Meta has won an existential challenge that could have forced the tech giant to spin off Instagram and WhatsApp after a judge ruled that the company does not hold a monopoly in the social networking space.
U.S. District Judge James Boasberg issued the ruling Tuesday after the historic antitrust case concluded in late May.
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His decision follows two separate court rulings that found Google an illegal monopoly in both search and online advertising, dealing another regulatory blow to a technology industry that has enjoyed nearly unlimited growth for years.
The Federal Trade Commission “continues to argue that Meta has been competing with similar old rivals for the past decade, that it holds a monopoly within its small group, and that it maintains that monopoly through anticompetitive acquisitions,” Boasberg wrote in the ruling.
“But regardless of whether Meta enjoyed monopoly power in the past, the agency must show that it continues to have such power in the present. Today’s court’s verdict finds that the FTC has not done so.”
The FTC argued that Meta maintains its monopoly by pursuing the “better to buy than to compete” strategy that CEO Mark Zuckerberg announced in 2008. True to this adage, Facebook has systematically pursued potential rivals and acquired companies it deems significant competitive threats. ”
In his testimony in April, Mr. Zuckerberg disputed the FTC’s claim that Facebook bought Instagram to neutralize the threat.
In a series of cross-examinations, FTC attorney Daniel Matheson repeatedly brought up emails written by Zuckerberg and his associates before and after the Instagram acquisition, many of which are more than a decade old.
While Mr. Zuckerberg has acknowledged the documents, he has often downplayed their contents, arguing that he created the documents in the early stages of considering an acquisition and that what he wrote at the time did not capture the full scope of his interests in the company.
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Just as the world’s attention shifted from desktop computers to mobile devices, Facebook also enacted policies designed to make it harder for smaller rivals to enter the market and “neutralize perceived competitive threats,” according to the FTC’s complaint.
The social media landscape has changed significantly since the FTC filed its case in 2020, Boasberg wrote, and the landscape has changed every time a court examines Meta’s apps or competitors. Two briefs dismissing the lawsuits filed in 2021 and 2022 didn’t even mention the popular social video platform TikTok. Currently, it “remains front and center as the meta’s most powerful rival.”
Quoting the Greek philosopher Heraclitus, who said, “You never step into the same river twice,” Boasberg said the same holds true in the online world of social media.
“The landscape that existed just five years ago when the Federal Trade Commission filed this antitrust case has changed significantly. It may have once made sense to separate apps into separate markets for social networking and social media, but that wall has since fallen down,” he wrote.
Facebook acquired Instagram in 2012, when it was a crappy photo-sharing app with no ads and a small cult following. The $1 billion cash and stock purchase price was impressive at the time, but as Facebook’s stock price fell after its initial public offering in May 2012, the deal dropped to $750 million.
Instagram was the first company that Facebook acquired and continued to operate as an independent app. Until then, Facebook was known for its small-scale acquisitions. It’s a type of deal popular in Silicon Valley, where companies buy startups as a way to hire talented workers and then shut down the acquired companies. Two years later, the company did it again with messaging app WhatsApp, which it acquired for $22 billion.
WhatsApp and Instagram helped Facebook shift its business from desktop computers to mobile devices and remain popular with younger generations as rivals like Snapchat, which it also tried to acquire but failed, and the rise of TikTok.
But the FTC defines Meta’s competitive market narrowly, making sure that companies like TikTok, YouTube and Apple’s messaging service aren’t seen as rivals to Instagram and WhatsApp.
Mehta did not immediately respond to a message seeking comment.
