Facebook Argues Breakup Would Be Costly, Weaken Security

Facebook’s lawyers, relying on research by the law firm Sidley Austin LLP, prepared a 14-page document that lays out its defenses against government threats to force a break from its messaging service WhatsApp and photo- and video-sharing platform Instagram. Congress and other federal antitrust regulators continue to investigate Facebook, as well as Google, Amazon and Apple, and the House Antitrust Subcommittee is expected to release its findings this month. Facebook’s acquisitions of Instagram in 2012 and WhatsApp in 2014 were vetted by the Federal Trade Commission.

“In the paper, Facebook says unwinding the deals would be nearly impossible to achieve, forcing the company to spend billions of dollars maintaining separate systems, weakening security and harming users’ experience,” reports The Wall Street Journal. “A ‘breakup’ of Facebook is thus a complete nonstarter,” explains the paper.

However, Columbia University law professor Tim Wu, who favors the breakup of Facebook, calls its “contention that past government inaction on the acquisitions should limit current action” as “surprisingly weak.” But WSJ points out that the government’s argument that Facebook’s purchases aimed to reduce competition wasn’t considered when the FTC made its decision not to oppose the deals.

“There’s no way a decision on one merger would be preclusive,” said Wu, who added that “the FTC’s reviews of both acquisitions had reserved the right to revisit the deals at a later time.” He noted that there is no “it’s too hard” defense, with regard to Facebook’s complaint regarding the difficulty of breaking up the company.

This summer, the Antitrust Subcommittee also published emails from 2012 “in which Facebook chief executive Mark Zuckerberg cited the difficulty of competing with Instagram as a rationale for buying the photo-based social media company, which at the time had 30 million users but only 13 employees.”

In one email, he wrote that, “once someone wins at a specific mechanic, it’s difficult for others to supplant them without doing something different.” In another email, he stated that one reason to buy Instagram would be to “neutralize a competitor,” although he later backtracked that statement.

In its defense, Facebook stated that the FTC had already seen these emails “along with the rest of a massive investigatory record” and still voted 5-0 to allow the deal to close. It also stated that the government revisiting these decisions made in 2012 and 2014 would “send a disquieting message to the business community.”

Related:
House Panel to Seek Breakup of Tech Giants, GOP Member Says, Bloomberg, 10/5/20
Breaking Up Facebook Won’t Fix Social Media, Harvard Business Review, 9/30/20
Facebook Just Made a Big Move Behind the Scenes, The Motley Fool, 10/3/20