Michigan joins FTC and dozens of states sue to break up Facebook

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FILE- In this Aug. 6, 2020 file photo, New York State Attorney General Letitia James takes a question at a news conference in New York. Federal regulators and a group of states launched a landmark antitrust offensive against Facebook, accusing the social network of abusing its market power in social networking to crush smaller competitors. “It’s really critically important that we block this predatory acquisition of companies and that we restore confidence to the market,” said James during a press conference announcing the lawsuit. (AP Photo/Kathy Willens, File)

WASHINGTON (AP) — Federal regulators asked Wednesday for Facebook to be ordered to divest its Instagram and WhatsApp messaging services as the U.S. government and 48 states and districts accused the company of abusing its market power in social networking to crush smaller competitors

Michigan Attorney General Dana Nessel issued the following statement on the lawsuit:

“Facebook’s power as a monopoly has been solidified through its methodical erosion of any and all viable competition in this arena,” Nessel said. “My colleagues and I seek to protect consumers and their data by ending Facebook’s illegal, anticompetitive conduct and prevent this type of predatory behavior in the future.” 

Since 2004, Facebook has operated as a personal social networking service that facilitates sharing content online without charging users a monetary fee, but, instead, provides these services in exchange for a user’s time, attention, and – most critically – personal data. Facebook then monetizes its business by selling the vast treasure trove of personal data collected from unwitting users to companies seeking to advertise to Facebook’s massive userbase with personalized messaging.  

To maintain its market dominance in social networking, Facebook employs a variety of methods to impede competing services and — as Chairman, Chief Executive Officer, and controlling shareholder Mark Zuckerberg has stated — to “build a competitive moat” around the company and “neutralize a competitor.” The two most used strategies have been to acquire smaller rivals and potential rivals before they could threaten Facebook’s dominance and to suffocate and squash third-party developers that Facebook invited to use its platform — allowing Facebook to maintain its monopoly over the social networking market and make billions from advertising. As one market participant noted, if an application (mobile app) encroached on Facebook’s turf and didn’t consider selling, Zuckerberg would go into “destroy mode,” subjecting small businesses to the “wrath of Mark.” 

Michigan Attorney General Dana Nessel

The antitrust lawsuits were announced by the Federal Trade Commission and New York Attorney General Letitia James.

“It’s really critically important that we block this predatory acquisition of companies and that we restore confidence to the market,” James said during a press conference announcing the lawsuit.

In its lawsuit, the FTC is seeking the separation of the services from Facebook, saying Facebook has engaged in a “a systematic strategy” to eliminate its competition, including by purchasing smaller up-and-coming rivals like Instagram in 2012 and WhatsApp in 2014. James echoed that in her press conference, saying Facebook “used its monopoly power to crush smaller rivals and snuff out competition, all at the expense of everyday users.”

Facebook is the world’s biggest social network with 2.7 billion users and a company with a market value of nearly $800 billion whose CEO Mark Zuckerberg is the world’s fifth-richest individual and the most public face of Big Tech swagger. Facebook did not have immediate comment.

James alleged Facebook had a practice of opening its site to third-party app developers, then abruptly cutting off developers that it saw as a threat. The lawsuit — which includes 46 states, Guam and the District of Columbia — accuses Facebook of anti-competitive conduct and using its market dominance to harvest consumer data and reap a fortune in advertising revenues.

“For years, Facebook has used its monopoly power as a social networking website to stifle competition and innovation and to sell alarming amounts of user data to make money, all at the expense of the many people who use its platform,” North Carolina Attorney General Josh Stein, who was on the executive committee of attorneys general conducting the investigation, said in a news release.

James said the coalition worked collaboratively with the FTC but noted the attorneys general conducted their investigation separately. The are confident they will succeed, James said, pointing to previous break-up actions, such as AT&T, as possible precedent.

Facebook paid $1 billion for Instagram, bolstering the social networking platform’s portfolio a month before its stock went public. At the time, the photo-sharing app had about 30 million users and wasn’t producing any revenue. Zuckerberg vowed both companies would be run independently, but over the years the services have become increasingly integrated with users able to link accounts and share content across the platforms. Instagram now has more than 1 billion users worldwide. Facebook acquired WhatsApp, an encrypted messaging service, for $19 billion.

Facebook has started to integrate Instagram and WhatsApp, most recently by linking the apps’ chat functions with its Messenger service. Such integration could make it more difficult — if not impossible — to break off the companies.

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