State AG and FTC Antitrust Actions against Facebook Fail to Prove Consumer Harm or Anticompetitive Behavior

The Federal Trade Commission (FTC) and 48 State Attorneys General today announced antitrust lawsuits against Facebook, asserting the social media company’s acquisitions of Instagram and What’s App suppress competition.

Associate Director of CEI’s Center for Technology and Innovation Jessica Melugin said:

“Today’s actions by the Federal Trade Commission and state attorneys general against Facebook are the perfect example of political theater dressed up as antitrust law.

“The FTC suit asserts that Facebook acquired Instagram and What’s App to suppress competition. But when viewed through the lens of the U.S. antitrust law standard of consumer harm, the question becomes, so what? Facebook’s superior resources and expertise took Instagram from a modest and glitchy app to one with a billion users as of 2018.

“Facebook took a risky bet on Instagram, whose owners were compensated to the tune of $1 billion. More users than ever use Instagram and presumably enjoy an improved experience. It’s worth noting that the FTC approved this purchase in 2012. Whatever Facebook’s motive was in acquiring Instagram, it’s clear that neither consumers nationally nor residents of the states filing suit have been harmed. The bottom line is that a billion consumers worldwide have benefited from Facebook’s purchase of Instagram and What’s App and it’s clear that the acquisitions did not harm consumers.

“Competition was not hurt by the acquisition either. Three of the top five apps in the App Store in recent weeks didn’t exist when Facebook purchased Instagram. Parler, MeWe and TikTok are all proof that Facebook’s social media business faces fierce competition in an innovative sector. The market is working to let consumers pick the winners and losers; both the FTC and state attorneys general should stay out of the way.”

CEI Vice President for Strategy Iain Murray weighed in on FTC’s action:

“The FTC action sends a terrible message to innovators. Many innovators create their start-up in the hopes of being acquired by a larger enterprise – and often secure venture funding on precisely that basis; it’s part of the business plan. If the FTC quashes that hope in the name of competition, the determined innovator will be forced to jump through the hoops of excessive financial regulation on the road to an IPO. If financial regulation were not so oppressive, that might not be an issue. But the combination of excessive antitrust action and excessive financial regulation will mean many innovators will not even bother. Ironically, they might just become junior employees of large tech firms instead.”

CEI senior fellow Mario Loyola commented on the lawsuit filed by state attorneys general:

“State antitrust actions, like this one against Facebook, don’t protect the public and should be preempted by federal enforcement. States don’t need to bring additional antitrust actions for the exact same conduct in dozens of different jurisdictions. All too often, the only real reason that states bring such cases is to shake down private industry in a rent-seeking exercise and shield their favored constituents from interstate competition.”

For more on CEI’s position on antitrust, please visit cei.org/antitrust.