompetitive acquisitions,” Boasberg wrote in his ruling. “Whether or not Meta enjoyed monopoly power in the past, though, the agency must show that it continues to hold such power now. The Court’s verdict today determines that the FTC has not done so.”
According to Meta, the FTC contended that the company, under CEO Mark Zuckerberg's direction, has preserved its dominant market position, “expressed in 2008: ‘It is better to buy than compete.’ True to that maxim, Facebook has systematically tracked potential rivals and acquired companies that it viewed as serious competitive threats.”
In his testimony during April, Zuckerberg disputed the FTC's assertion that Facebook acquired Instagram to eliminate a competitive risk. Throughout his examination, FTC lawyer Daniel Matheson frequently referenced correspondence, much of it over ten years old, exchanged by Zuckerberg and his colleagues both prior to and following Instagram's purchase.
Zuckerberg, while recognizing the existence of the documents, has frequently attempted to minimize their significance, stating that he drafted them during the initial phases of contemplating the purchase and that his writings then did not fully represent the extent of his interest in the firm.
The FTC’s complaint said Facebook also enacted policies designed to make it difficult for smaller rivals to enter the market and “neutralize perceived competitive threats,” just as the world shifted its attention to mobile devices from desktop computers.
Boasberg noted that the social media environment has transformed significantly since the FTC initiated its lawsuit in 2020, to the point where Meta's applications and competitive strategies evolved with each judicial review. Notably, two motions to dismiss the lawsuit, submitted in 2021 and 2022, failed to acknowledge the widely used social video service, TikTok. Currently, it “holds center stage as Meta’s fiercest rival.”
Quoting the Greek philosopher Heraclitus, “that no man can ever step into the same river twice,” Boasberg said the same is true for the online world of social media as well.
“The landscape that existed only five years ago when the Federal Trade Commission brought this antitrust suit has changed markedly. While it once might have made sense to partition apps into separate markets of social networking and social media, that wall has since broken down,” he wrote.
In 2012, Facebook acquired Instagram, which was then a fledgling photo-sharing application with no advertisements and a devoted, albeit small, user base. The acquisition cost of $1 billion in cash and stock was considered astonishing then, though its worth decreased to $750 million after Facebook's stock value declined subsequent to its public debut in May 2012.
Instagram was the first company Facebook bought and kept running as a separate app. Up until then, Facebook was known for smaller “acqui-hires” — a type of popular Silicon Valley deal in which a company purchases a startup as a way to hire its talented workers, then shuts the acquired company down. Two years later, it did it again with the messaging app WhatsApp, which it purchased for $22 billion.
Facebook's acquisition of WhatsApp and Instagram was instrumental in its transition from desktop to mobile platforms, helping it retain relevance among younger users amidst the rise of competitors such as Snapchat and TikTok, despite Facebook's unsuccessful attempt to acquire Snapchat. Nevertheless, the FTC's restricted view of Meta's competitive landscape does not classify companies like TikTok, YouTube, or Apple's messaging service as direct competitors to Instagram and WhatsApp.
Meta did not immediately respond to a message for comment.