48 AGs, FTC Sue Facebook, Alleging Illegal Power Grabs To 'Neutralize' Rivals
The state and federal officials say Facebook's acquisitions of WhatsApp and Instagram violated competition laws and served to stifle rivals by giving the social network an unfair advantage.
ARI SHAPIRO, HOST:
For years, Facebook has become bigger and more powerful, buying other tech companies along the way. And today, the social media giant got hit with a one-two punch - first, a lawsuit from 48 attorneys general across the country and then another lawsuit from the Federal Trade Commission. Both say Facebook has gone too far. NPR tech correspondent Shannon Bond joins us.
And we need to mention that Facebook is a financial supporter of NPR.
SHANNON BOND, BYLINE: Hi, Ari.
SHAPIRO: Walk us through the argument that these lawsuits are making.
BOND: Sure. So the FTC and these states have been investigating Facebook together, and the core accusation is the same in both suits. Here's what New York Attorney General Letitia James, who led the state's investigation, said at a press conference today.
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LETITIA JAMES: For nearly a decade, Facebook has used its dominance and monopoly power to crush smaller rivals and snuff out competition, all at the expense of everyday users.
BOND: So James described this strategy at Facebook of crushing the competition by buying or burying. So in the first case, you know, she says, Facebook spends huge amounts of money to buy companies that it sees as potential rivals. And the key companies at issue here are Instagram, which Facebook bought in 2012, and WhatsApp, which it bought a few years later. And those deals, you know, they really helped Facebook gain users, especially on smartphones, and become even more powerful. You know, today, more than 2 billion people use its apps every day.
SHAPIRO: So that's the buy part of the equation. What about the bury? How does James say Facebook crushed competitors?
BOND: Right. So for companies that rebuffed Facebook's offers to do a deal or that it didn't want to buy, prosecutors say Facebook lured them in - lured their developers in - with promises they could plug into its systems and access its data. And then they allege if those companies look like they might be a competitive threat, Facebook would pull the plug.
So as an example, you might remember Vine, the short video app. It was really popular. You could look on there and find your Facebook friends in the app until Facebook cut off that access. And what, you know, James and the FTC allege is that this buy or bury strategy, it not only harmed competitors, it also actually hurt social media users because they have less choice over what social networks to use.
SHAPIRO: So what are these lawsuits seeking? I mean, how do they propose to dismantle this, if that's actually what they want?
BOND: Well, among other things, both lawsuits have a really big ask. They're basically asking the courts to look at breaking up Facebook, forcing it to undo these purchases of Instagram and WhatsApp, which, of course, are its crown jewels. And you know, that's a really big ask. The attorney generals' suit also asked the court to block Facebook from making any new deals worth more than $10 million while this case is going on. And, you know, $10 million sounds like a lot of money, but that's not necessarily a lot for a tech company. So that could basically stop Facebook from buying almost, you know, anything that it might have its eye on while this is all happening.
SHAPIRO: Now, Facebook has been under this kind of criticism from Congress for a while, although these lawsuits are new. How does Facebook respond to to these critiques?
BOND: That's right. Well, Facebook says, you know, look, the FTC had a chance to raise concerns over the purchases of Instagram and WhatsApp back when they happened years ago, and it didn't do it. So Facebook is accusing the government of asking for a do-over. It says that's just not fair. It also says, you know, that Instagram and WhatsApp are so successful in large part because Facebook bought them and invested in them. And it says it's unfair to try to punish them for that success.
You know, Facebook also has pointed repeatedly to other competition it faces in social media. It says it's not the only player. Look at TikTok, which has gained lots of users. But you know, Ari, four years, these biggest tech companies, you know, they didn't receive a lot of scrutiny or regulation. That is really starting to change. Just in October, the U.S. Justice Department sued Google, alleging anti-competitive behaviour.
SHAPIRO: That's NPR tech correspondent Shannon Bond. Thank you.
BOND: Thank you. Transcript provided by NPR, Copyright NPR.