Is this break-up time for Facebook?

Facebook is facing another wave of antitrust action in the US that could result in its forced break-up. Two new cases have been brought against the social media giant, one by the Federal Trade Commission and the other by a group of 46 states and two jurisdictions lead by New York Attorney-General, Letitia James.

Both cases allege that Facebook wields monopoly power and uses this power to stifle competition. The FTC accused the company of “maintaining its personal social networking monopoly through a years-long course of anti-competitive conduct”. The states’ case was even more aggressive arguing “Facebook illegally maintains […] monopoly power buy-or-bury strategy that thwarts competition and harms both users and advertisers”.

Both cases single out two practises by Facebook for particular criticism. The first is acquisition of companies that could prove potential competitors – Instagram in 2012 and WhatsApp in 2014 – in order to preserve its dominance.

Indeed, emails obtained by the Congress’ House Judiciary Committee’s antitrust committee showed that Mark Zuckerberg, Facebook’s founder and CEO, explicitly viewed buying-out rivals as a way to neutralise them. As Zuckerberg flatly stated in one email in 2012 “Instagram can hurt us”. Later that year, in an email sent not long after acquiring Instagram, Zuckerberg observed “One thing about startups is that you can often acquire them.”

The second set of allegations claims that Facebook imposed anti-competitive condition on third-party software developers. In particular, it is alleged that Facebook stopped third-party developers from using applications programming interfaces (APIs) needed to allow apps to interface with Facebook unless these third-party developers promised not to develop apps that competed with Facebook and not to work with other social media companies.

Vitally, the cases make a strong link between Facebook’s growing size and its adoption of anti-competitive and anti-consumer practises. In particular the states’ case makes strong claims that Facebook’s early growth relied heavily on third-party developers apps and promises of better privacy protections than its competitors, but that these practises were ditched once Facebook had attained market dominance.

If Facebook loses the cases the consequences could be huge. The most dramatic sanction courts might levy would be forcing the company to sell off key assets like Instagram and WhatsApp. Additionally, courts could ban Facebook from imposing anticompetitive conditions on software developers and require government approval for all future Facebook acquisitions.

So, just how likely is it that Facebook will be put on the rack?

Jonathan Compton, a specialist in antitrust law at City law firm,  DMH Stallard, said the action by the FTC “is more serious, many argue, than any action hitherto brought against this giant of the tech industries.”  Compton adds that the mood in the US has hardened against Big Tech. In July this year ,Congress’ House Judiciary Committee’s antitrust panel put four key Big Tech players – Facebook, Google, Amazon, and Apple – on the rack summoning their CEOs to face aggressive cross-examination as the culmination of a months long inquiry.

The subsequent report by the committee was scathing. It not only concluded that these companies did indeed wield “monopoly power” but also declared “These firms have too much power, and that power must be reined in and subject to appropriate oversight and enforcement, our economy and democracy are at stake.”

Indeed, in an age of vicious partisan division a dislike of Big Tech is one of the few things Republicans and Democrats seem to agree on. Accusations of unethical, or even illegal, business practises are supplemented by political concerns. Facebook is accused by Democrats of churning out disinformation and by Republicans of censoring conservative voices.

Nor can the incoming Joe Biden administration be expected to ignore these calls to control Facebook. As Biden continues to raise money for his inauguration he has refused money only from companies connected to fossil fuels and Facebook. This is a far cry from a little over four years ago when Hillary Clinton contemplating her Cabinet choices hubristically was reportedly considering Sheryl Sandberg, Facebook’s Chief Operating Officer.