In a case that could test the Federal Trade Commission's power to regulate tech giants, Meta is now facing a trial over whether it violated antitrust laws when it bought competitors Instagram for $1 billion in 2012 and WhatsApp in 2014 for $19 billion. Both mergers initially received regulatory approval.
Meta has faced significant lawsuits before in its relatively short time as a global business, but this one could be one of the most important.
What Is a Monopoly?
The word 'monopoly' may remind you of the board game from your teenage years or the "Gilded Age" titans of industry such as John D. Rockefeller or Andrew Carnegie. They amassed massive fortunes through Standard Oil and Standard Steel, companies that were broken up but still exist today in the form of ExxonMobil, Chevron, BP, and U.S. Steel, among many others.
Antitrust legislation has been created to prevent the existence of these corporate giants, but success in upholding these laws has been far from absolute. Critics argue existing regulations are outdated and fail to address current challenges, especially in technological markets.
Today, the names that are most frequently associated with antitrust issues are Meta, Amazon, Google, and Microsoft. All have a history of conflicts with the FTC or the DOJ, the two federal entities whose mission is to enforce antitrust laws.
The Case Against Meta
FTC attorney Daniel Matheson pointed to a quote from Meta CEO Mark Zuckerberg, who expressed that “it is better to buy than compete.” For the FTC, this is evidence that Facebook took deliberate actions to violate antitrust laws. “Unable to maintain its monopoly by fairly competing, the company’s executives addressed the existential threat by buying up new innovators that were succeeding where Facebook failed,” the FTC argued in its legal complaint against the social media giant.
Meta defended itself by explaining during opening arguments that “the evidence at trial will show what every 17-year-old in the world knows: Instagram, Facebook and WhatsApp compete with Chinese-owned TikTok, YouTube, X, iMessage and many others. More than 10 years after the FTC reviewed and cleared our acquisitions, the Commission’s action in this case sends the message that no deal is ever truly final.”
Meta's lawyers are also trying to appeal publicly to a nationalist sentiment, claiming that state regulators should be on the side of “American innovation” rather than giving China more leverage by breaking up the company.
Meta lawyer Mark Hansen also argued that if Meta truly had monopoly power, it would control social networking prices, but its services are free.
This argument is contested. Meta does not charge its users to create an account and have a social profile on its platforms, but it makes billions annually from advertisements.
A more viable strategy could be Meta's contention of the definition of “market” the FTC is using. Meta argues the FTC's narrow definition that excludes messaging services from Apple, Youtube and TikTok is inappropriate. This seemed to be the main focus for Zuckerberg during his testimony early in the trial. The FTC labeled Meta's market as "personal social networking”, but Meta´s CEO spent hours testifying that his apps are much more than that.
After Zuckerberg's three days of testimony, Sheryl Sandberg, Facebook's second-in-command from 2008-2022, also testified regarding Facebook's refusal to allow advertising from Google+, a now-defunct social media platform Google started to compete with Meta.
The Sherman Act
Antitrust laws are complex and sweeping. Several federal antitrust laws establish when a company is wielding monopoly power. Here, the FTC is alleging that Meta violated the Sherman Act. Specifically, section 2, which prohibits monopolies.
How Much Is Too Much?
In general, monopoly power is measured by the share of the “market” that a company has. If a company has 70% of the sales of a type of product, it is considered monopoly power. The percentage between 50% and 70% is a gray area. In addition to having a market share that is considered a monopoly, it must be shown that the company acquired or maintained that power intentionally.
This has led to criticism of the Sherman Act, calling it “vague”. The law does not define crucial terms such as “conspiracy,” “combination,” or “monopoly” and this has resulted in different interpretations in court throughout the years.
Perhaps the most relevant recent case is United States v. Microsoft Corp. from the late 1990s/early 2000s. Microsoft and the FTC reached a settlement in which the software giant had to make concessions but was not forced to split.
Microsoft also had more recent litigation with the FTC: The agency was unsuccessful at a preliminary injunction opposing Microsoft's acquisition of Activision Blizzard. The FTC had also suffered another defeat when it tried to prevent the merger between AT&T and Time Warner Cable in 2018.
Returning to the Meta case, the FTC showed communications from Zuckerberg expressing how fast Instagram was growing, in an attempt to prove how the purchase was made with the intent of establishing a monopoly. The Commission also claims that Meta controls 78% of the “personal social networking” market.
However, Meta insists that the FTC's market definition was manipulated to exaggerate the company's influence, and that it actually controls only 30% of the social networking market.
Unlike with the Microsoft case, federal regulators are seeking to split up Meta if the court finds in their favor. Meta is almost certain to appeal if that occurs.
Related Resources
- Unbundled Sports Streaming Service Benched by Legal Challenge from FuboTV (FindLaw's Law and Daily Life)
- What Is Antitrust Law and Trade Regulation? (FindLaw's Learn About the Law)
- Authors Battle Amazon Over Audiobook Monopoly (FindLaw's Law and Daily Life)
