Sunday, September 26

What you should know about the antitrust case against Facebook

San Francisco (CNN Business) — The United States government has just opened another big front in technology investigations: an antitrust case against Facebook.

Facebook was hit with two lawsuits by the Federal Trade Commission and attorneys general from dozens of states on Wednesday, in one of the most serious challenges for the Silicon Valley giant. The cases could result in the division of Facebook.

This is what you should know.

What is Facebook accused of?

The FTC and the states accuse Facebook of abusing its dominance in the digital marketplace and engaging in anti-competitive behavior.

“Facebook’s actions to entrench and maintain its monopoly deny consumers the benefits of competition,” said Ian Conner, director of the FTC’s Office of Competition, in a statement. “Our goal is to roll back Facebook’s anti-competitive behavior so that innovation and free competition can flourish.”

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Will Facebook split over this antitrust case?

That is what the government and regulators want. Officials specifically call for two of the largest apps in Facebook’s social media empire to be split into separate companies.

The FTC is seeking a permanent injunction in federal court that could require Facebook to divest assets, including Instagram, which it bought for $ 1 billion in 2012, and WhatsApp, which it bought for $ 19 billion in 2014, effectively breaking Facebook as we know it.

The states are also calling for the dissolution of the company, if a court deems it “appropriate.”

However, there is no guarantee that it will happen. Facebook has vowed to “defend itself vigorously” in this antitrust case. And any decision about whether to break the company will likely take years to materialize.

Facebook antitrust case

What does Facebook say?

Facebook rejected the allegations made in the antitrust case, and its vice president and general counsel Jennifer Newstead criticized the FTC’s scrutiny of the WhatsApp and Instagram deals, given that the agency itself “authorized these acquisitions years ago.”

“The government now wants a restructuring, sending a chilling warning to US companies that no sale is final,” added Newstead.

Lawsuit in US demands that Facebook get rid of Instagram and WhatsApp 2:41

But former FTC Chairman William Kovacic told CNN Business that competition agencies have every right to change their mind about acquisitions later in light of new evidence.

Facebook, like its great technological rival Google, argues that people choose its services not because they have to, but because they want to. The social media company has honed its talking points as Washington’s scrutiny has increased, and settled on a narrative that Facebook welcomes regulation, but that cracking down could give other countries like China a competitive advantage in the fast-moving technology sector.

“We compete hard and compete fairly,” Zuckerberg said in an internal memo to employees shortly after the lawsuit was announced. “I’m proud of that.”

How do we get here?

The lawsuits in their current form have been in preparation for over a year.

New York Attorney General Letitia James announced last September that she was leading several of her counterparts in other states in the Facebook investigation for anti-competitive practices, an investigation 47 state attorneys general signed on to a month later. James said at the time that they were “concerned that Facebook may have put consumer data at risk, reduced the quality of consumer choices, and increased the price of advertising.”

Facebook CEO Mark Zuckerberg has been questioned multiple times in the months since then over allegations about his company’s anti-competitive behavior, including by lawmakers and, most recently, the FTC.

It’s not just Facebook. The US government has stepped up scrutiny of big tech companies and their power this year, and Zuckerberg appeared before Congress in July along with the CEOs of Google, Apple and Amazon.

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Google is already facing an antitrust lawsuit of its own, filed by the Justice Department in October.

What happens after the antitrust case?

In the short term, not much.

Antitrust cases, particularly those as important as the one against Facebook, often take years to resolve. One of the most prominent cases, the landmark lawsuit against Microsoft in 1998, took nearly two years to reach a verdict that the tech giant should separate.

MIRA: The US files antitrust lawsuits against Facebook

And that breakdown never really happened: Microsoft and the Justice Department reached an agreement in November 2001 that instead placed various restrictions on how the company sold and licensed its products.

In his internal memo, Zuckerberg tried to assure Facebook employees that nothing significant will change immediately on Wednesday. He said the company planned to fight the allegations in court and did not “anticipate any impact on teams or individual roles” in the short term.

“Today’s news is a step in a process that could take years to fully develop,” he added.

Brian Fung contributed to this report.

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