December 10, 2020
WASHINGTON (Reuters) – Facebook, faced with two major antitrust lawsuits, could be forced to breakup, settle with changes to its business, or it could prove its government challengers wrong and win in court, antitrust experts said.
The Federal Trade Commission and a major coalition of states are asking that Facebook be forced to sell WhatsApp and Instagram, saying it used a “buy or bury” strategy to snap up rivals and keep smaller competitors at bay.
THE FTC AND STATES WIN
If the government wins, the judge could rule Facebook must divest its photo sharing app Instagram and messaging app WhatsApp.
“At first blush, it’s a very strong case on the merits. The remedy is tough, because breakup is an unusual remedy, but it certainly may be merited here,” said Sam Weinstein, who teaches at Cardozo Law.
While a “breakup remedy” is rare, Weinstein said, “this is a case where it’s possible, I’d say, and maybe even likely.” He noted the Facebook case contained damning evidence from the company’s own documents, unlike the Justice Department’s lawsuit against Google.
Although breakup is not common, even on a small scale, in 2014 the Justice Department sued BazaarVoice after it bought PowerReviews and forced the deal between the consumer review sites to be undone. Most famously it forced the breakup of the telephone company ATT in 1982.
President-elect Joe Biden’s incoming administration, which did not respond to a request for comment, would also likely support the lawsuit. FTC commissioners voted 3-2 to file its lawsuit with two of the three votes in favor coming from Democrats.
A FACEBOOK WIN
One difficulty the FTC will face is that it cleared Facebook’s purchase of Instagram in 2012 and WhatsApp in 2014 — a point Facebook made in its response https://about.fb.com/news/2020/12/lawsuits-filed-by-the-ftc-and-state-attorneys-general-are-revisionist-history to the lawsuits.
“It’s very difficult to unwind a consummated merger that’s been in place for years,” said Seth Bloom of Bloom Strategic Counsel. “A court would be very reluctant to unwind the merger.”
Further, Bloom said the argument in the complaint that Facebook required software developers on its platform to refrain from competing with Facebook was potentially outdated and certainly easy to resolve.
The complaint said: “Specifically, between 2011 and 2018, Facebook made Facebook Platform, including certain commercially significant APIs, available to developers only on the condition that their apps neither competed with Facebook … nor promoted competitors.”
In a blog post, Facebook argued that the restrictions were standard in the industry.
“Companies are allowed to choose their business partners, and it gives platforms comfort that they can open access to other developers without that access being exploited unfairly,” wrote Facebook General Counsel Jennifer Newstead.
Facebook also believes it can prevail in court.
Newstead said the company continues “to operate in a highly competitive space.
“We look forward to our day in court, when we’re confident the evidence will show that Facebook, Instagram and WhatsApp belong together, competing on the merits with great products,” she said.
WILL THE TWO SIDES SETTLE?
With no criminal charges in the lawsuit there is no incentive for Facebook to cut a deal, argues George Hay, who teaches antitrust at Cornell University law school. He also predicted the case would take years of litigation.
“It’s not an obvious winner,” he said of the government’s arguments. “Everything that Facebook does is out in the open and it’s been out in the open for 15 years. They’ve never done anything without consulting with teams of antitrust lawyers.”
Still, Facebook agreed last year to pay $5 billion to resolve an FTC investigation into its privacy practices.
(Reporting by Diane Bartz and Katie Paul; Editing by Aurora Ellis)
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