Four small startups are suing Facebook on antitrust grounds, claiming its acquisition strategy and impending integration plans strangle independent competition. It adds to an onslaught of such lawsuits and investigations facing the company.
The four complainants are Circl, an online marketplace and social network; Beehive Biometric, an identity-verification firm; Reveal Chat, a chat app; and Lenddo, a financial-services provider. In their suit filed yesterday in San Francisco, the group demands that Facebook CEO Mark Zuckerberg divest his majority control over the company, saying he has been a driving force behind Facebook’s anti-competitive strategy.
Combining its apps will make Facebook unstoppable — The crux of their argument is that by acquiring and integrating major messaging apps including WhatsApp and Instagram, consumers will be overwhelmingly incentivized to choose those apps over independent alternatives. Zuckerberg has said he wants users across Facebook’s various apps to be able to communicate with one another cross-app, meaning a WhatsApp user could message an Instagram user without switching apps. Doing so would add convenience and ensure all the conversations are encrypted.
It would also make it harder to break up Facebook.
"The integration, if completed, will not only substantially lessen competition, it may allow Facebook to destroy it — for a very long time," the lawsuit said.
Instagram, WhatsApp, and Facebook Messenger each have over 1 billion monthly active users (though there’s certainly some overlap), meaning that, if integrated, any consumer who chooses a Facebook-affiliated product will be able to reach a lot more of their friends, versus if they were to use a more obscure product like Telegram.
The feds are circling Facebook for the same reasons — The FTC is reportedly considering filing an injunction against Facebook temporarily blocking the integration on these very grounds. If it were to do so, Facebook would have to head to court and argue that its behavior doesn’t harm competition. The company has said that WhatsApp and Instagram wouldn’t be where they are today without Facebook’s resources, and that consumers in fact get a better experience thanks to Facebook. However, it’s been widely reported that Facebook acquired WhatsApp after it discovered the app was sending twice as many messages per day as Messenger, which undercuts the idea that it wouldn’t be doing well today.
"Facebook faced an existential threat from mobile apps,” said Yavar Bathaee, a lawyer representing the complainants, “and while it could have responded by competing on the merits, it instead chose to use its might to intentionally eliminate its competition.”
Facebook is in familiar company with other tech giants like Google, which has faced antitrust cases over its dominance in search and mobile operating systems.
The FTC's case may also set up a challenge of the woefully outdated anti-trust precedent, which currently finds that consumers have to be financially harmed in order for there to be a monopoly case. Facebook doesn't directly charge for use of its apps, but by crushing competiton it may be hindering innovation. Some believe Facebook handicapped Snapchat's potential by copying Stories into Instagram, thereby pushing it into markets Snapchat hadn't yet entered.