Landmark antitrust trial could force Zuckerberg to sell Instagram

A pivotal antitrust trial concerning social media behemoth Meta began in Washington on Monday, addressing allegations that the tech giant illegally stifled competition. The Federal Trade Commission (FTC) contends that Meta, formerly known as Facebook, engaged in unlawful tactics by acquiring Instagram and WhatsApp, actions the agency argues were designed to eliminate emerging rivals in the social networking and messaging spheres. This landmark case could potentially reshape the landscape of the tech industry and force significant changes in Meta’s corporate structure.

Attorneys representing the Federal Trade Commission (FTC) asserted that Meta acted to squash burgeoning competitors by strategically purchasing Instagram and WhatsApp over a decade prior.

“They concluded that genuine competition was excessively challenging, opting instead to acquire rival entities rather than engage in head-to-head market rivalry,” stated FTC legal representative Daniel Matheson.

Conversely, Meta dismissed the FTC’s lawsuit, characterizing it as “misguided,” particularly given the agency’s prior review and approval of these very acquisitions.

Meta’s legal counsel, Mark Hansen, countered that the acquisitions of Instagram and WhatsApp were undertaken to “enhance and expand them in conjunction with Facebook.”

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A successful outcome for the FTC could mandate a corporate breakup for Meta, potentially compelling CEO Mark Zuckerberg to divest key assets.

This divestiture could involve the separation of the widely-used photo-sharing application Instagram and the popular messaging platform WhatsApp into independent companies.

The FTC posits that Meta overvalued Instagram at $1 billion in its 2012 acquisition and subsequently overpaid for WhatsApp at $19 billion two years later.

“The FTC’s central argument is that acquiring Instagram served as a method to neutralize a growing competitive threat to Facebook’s dominance,” explains Rebecca Haw Allensworth, a Vanderbilt Law School professor specializing in antitrust law.

Professor Allensworth suggests that statements made by Mr. Zuckerberg himself, particularly documented in emails, may constitute compelling evidence during the trial proceedings.

“His own words indicated a preference for acquisition over competition. Such direct language is highly impactful,” Allensworth commented.

During opening statements, Matheson highlighted a 2012 internal memo from Zuckerberg discussing the necessity of “neutralizing” Instagram, which Matheson presented as “clear-cut proof.”

Meta, on the other hand, maintained that these acquisitions ultimately led to an improved user experience.

Hansen argued that “acquisitions aimed at improvement and expansion” have never been deemed illegal and “should not be considered unlawful in this instance.”

Meta contends that it faces considerable competition from various other platforms, citing TikTok, X, YouTube, and iMessage as examples.

Both Mark Zuckerberg and Meta’s former Chief Operating Officer, Sheryl Sandberg, are expected to provide testimony during the trial, which is anticipated to last for several weeks.

The lawsuit, officially titled FTC v Meta, originated during the administration of former US President Donald Trump. However, it now faces potential politicization amidst his renewed political prominence.

Reports indicate that Mr. Zuckerberg directly lobbied Trump to dismiss the FTC case, as reported by the Wall Street Journal.

When questioned by the BBC about these reports, Meta avoided direct confirmation but released a statement asserting, “The FTC’s legal actions against Meta defy reality.”

A Meta spokesperson further elaborated to the BBC, stating, “More than a decade after the FTC thoroughly reviewed and cleared our acquisitions, the commission’s current stance sends a concerning signal that no business deal is ever truly definitive.”

Previously, relations between Zuckerberg and Trump were strained, particularly following Trump’s ban from Meta’s social media platforms after the events at the US Capitol in January 2021.

Subsequently, their relationship has become less adversarial.

Meta contributed $1 million to Trump’s inauguration fund and has recently appointed former Trump advisor Dina Powell McCormick, along with Dana White, head of the Ultimate Fighting Championship and a known Trump supporter, to Meta’s board of directors this year.

Furthermore, Meta announced in January the discontinuation of its independent fact-checking program and reached a $25 million settlement with Trump regarding the suspension of his accounts following the January 6th Capitol riots in 2021.

President Trump’s decision to dismiss two FTC commissioners in March adds another layer of complexity to the proceedings.

Rebecca Kelly Slaughter and Alvaro Bedoya, both Democrats, represented the minority on the five-member commission.

Until recently, only two positions on the commission were filled, both by Republicans. However, a further Republican appointee was confirmed by the Senate on Thursday.

Slaughter and Bedoya, who are contesting their removal in court by suing the Trump administration, argue that their dismissal was intended as an act of intimidation.

“The president conveyed a very explicit message, not only to us but also to Chairman Ferguson and Commissioner [Melissa] Holyoak, indicating potential repercussions if they acted contrary to his preferences,” Slaughter stated in a recent interview with the BBC.

“Consequently, if they are disinclined to accommodate his political allies, their positions could also be at risk,” Slaughter added.

Both Slaughter and Bedoya voiced apprehension regarding recent reports detailing Zuckerberg’s lobbying endeavors.

“My sincere hope is that political interference is absent from this process,” Mr. Bedoya conveyed to the BBC.

The FTC has not provided comments when approached by the BBC for a statement.

Ferguson, appointed as FTC chair by Trump, recently indicated to The Verge that he would “comply with lawful directives” when questioned about his response if the president instructed him to drop the Meta lawsuit.

However, Ferguson expressed considerable skepticism that such a scenario would ever materialize.

The FTC is recognized as a crucial antitrust enforcement body. In recent years, it has facilitated the return of hundreds of millions of dollars to fraud victims, alongside enacting regulations to prohibit hidden fees and deceptive subscription practices.

As the Meta trial commences, it occurs amidst a broader context of numerous independent regulatory agencies facing increased pressure from the current administration.

Chair Ferguson has also recently been quoted reiterating his viewpoint that independent regulatory bodies are “detrimental to democracy.”

The commencement of FTC v Meta coincides with another significant antitrust case, USA v Google, progressing into the remedies phase.

The Department of Justice achieved a victory in the initial phase of the Google case last summer, with Judge Amit Mehta ruling that Google possesses a monopoly in online search, commanding approximately 90% of market share.

Last month, the DOJ reaffirmed its demand from the Biden administration, urging the court to dismantle Google’s search monopoly.

Experts suggest the FTC’s case against Meta presents a more formidable challenge, according to Laura Phillips-Sawyer, a business law professor at the University of Georgia.

“I believe the FTC faces a genuinely uphill battle in this instance,” Ms. Phillips-Sawyer commented.

“They have a considerable distance to traverse before the divestiture of Instagram or WhatsApp becomes a realistic consideration.”

This is primarily attributed to the amplified competition within the personal network service sector, in which Meta operates, in contrast to the online search market, Ms. Phillips-Sawyer elaborated.