Legislation in the Australian parliament that might get Facebook and Google to pay some small amounts to local media companies has been overtaken in importance for the social media giants, especially Facebook, by news of a massive anti-trust lawsuit filed in an American court late Wednesday.
Suddenly upsetting the likes of News Corp, Nine Entertainment and the Morrison Government isn’t as vital as it was earlier in the week. Facebook and its peers in social media and high technology are now facing what could be the definitive legal action to restrict their growth and even break them up – as was the US Government action in 1984 to break up Ma Bell, the old AT&T – an action that helped trigger the enormous growth in technology ideas and companies in the US and globally.
The US Federal Trade Commission and New York Attorney General Letitia James a 48-strong coalition of states and territories sued Facebook on Wednesday in a court in Washington DC, saying that the social media giant broke antitrust law.
The FTC said in a statement that it would seek an injunction that “could, among other things: require divestitures of assets, including Instagram and WhatsApp.”
“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 news came as tech stocks were weakening after an early high and saw the Nasdaq lose more than 2% as news of the impending legal action spread through the market.
By the close the prices of Facebook, Apple, Alphabet (Google) and Amazon had all fallen by more than 2%. Some of that weakness was the move out of techs and back to value stocks because of more hope about stimulus spending from a dividend Congress.
But the legal action – given its strong support from the Federal Government and Republican and Democrat-controlled states – it is considered to be the most serious of anti-trust moves against these tech giants. That tech-dominated states like California and Washington are part of the action says that the power of the tech lobby is not as great as some might think.
The FTC’s involvement follows stuttering attempts by Donald Trump to try and punish the social media companies for putting warnings on some of hies tweed lies and Facebook postings. He is trying to remove their immunity to legal action over posts and tweets. But the action from the fTC and the states is far more substantive and means it will continue under the Biden administration after January 20.
In its lawsuit, the FTC is seeking the separation of the services from Facebook, saying 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 $US800 billion whose CEO Mark Zuckerberg is the world’s fifth-richest individual. Facebook did not have immediate comment.
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.
“For years, Facebook has used its monopoly power as a social networking website to stifle competition and innovation and to sell alarming amounts of user data to make money, all at the expense of the many people who use its platform,” North Carolina Attorney General Josh Stein, who was on the executive committee of attorneys general conducting the investigation, said in a news release.
James said the coalition worked collaboratively with the FTC but noted the attorneys general conducted their investigation separately. The are confident they will succeed, James said, pointing to previous break-up actions, such as AT&T, as possible precedent.
46 of America’s states are involved in the action and two territories – Washington DC and Guam. Only the conservative Republican states of South Dakota, Alabama, South Carolina and Georgia are not involved in the action that does include Republic states such as Idaho, Iowa, Kentucky and Mississippi.
This particular action has long been mooted and is considered to be the most serious challenge to not only facebook but the activities of other giants like Google (Alphabet), Amazon, and Apple.
