US Federal Court dismisses FTC call for Facebook to divest Instagram and WhatsApp

The FTC's latest attempt to break up Facebook did not contain enough evidence, according to a US federal court judge.
Written by Campbell Kwan, Contributor
Image: Getty Images

The US Federal Trade Commission's (FTC) legal complaint that sought to slap Facebook with anti-trust penalties, including forcing the social networking giant to divest Instagram and WhatsApp, was dismissed [PDF] at Federal Court on Monday.

Filed in December last year, the anti-trust regulator accused Facebook of buying up companies -- namely, Instagram for $1 billion in 2012 and WhatsApp for $19 billion in 2014 -- to eliminate any competition that has the potential to erode the company's dominance.

Facebook was also accused of changing its practices and policies to close APIs relied upon by competitors and taking additional actions to degrade and suppress the quality of competitors' interconnections with Facebook.

Specifically, the FTC alleged that Facebook adopted policies under which its APIs would be "available to developers only on the condition that their apps" did not compete with Facebook Blue or Facebook Messenger.

By making these allegations, the FTC called for Facebook to break off from Instagram and WhatsApp to "restore the competition that would exist" absent of the social networking giant's alleged monopolistic practices.

But on Monday, District Judge James Boasberg set aside the FTC's complaint as it did not have sufficient evidence to prove that Facebook possessed monopoly power.

"The FTC has failed to plead enough facts to plausibly establish a necessary element of all of its Section 2 claims -- namely, that Facebook has monopoly power in the market for Personal Social Networking (PSN) Services," Boasberg wrote in his judgment.

When making that decision, Boasberg noted that while FTC did bring forth various specific instances where Facebook may have violated federal anti-trust laws, the laws can only be enforced when a company is currently or about to use monopoly power to act anti-competitively.

All of the pleaded instances brought forth by the FTC took place in 2013.

"The FTC has certainly not alleged that that specific sort of conduct is 'about to' occur. Nor could it since, according to the complaint, Facebook has not actually taken such an action in nearly eight years."

At the same time, Boasberg also made clear that the anti-trust lawsuit brought against Facebook could still force the company to divest its Instagram and WhatsApp acquisitions even if they were made years ago.

He explained that the acquisitions of Instagram and WhatsApp could still be undone if the acquisitions created a monopoly as the anti-trust legislation does not refer to "a discrete transaction but [rather] a status which continues until the transaction is undone."

"The rule under Section 7 is thus that so long as an acquiring company continues to hold acquired assets, the government may 'at any time' argue that such company is violating Section 7," Boasberg wrote.

While the FTC complaint has been dismissed, the court has allowed the case to remain active, with the FTC being given 30 days to file an amended complaint if it wishes to do so.

In the background of the anti-trust lawsuit, Democrats and Republicans on the House Antitrust Subcommittee last week unveiled a package of antitrust Bills that target Amazon, Apple, Facebook, and Google as part of efforts to reform how big tech companies are regulated.

"Unregulated tech monopolies have too much power over our economy. They are in a unique position to pick winners and losers, destroy small businesses, raise prices on consumers, and put folks out of work," committee chairman and Democrat Representative David Cicilline said last week.

If passed, the legislation could have significant impacts on the industry, including potentially giving the Justice Department the green light to break up big companies. 

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