Q&A: What's next for Facebook in the antitrust case?
Could Facebook be forced to spin off WhatsApp and Instagram? That’s what the U.S. government is seeking in a long-awaited antitrust lawsuit filed Wednesday, the same day dozens of states sued the social media giant on similar grounds. Whatever happens, experts expect a long-drawn out battle that Facebook is prepared to defend vigorously — and with enormous resources.
Lawmakers of both major parties are also calling for stronger oversight of Facebook and other tech-industry giants. They argue that the companies' massive market power is out of control, crushing smaller competitors and endangering consumer privacy and choice. Facebook insists that its services provide useful benefits for users and that complaints about its power are misguided.
Here are some questions and answers about what the government actions against Facebook mean.
WHAT HAPPENS NEXT?
The short answer is: We wait.
The battle initiated by the Federal Trade Commission and the states could take years to resolve. At the moment, experts think it's unlikely to end in a settlement, so it may be a fight to the verdict. And the two sides could spend months arguing over issues such as document disclosure before the trial even starts. Once it does, expect a slugfest.
Facebook has been “well aware” of the possibility for this antitrust challenge for some time and they have "the resources to make this a formidable challenge for prosecutors,” said George Hay, an antitrust expert and law professor at Cornell University. “The one thing that is certain is that the demand for antitrust lawyers and economists will increase.”
ARE APPLE AND AMAZON NEXT?
Justice Department prosecutors are pursuing a separate antitrust case against Google, one that mirrors its case against Microsoft 20 years ago. Microsoft lost that one, although it escaped a breakup when an appellate court disagreed with the trial judge's order.
It's possible that more cases could follow. Congressional investigators spent months digging into the actions of Apple and Amazon in addition to Facebook and Google, and called the CEOs of all four companies to testify. The FTC and the Justice Department reportedly have been investigating Amazon and Apple, respectively.
So no one can rule out the possibility that three or even all four of these companies could end up in court.
WILL FACEBOOK HAVE TO DIVEST INSTAGRAM AND WHATSAPP?
Government prosecutors are asking for exactly that. But it could be harder than it sounds.
The FTC argues that Facebook has engaged in a “systematic strategy” to eliminate its competition, including by purchasing smaller up-and-coming rivals Instagram in 2012 and WhatsApp in 2014. Facebook called the government’s claims “revisionist history” that punishes successful businesses and noted that the FTC cleared the Instagram and WhatsApp acquisitions years ago.
That's true, although experts say it doesn't really matter — at least not legally. The FTC approvals years ago don't preclude re-examining or even reversing those acquisitions. Still, it's complicated.
“It may be that, if the court agrees with the government’s theory of the case, divestiture is the only way to cure the anticompetitive harm,” said Daniel A. Lyons, a law professor and antitrust expert at Boston College. “But courts traditionally break up companies only as a last resort, because unwinding two merged entities is difficult. In this case, it would involve undoing over a decade of integration."
Facebook doesn't operate the three companies as separate businesses and has been integrating functions of Instagram and WhatsApp with its main platform. For instance, users can now access messages sent on either app in Facebook's Messenger app.
WOULD A BREAKUP BE GOOD FOR USERS?
In the short term: probably not. In the medium-to-long term: maybe.
Any spinoff would involve undoing years of technical integration, and that's not easy to untangle. And a split would almost inevitably create issues that could annoy users, ranging from the loss of features added by Facebook to technical problems as engineers muck around with the apps' internal code.
When Facebook bought Instagram, the photo-sharing app was a fraction of its current size, with just 30 million users; today is has well over 1 billion. It offered a simple app that users really liked, although it didn't make any money. Facebook has since added a bevy of new features, such as chats, disappearing “stories” and the ability to shop and create and watch longer videos.
While some original Instagram users deride the additions, others have come to appreciate them — and might miss them if they were to disappear.
WhatsApp has stayed truer to its origins, although Facebook has big plans underway for the messaging app as well. For instance, shopping. Facebook argues that neither app would be where they are today if it hadn't thrown vast resources at expanding features, beefing up security and moderating content.
But a post-breakup Facebook might be so busy trying to fill Instagram- and WhatsApp-sized holes that startups formerly under its shadow could spring up with their own innovative services. Which could be good for everyone.
GIVEN ALL ITS PROBLEMS, WHY IS FACEBOOK STILL GROWING?
Facebook has 2.7 billion users, most of them outside of the U.S. In 2012, when it bought Instagram, it had 1 billion. While growth has slowed, nothing — not privacy concerns, not abuse and misinformation, not criticisms about the giant's power and dominance, not even unproven claims about bias against conservatives — have been able to reverse this trend.
Even when people declare they are leaving Facebook, they often end up returning. And there are still enough people in the world, especially outside of the U.S. and Europe, who join and make up for anyone who “flounces.”
Of course, acquiring Instagram and WhatsApp has also helped Facebook fold more people into its “family of apps." It's easy to join Facebook and not as easy to leave — both technically and because everyone you know is on there, not to mention photos, memories and the ability to keep tabs on exes and former classmates.