Healey Joins Multistate Lawsuit Seeking To End Facebook's 'Illegal Monopoly'
BOSTON (CBS/AP) - Massachusetts Attorney General Maura Healey announced on Wednesday that she has joined a bipartisan group of 47 other attorneys general who sued Facebook, seeking forced divestment of its Instagram and WhatsApp messaging services.
In a separate case, 48 states and districts also accused the company of abusing its market power in social networking to crush smaller competitors.
"For nearly a decade, Facebook and Mark Zuckerberg ran an illegal monopoly in the social media sphere by buying out companies that showed promise as potential competitors and blocking others – and they did this at the expense of their users' time and privacy," AG Healey said in a statement. "We are suing to stand up for the millions of consumers and small businesses that have been harmed by Facebook's illegal business practices."
The antitrust lawsuits were first announced by the Federal Trade Commission and New York Attorney General Letitia James.
"It's really critically important that we block this predatory acquisition of companies and that we restore confidence to the market," James said during a press conference announcing the lawsuit.
The FTC said Facebook has engaged in a "a systematic strategy" to eliminate its competition, including by purchasing smaller up-and-coming rivals like Instagram in 2012 and WhatsApp in 2014. James echoed that in her press conference, saying Facebook "used its monopoly power to crush smaller rivals and snuff out competition, all at the expense of everyday users."
Facebook is the world's biggest social network with 2.7 billion users and a company with a market value of nearly $800 billion whose CEO Mark Zuckerberg is the world's fifth-richest individual and the most public face of Big Tech swagger.
In a statement, Facebook called the lawsuit "revisionist history" saying the Commission cleared the acquisitions years ago.
"The government now wants a do-over, sending a chilling warning to American business that no sale is ever final," said Jennifer Newstead, Facebook's Vice President and General Counsel. "People and small businesses don't choose to use Facebook's free services and advertising because they have to, they use them because our apps and services deliver the most value."
James alleged Facebook had a practice of opening its site to third-party app developers, then abruptly cutting off developers that it saw as a threat. The lawsuit — which includes 46 states, Guam and the District of Columbia — accuses Facebook of anti-competitive conduct and using its market dominance to harvest consumer data and reap a fortune in advertising revenues.
James said the coalition worked collaboratively with the FTC but noted the attorneys general conducted their investigation separately.
Facebook paid $1 billion for Instagram, bolstering the social networking platform's portfolio a month before its stock went public. At the time, the photo-sharing app had about 30 million users and wasn't producing any revenue. Zuckerberg vowed both companies would be run independently, but over the years, the services have become increasingly integrated. Users are now able to link accounts and share content across the platforms. Instagram now has more than 1 billion users worldwide.
Facebook acquired WhatsApp, an encrypted messaging service, for $19 billion. When Facebook bought WhatsApp, it said it "fosters an environment where independent-minded entrepreneurs can build companies, set their own direction and focus on growth while also benefiting from Facebook's expertise, resources and scale. This approach is working well with Instagram, and WhatsApp will operate in this manner."
But in the coming years, the founders of both Instagram and WhatsApp left Facebook amid disagreements with Zuckerberg. Facebook has started to integrate Instagram and WhatsApp, most recently by linking the apps' chat functions with its Messenger service. Such integration could make it more difficult to break off the companies.
Tech industry group NetChoice quickly panned the lawsuits, saying the actions are "more about advancing ambition than consumer interests. The case for antitrust enforcement against Facebook has never been weaker as new social media and digital ad providers like TikTok and Snapchat overtake older services," said Carl Szabo, Vice President and General Counsel of NetChoice.
(© Copyright 2020 CBS Broadcasting Inc. All Rights Reserved. The Associated Press's Marcy Gordon, Michael R. Sisak, Barbara Ortutay, and Gary D. Robertson contributed to this report.)