Why 46 States and the FTC Are Suing Facebook

Breaking up is hard to do

Key Takeaways

  • The FTC and states are suing Facebook over what they allege to be “illegal” monopoly practices.
  • Facebook’s dominance includes social media apps, websites, and advertising, which encroaches on various sectors.
  • Advertisers' relationship with Facebook is one of its many dominating aspects.
Mark Zuckerberg, Chief Executive Officer of Facebook, testifies remotely during the Senate Judiciary Committee hearing on November 17, 2020
Bill Clark-Pool / Getty Images

The Federal Trade Commission (FTC) and nearly all U.S. states filed twin lawsuits seeking to minimize Facebook’s dominance by breaking up the tech giant’s ability to operate across platforms.

The complaint accuses Facebook of entrenching itself in the lives of billions of people by absorbing competitors and behaving in a generally anti-competitive way. Alabama, Georgia, South Carolina, and South Dakota are the only states that failed to join. The landmark antitrust suit seeks to split up Facebook, Instagram, and WhatsApp, alleging that Facebook’s acquisition of the latter two was an attempt to quell competitors and keep consumers from more privacy-focused alternatives.

"For almost a decade, Facebook has had monopoly power in the personal social networking market in the United States…," says the complaint. "Facebook illegally maintains that monopoly power by deploying a buy-or-bury strategy that thwarts competition and harms both users and advertisers."

Facebook’s Dominance

Facebook co-founder and CEO Mark Zuckerberg has argued that absorbing different social media competitors allows the company to create a "competitive moat." Like medieval moats, this metaphorical barrier allows the company to dominate relatively undisturbed. You can see this strategy in its early acquisition of both Instagram and WhatsAppm as both apps grew increasingly popular.

For almost a decade, Facebook has had monopoly power in the personal social networking market in the United States...

Facebook acquired Instagram in 2011 for $1 billion, and WhatsApp in 2014 for an estimated $19 billion. The tech giant’s apps give it access to at least 2.7 billion monthly active users, according to Statista. Facebook alone has 1.8 billion people who visit the social networking site daily from almost every country. And as of 2020, the company controls and operates four of the top-10 most downloaded mobile apps: Facebook, Facebook Messenger, WhatsApp, and Instagram.

"Because Facebook users have nowhere else to go for this important service, the company is able to make decisions about how and whether to display content on the platform and can use the personal information it collects from users solely to further its business interests, free from competitive constraints, even where those choices conflict with the interests and preferences of Facebook users," the lawsuit alleges.

The troves of data the company collects across platforms also make it susceptible to large-scale abuse. In 2019, an unsecured database allowed hackers access to 419 million users' private data, habits, and personality profiles. In a popular example, Cambridge Analytica was able to leverage Facebook data during the 2016 election to enact sophisticated, targeted influence campaigns.

The Advertising Dilemma

While other social networking apps like TikTok, Twitter, and Reddit exist, few offer the same kind of all-purpose service as Facebook. Additionally, Facebook’s relationship with advertisers is only rivaled by Google—no social media platform comes close. From a market standpoint, Facebook has thwarted innovation through its practices that put competitors in the company’s crosshairs. And it is not just the social media sector, either.

Between the tech giant’s three apps, the company has access to at least 2.6 billion users.

Facebook is the advertising industry’s golden goose. Along with Google, the company accounted for about 85% of global digital ad revenue in 2018. Advertisers pay billions to get access to the trove of personal data Facebook has collected through its vast networks over the past decade. This allows advertisers to reach consumers with unparalleled accuracy. In some cases, uncanny accuracy.

"There have been times where I’ve said one thing or typed a message to someone and then, all of a sudden, I see an ad on my feed while scrolling shortly after," Instagram user A.J. Fontenot said in a phone interview about his general concerns about social media platforms. 

"I don’t know, it happened way too many times to be a coincidence," he continued. "Even just talking in DMs on Instagram; it’s really weird if they’re actually listening to us through our mics or reading our DMs."

Facebook eavesdropping has become a bit of an urban legend among social media users, though the tech giant promises it’s not listening to users. "I run ads product at Facebook. We don’t—and have never—used your microphone for ads. Just not true," Rob Goldman, the company’s former vice president of advertising, tweeted in 2017, though that post has since been deleted.

The persistence of this fable speaks to the growing Big Brother narrative surrounding Silicon Valley and the unease consumers are feeling about their technological output. In a culture that is becoming progressively skeptical about the influence of Big Tech, this lawsuit could not have come at a more opportune time. Facebook is the canary in the coal mine. If this suit succeeds, expect more casualties.

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