Technology

FTC and states are suing Fb, might power Fb to promote Instagram and WhatsApp

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Facebook founder and CEO Mark Zuckerberg arrives to testify on Facebook on Capitol Hill in Washington, DC, after a pause during a joint hearing of the Senate Committee on Commerce, Science, and Transportation and the Senate Judiciary Committee.

Saul Loeb | AFP | Getty Images

Facebook now faces two legal challenges for engaging in anti-competitive practices. The lawsuits come from the Federal Trade Commission and a coalition of 48 attorneys general led by New York AG Letitia James.

Both lawsuits target two of Facebook's top acquisitions: Instagram and WhatsApp. Both are looking for remedies for the alleged anti-competitive behavior that could lead Facebook to part ways with the two apps.

The company's stock fell nearly 4% on the news of the lawsuits.

The FTC claims Facebook had a systematic strategy to eliminate threats to its monopoly, including the acquisitions of Instagram and WhatsApp in 2012 and 2014. It is claimed that Facebook has monopoly power in the US personal social networking market.

The FTC claims Facebook had a systematic strategy to eliminate threats to its monopoly, including the 2012 and 2014 acquisitions of Instagram and WhatsApp that the FTC previously approved. Facebook acquired Instagram for $ 1 billion and WhatsApp for $ 19 billion.

As part of the lawsuits, the FTC will seek a permanent injunction that could lead to the divestment of Instagram and WhatsApp, the agency said. Additionally, the FTC will seek to prohibit Facebook from imposing anti-competitive terms against third-party software developers.

"Ever since Facebook toppled its early rival Myspace and gained monopoly power, it has set itself the goal of using anti-competitive means to play defense," the FTC's lawsuit said. "After Facebook identified two major competitive threats to its dominant position – Instagram and WhatsApp – Facebook attempted to quell those threats by buying the companies. This echoed CEO Mark Zuckerberg's view in a 2008 email dated It was said, "It is better to buy than to compete. "" "

James said at a news conference on Wednesday that the state's lawsuit had sent a message that "all efforts to stifle competition, harm small businesses, reduce innovation and creativity, diminish privacy, do all with the full force of ours Offices are implemented ".

Facebook first announced that it was being investigated by the Federal Trade Commission on antitrust grounds in July 2019. A coalition led by New York's Letitia James announced an investigation into the deal shortly thereafter.

Facebook has been undergoing an accelerated review of both user data and competitive practices since 2017, when news investigations revealed that its service was being used by the political data firm Cambridge Analytica to obtain information about users without their consent prior to the 2016 US presidential election. The FTC resigned itself to Facebook for $ 5 billion last year after investigating its data practices, which tech hawks in Congress criticized as a slap on the wrist for Facebook – they only made about 9% of Facebook's revenue a year 2018 from.

On the competition side, lawmakers have criticized the FTC for failing to adequately review Facebook's previous acquisitions of Instagram and WhatsApp. The House of Representatives Antitrust Subcommittee released internal Facebook documents from its own investigations into the company, showing that Facebook executives are concerned about Instagram's rise. In a correspondence between the boss of Instagram and an investor, he feared that Facebook boss Mark Zuckerberg would "switch to destruction mode" if he refused to sell.

The Facebook lawsuit follows another tech cartel indictment by the Justice Department against Google. The DOJ alleged in its October filing that Google violated antitrust laws by illegally maintaining a monopoly on general online search by tying distribution channels for competitors. Eleven Republican attorneys general joined the DOJ in its lawsuit. Other states are still investigating Google and could file their own charges and potentially join the DOJ's complaint.

This story evolves. Check for updates again.

Sal Rodriguez from CNBC contributed to this report.

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Katherine Clark