46 states and FTC file antitrust lawsuits against Facebook

Forty-six state attorneys general and the Federal Trade Commission (FTC) on Wednesday filed lawsuits against Facebook, accusing the social media giant of anti-competitive acquisitions.

The lawsuit from states — led by New York’s Letitia James (D) — alleges Facebook sought to maintain its monopoly power by acquiring potential rivals, including WhatsApp and Instagram, and that it has stifled innovation by cutting off platform services to competitors. The attorneys general from 45 other states plus D.C. and the territory of Guam joined in the lawsuit.

Alabama, Georgia, South Carolina and South Dakota were not involved with the lawsuit.

The legal action by such a broad coalition puts Facebook firmly in the antitrust hot seat following similar bipartisan criticisms from lawmakers in Congress.

“For nearly a decade, Facebook has used its dominance and monopoly power to crush smaller rivals and snuff out competition, all at the expense of everyday users,” James said in a statement. “Today, we are taking action to stand up for the millions of consumers and many small businesses that have been harmed by Facebook’s illegal behavior.”

The lawsuit seeks relief that includes the potential unwinding of Facebook’s purchases of WhatsApp and Instagram, moves that could lead to the first court-ordered breakup of a major U.S. company in years.

Facebook has emphasized that both acquisitions were approved by regulators at the time.

“This is revisionist history,” Jennifer Newstead, Facebook’s vice president and general counsel, said in a statement Wednesday afternoon. “Antitrust laws exist to protect consumers and promote innovation, not to punish successful businesses.”

“The government now wants a do-over, sending a chilling warning to American business that no sale is ever final. People and small businesses don’t choose to use Facebook’s free services and advertising because they have to, they use them because our apps and services deliver the most value. We are going to vigorously defend people’s ability to continue making that choice,” Newstead added.

The FTC alleges Facebook is illegally maintaining a monopoly and calls for the divestiture of Instagram and WhatsApp.

“Personal social networking is central to the lives of millions of Americans,” Ian Conner, director of the FTC’s Bureau of Competition, said in a statement Wednesday. “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 five-member agency voted 3-2 to proceed with the lawsuit against Facebook, with GOP commissioners Noah Joshua Phillips and Christine S. Wilson voting no. Chairman Joseph Simons, a Republican, voted with the commission’s two Democrats to proceed.

The FTC in 2019 settled with Facebook for $5 billion in a case centered on reports that that data from tens of millions of users was shared with the firm Cambridge Analytica.

In addition to seeking to force Facebook to divest Instagram and WhatsApp, the FTC and states are calling for restrictions on any future deals involving Facebook.

The FTC wants a permanent injunction in court that would prohibit Facebook from imposing anti-competitive conditions on software developers and would require Facebook to seek prior notice and approval for mergers and acquisitions.

The attorneys general are asking the court to stop Facebook from making further acquisitions valued at or in excess of $10 million without advance notice to the 46 states that filed the complaint.

The lawsuits filed Wednesday add to a growing number of legal challenges against Silicon Valley’s biggest companies.

The Justice Department and 11 state attorneys general charged Google in October with illegally maintaining a monopoly on search and search advertising. Google rejected the case’s claims as “deeply flawed.”

Democrats on the House Judiciary Committee’s antitrust panel released a report this fall accusing Facebook, Amazon, Apple and Google of illegally stifling competition.

That report unearthed emails showing senior Facebook employees, including CEO Mark Zuckerberg, describing acquiring Instagram in 2012 as a way to neutralize a competitive threat. It also uncovered an internal memo from October 2018 claiming Facebook faced more competition within its own products — Facebook, Instagram, WhatsApp and Messenger — than externally.

Rep. David Cicilline (D-R.I.), who spearheaded the report, praised Wednesday’s lawsuits.

“Facebook has broken the law. It must be broken up,” he said in a statement. “I applaud the FTC and state attorneys general who are leading this effort today. This marks a major step in our ongoing work to bring the tech industry’s monopoly moment to an end.”

Sen. Amy Klobuchar (D-Minn.), the ranking member on the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights, also lauded the lawsuits.

“Big technology companies like Facebook should not have free reign to impose their will on the market, and they must be held accountable when they attempt to do so. I’m glad the FTC and state enforcers are taking action to stop Facebook’s anti-competitive behavior,” Klobuchar said in a statement.

Updated on Dec. 10 at 11:56 a.m.