Explained: The antitrust lawsuits against Facebook and Google
Antitrust laws are developed by governments to protect consumers and regulate companies. These laws try to level the playing field by ensuring similar businesses can operate in an industry without having their competition gain unfair advantage or power. Antitrust laws evolved as markets around the world opened up as a means to guard against monopolization of competition.
Antitrust laws have been making a splash recently because of the lawsuits against big tech giants like Facebook, Google, Amazon et al. Facebook has been dealing with controversies since the 2016 US Presidential Elections related Cambridge Analytica scandal, this is the first time a federal agency has taken steps to curb what it sees as “anti-competitive behaviour”.
Why are Facebook and Google embroiled in antitrust litigations
United States federal agency, the Federal Trade Commission (FTC), along with the 46 states, the District of Columbia and Guam have filed a lawsuit against Facebook, accusing it of “ illegally maintaining its personal social networking monopoly through a years-long course of anticompetitive conduct”.
The “anticompetitive conduct” in question is Facebook’s 2012 acquisition of Instagram for $1 billion and the subsequent 2014 acquisition of WhatsApp for $19 billion, both deals were approved by the FTC. It claims that every time a competitor possessed “an existential threat to Facebook’s monopoly power” Facebook bought the app to neutralize the threat. It further states that for future deals Facebook will need to seek prior approval of FTC. The FTC’s bold move seems to be centered around trying to break up Facebook Inc, like it did with AT&T in 1984.
The Department of Justice (DoJ) had brought a similar lawsuit against Google in October, which the state of California has appealed to join on December 11. Google has till December 18 to respond to the state of California’s appeal.
The DoJ’s case against the American multinational states that the search engine pays mobile phone manufacturers to keep Google as the default browser, helping it rake in millions of dollars in ad-revenue. A similar lawsuit was filed against Microsoft in 1994, which the DoJ won.
Elsewhere, the European Union too has brought antitrust complaints against internet giant Amazon on similar grounds. The EU had in 2017 imposed the biggest fine till date, amounting to $2.7 billion, against Google, in the first ever antitrust case. The EU too had accused Google of indulging in ‘anti-competitive behaviour’ by denying “European consumers a genuine choice of services and the full benefits of innovation” and harmed rival businesses by denying them “the chance to compete on the merits and to innovate”.
What are the ramifications of an antitrust lawsuit?
In a 2019 op-ed for the New York Times, former Facebook spokesperson and co-founder Chris Hughes had given a call for breaking up the social media platform. Even though antitrust laws exist in almost every free-market economy, the United State’s trials and tribulations with antitrust theorists and academicians has left its mark on the current body of legislation.
Both Facebook and Google have denied the charges leveled against them. A spokesperson for Google told Reuters that “People use Google because they choose to, not because they’re forced to, or because they can’t find alternatives.” While Facebook in a blog post has commented that this is not how antitrust laws are designed to work, arguing that its business partners like Youtube, WeChat, and Twitter have all done well, alluding that it cannot be accused of being anti-competitive.