A massive lawsuit could force Facebook to sell Instagram and WhatsApp amid allegations of anti-competitive behaviour. What's anti-competitive behaviour?
Facebook is really big. It’s the sixth largest company in the world. But it’s not just ‘Facebook’ - the tech giant sources much of its revenue from WhatsApp and Instagram. Over its lifetime, the company has bought almost 100 different businesses.
Two new lawsuits in the U.S. - one signed onto by 48 of the country’s attorneys-general, and one brought on by the country’s top consumer watchdog - accuse Facebook of using its huge influence to squash competitors by simply buying them out. The result? Facebook could be forced to sell WhatsApp and Instagram.
Isn’t that just how business works?
Most countries have laws against companies behaving in an anti-competitive way. In Australia, you’re not allowed to meet with your competitors and decide what price your products should be - Woolworths can’t meet with Coles and decide to make bread $10 a loaf.
What law did Facebook allegedly break here?
Under U.S. law, you’re not allowed to act in a way that intends, or has the effect of, significantly reducing the amount of competition in your market. The two lawsuits claim that Facebook’s purchase of Instagram (for $1 billion in 2012) and WhatsApp (for $19 billion in 2014) had that effect.
I like Facebook. And what they’ve done with Instagram is great. Why is it bad that they’ve gotten so big?
The theory is: the more competition there is in a market, the better quality the goods or services are. One U.S. Government report concluded that Facebook’s lack of competition had caused worse privacy, more misinformation and an overall worse product than if Facebook had a proper rival.
So how do you stop the sixth biggest company in the world?
The two different lawsuits have two different ideas:
To break up Facebook, forcing the company to sell WhatsApp and Instagram so that it has more competitors
To force it to act more competitively, by letting users see posts from other social media in its own platform, or permitting rivals to use its friend lists and other data