DOJ Antitrust Lawsuit Against Facebook No Slam Dunk
A 14-page report Facebook lawyers prepared in advance of a potential antitrust lawsuit from the government found such action would hurt users, be contrary to established law and cost billions of dollars, WSJ reported after seeing the document.
Facebook bought Instagram, the photo- and video-sharing social networking service, in 2012 for $1 billion and WhatsApp, the cross-platform messaging service, in 2014 for $19 billion.
While the transactions were approved by regulators, some Capitol Hill lawmakers have raised antitrust concerns and urged the Federal Trade Commission (FTC) to break up the company and its subsidiaries.
The document was prepared by Facebook staff based on work it commissioned from lawyers at Sidley Austin, a Chicago-based law firm, and reviewed by WSJ. It offers a glimpse into how the Menlo Park, California-based social media conglomerate will defend itself against federal antitrust prosecutors and members of Congress about its power and competitive behavior.
The report said separating the two apps from Facebook would be nearly impossible to achieve, cost billions, weaken security of the services and harm users’ experience.
“A ‘breakup’ of Facebook is thus a complete nonstarter,” the document stated, according to WSJ.
But Tim Wu, a Columbia University law professor who has said Facebook should be broken up, told WSJ that Facebook’s insistence that the government’s approvals of the acquisitions in the past should limit action in federal court today is “surprisingly weak.”
He said the DOJ lawsuit would probably rely on the argument that Facebook made these acquisitions to reduce competition. That’s a question that wasn’t considered when the FTC chose not to oppose the Instagram and WhatsApp deals, he said, according to WSJ.
Wu also noted the fact that it would be difficult and expensive to break up the company’s divisions would not carry any weight in a courtroom.
“There is no ‘it’s too hard’ defense,'” Wu told WSJ
Facebook declined to discuss the information. The FTC didn’t immediately respond to a WSJ request for comment.
In July, Facebook CEO Mark Zuckerberg defended the acquisition of Instagram to the House Judiciary Subcommittee on Antitrust, Commercial and Administrative Law. He said it was a natural extension of its global social media business and not an attempt to remove a potential competitor from the marketplace.
“It was not a guarantee that Instagram was going to succeed,” Zuckerberg said. “In hindsight, it looks obvious that Instagram reached the scale it has, [but] at the time, it was far from obvious.”