Vidostream | News, sport and opinion from the Vidostream's US Edition

https://vidostream.com

U.S. Prepares to Challenge Meta’s Social Media Dominance

On Monday, Meta will face off against the federal government in a landmark antitrust trial over claims that it illegally squashed competition by buying Instagram and WhatsApp.

The outcome of the trial could drastically reshape the way consumers share information online.Credit...Jason Henry for The New York Times

The outcome of the trial could drastically reshape the way consumers share information online.Credit...Jason Henry for The New York Times

Soon after Mark Zuckerberg co-founded Facebook in his Harvard dorm room in 2004, the social network skyrocketed in popularity. Roughly a decade later, the company experienced another round of explosive growth after buying its smaller rivals Instagram and WhatsApp, cementing its place in social media.

On Monday, Judge James Boasberg of the U.S. District Court for the District of Columbia will begin considering a landmark monopoly case involving the company — now called Meta — that hinges on a novel legal question: Did it break the law to stay dominant by acquiring the start-ups that stood in its way?

The case — Federal Trade Commission v. Meta Platforms — will for the first time try to stretch theories of U.S. antitrust law to include what regulators are calling a “buy or bury” strategy. Meta broke the law by acquiring nascent competitors to maintain its monopoly in social networking, the F.T.C. argues. Regulators are seeking to force Meta to divest Instagram and WhatsApp.

Meta has countered that it faces ample competition in social media from TikTok, Snap, Reddit and LinkedIn, and that regulators approved the acquisitions at the time. The company also hasn’t given up on settling the case: Early this month, Mr. Zuckerberg was at the White House to try to persuade the Trump administration to avert a trial.

The outcome of what is expected to be a multiweek trial, the first major tech case prosecuted by the Trump administration, could reshape the U.S. antitrust landscape as companies face intense scrutiny over mergers and acquisitions. A government victory could also have ripple effects for Silicon Valley, where start-ups bank on lucrative acquisitions by bigger companies for payouts.

Still, the F.T.C. faces an uphill battle to prove its case, legal experts said. The government’s legal argument hinges on showing that Meta would not be as dominant, and would not have stayed as dominant, if it hadn’t acquired Instagram and WhatsApp — a hypothetical situation that is difficult to prove because many factors have played into the company’s growth.

“This is a critical test case for whether the antitrust laws can be used to unwind mergers designed to eliminate upstart competition,” said Gene Kimmelman, a former senior official in the antitrust division of the Department of Justice. “A win for the government would give consumers more choices and opportunities to switch across social media platforms without having to be on Facebook.”

 

Mark Zuckerberg sits at a table before a microphone.
Meta’s chief executive, Mark Zuckerberg, is expected to testify during the trial.Credit...Kenny Holston/The New York Times

 

The lawsuit has bipartisan support and is part of the most aggressive trustbusting effort by federal regulators since the Gilded Age, with Google, Meta, Amazon and Apple facing questions over their power to control the ways consumers shop, find information and communicate.

The Justice Department last year won an antitrust suit against Google for monopolizing internet search, and a trial to determine how to remedy that monopoly is slated to start on April 21. Google is also awaiting a judge’s decision in a separate trial over claims that it illegally squashed competition in the ad tech market.

The D.O.J. has also sued Apple over claims that its tightly knit system of devices and software makes it challenging for consumers to leave. And the F.T.C. has sued Amazon, accusing it of illegally protecting a monopoly in online retail. Those cases are expected to go to trial next year.

The tech industry is closely watching the Meta trial, one of the first major signals of how aggressively President Trump may rein in the most powerful tech companies. The case originated under his first administration, before a handoff in 2021 to the F.T.C. chair Lina Khan, a Biden appointee who drew attention for her quest to break up tech monopolies.

Now Andrew Ferguson, Mr. Trump’s choice to lead the agency, has taken the baton. He has warned against concentrated power held by Meta. He is also motivated by a shared Republican view that tech platforms have censored content, particularly conservative voices.

“We don’t intend to take our foot off the gas,” Mr. Ferguson said in an interview last month with Bloomberg.

For Meta, even the idea of hiving off Instagram and WhatsApp is alarming. The company bought Instagram for $1 billion in 2012 and WhatsApp for $19 billion in 2014. At the time of the deals, the apps were small — Instagram had just 30 million users and 13 employees, while WhatsApp had 450 million users and 50 employees. Since then, both have become critical to Meta, with faster growth and engagement by users than Facebook.

The trial is expected to feature about seven hours of testimony from Mr. Zuckerberg, who will be a star witness, along with Meta’s former chief operating officer, Sheryl Sandberg, and the founders of Instagram and WhatsApp.

Meta has an army of the most expensive and experienced litigators arguing its defense, led by Mark C. Hansen, a partner at Kellogg, Hansen, Todd, Figel & Frederick. Meta plans to argue that the fast rise of the video-sharing site TikTok, in particular, shows healthy competition in the market.

“We are confident that the evidence at trial will show that the acquisitions of Instagram and WhatsApp have been good for competition and consumers,” said Chris Sgro, a spokesman for Meta. “The commission is wrongly continuing to assert that no deal is ever truly final, and businesses can be punished for innovating.”

The F.T.C. first sued Meta in December 2020, alongside a similar suit brought by 46 states. The agency’s legal argument hinges on Section 2 of the Sherman Antitrust Act of 1890, which specifies that it is illegal to maintain a monopoly by using anticompetitive practices — in this case, acquiring companies at a premium as a strategy to eliminate them as competitors.

To support its case, the F.T.C. plans to present a 2008 email from Mr. Zuckerberg saying, “It is better to buy than compete” and a 2012 memo he wrote saying that his motivation for buying Instagram was “neutral[izing] a potential competitor.”

Judge Boasberg, who has been locked in a contentious court battle with the Trump administration over its use of a powerful wartime statute to summarily deport Venezuelan migrants, will decide the case. During a recent pretrial tutorial, the judge said he had never had a personal Facebook or Instagram account.

Judge Boasberg rejected the F.T.C.’s initial case in June 2021, saying the agency needed to provide stronger definitions for the social media market and how Meta had come to monopolize it. He accepted a refiled version of the case in January 2022, but cautioned that it was far from a slam dunk.

In a ruling against Meta’s motion to dismiss the case last year, Judge Boasberg said the F.T.C. “faces hard questions about whether its claims can hold up in the crucible of trial.”

“Indeed, its positions at times strain this country’s creaking antitrust precedents to their limits,” he added.

Legal experts say the case will be challenging to prove because it hinges on determining intentions by executives more than a decade ago, during a very different internet age. The deals were approved by regulators at the time, and years of integration between the apps mean they share many of the same internal systems and data — making a breakup challenging.

“It’s asking a judge to decide if Meta tried to kill competition or got lucky and made a good bet,” said Jennifer Huddleston, a senior fellow at the Cato Institute, a think tank. “It’s assuming a counterfactual we can’t know.”

Author: Cecilia Kang Cecilia Kang, who reports on tech policy, has covered Facebook since it was created

Source: N.Y Times

We are using cookies to give you the best experience on our website. By continuing to browse, you are agreeing to our Cookie Policy.
You did not use the site, Click here to remain logged. Timeout: 60 second