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FTC pushing Facebook to sell Intagram and WhatsApp before Court

The Federal Trade Commission today sued Facebook, alleging that the company is illegally maintaining its personal social networking monopoly through a years-long course of anticompetitive behavior, including: the purchases of Instagram and WhatsApp and imposing conditions against free competition on third-party software developers’ access to valuable interconnections to its platform.

The FTC is seeking with this judicial procedure a permanent injunction in Federal Court that could, among other things: require divestitures of assets, including Instagram and WhatsApp; prohibit Facebook from imposing anticompetitive conditions on software developers; and require Facebook to seek prior notice and approval for future mergers and acquisitions.

“Personal social networking is central to the lives of millions of Americans,” said Ian Conner, Director of the FTC’s Bureau of Competition. “Facebook’s actions to entrench and maintain its monopoly deny consumers the benefits of competition. Our aim is to roll back Facebook’s anticompetitive conduct and restore competition so that innovation and free competition can thrive.”

The complaint follows an investigation by the FTC’s Technology Enforcement Division, whose staff cooperated closely with a coalition of around 46 attorneys general accross the USA, under the coordination of the New York State Office of the Attorney General.

Despite this, the vote for the compalint against Facebook at FTC was narrow. Just 3 out of 5 commissioners voted yes. Commissioners Noah Joshua Phillips y Christine S. Wilson voted no.

Can’t overcome them?, buy them

The complaint alleges that Facebook executives, including CEO Mark Zuckerberg, quickly recognized that Instagram was a vibrant and innovative personal social network and an existential threat to Facebook’s monopoly power.

Facebook initially tried to compete with Instagram on the merits by improving its own offerings, but Facebook ultimately chose to buy Instagram rather than compete with it. Facebook’s acquisition of Instagram for $1 Bn in April 2012 allegedly both neutralizes the direct threat posed by Instagram and makes it more difficult for another personal social networking competitor to gain scale.

According to the complaint, Facebook perceived that “over-the-top” mobile messaging apps also presented a serious threat to Facebook’s monopoly power. In particular, the complaint alleges that Facebook’s leadership understood and feared that a successful mobile messaging app could enter the personal social networking market, either by adding new features or by spinning off a standalone personal social networking app.

By 2012, WhatsApp had emerged as the clear global “category leader” in mobile messaging. Again, according to the complaint, Facebook chose to buy an emerging threat rather than compete, and announced an agreement in February 2014 to acquire WhatsApp for $19 Bn.

Facebook’s acquisition of WhatsApp allegedly both neutralizes the prospect that WhatsApp itself might threaten Facebook’s personal social networking monopoly and ensures that any future threat will have a more difficult time gaining scale in mobile messaging.

Contract conditions against free competition

FTC sues facebook as well by anticompetitive platform conduct. The complaint also alleges that Facebook, over many years, has imposed anticompetitive conditions on third-party software developers’ access to valuable interconnections to its platform, such as the application programming interfaces (“APIs”) that allow the developers’ apps to interface with Facebook.

Facebook allegedly has made key APIs available to third-party applications only on the condition that they refrain from developing competing functionalities, and from connecting with or promoting other social networking services.

Facebook has enforced these policies by cutting off API access to blunt perceived competitive threats from rival personal social networking services, mobile messaging apps, and other apps with social functionalities and quotes under this case, the treatment aplied by facebook to Vine.

In 2013, Twitter launched the app Vine, which allowed users to shoot and share short video segments. In response, according to the complaint, Facebook shut down the API that would have allowed Vine to access friends via Facebook.

Image over the headline.- Facebook dislike. Image © Facebook. Rotation,© Eastwind.

Related Eastwind Marketing links:

Statement by FTC Bureau of Competition Director, Ian Conner, on the Facebook Enforcement Action (video)

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