(Bloomberg) — The US Federal Trade Commission is finally having its day in court against Meta Platforms Inc., arguing that the company must be broken up for illegally monopolizing the social media market after buying Instagram and WhatsApp more than a decade ago.
The FTC’s opening salvo began Monday in Washington before Chief Judge James Boasberg in a case that’s been years in the making. Agency attorneys kicked off their arguments by invoking a long US tradition of seeking to ensure a competitive marketplace, one that the FTC’s lead trial lawyer, Daniel Matheson, accused Meta of violating.
“For more than 100 years, American public policy has insisted firms must compete if they want to succeed,” Matheson said in his opening statement. “The reason we are here is that Meta broke the deal.”
If the FTC prevails, a spinoff of Instagram and WhatsApp would undo years of integration between the apps, disrupt two of the most popular digital consumer products in the world and potentially erase hundreds of billions of dollars in Meta’s market value. It would also raise serious questions about how the government evaluates and approves deals.
The company is poised to counter with its defense later Monday. The trial is expected to last about two months and feature testimony as soon as this week from Chief Executive Officer Mark Zuckerberg and former executive Sheryl Sandberg.
FTC Chair Andrew Ferguson was in the courtroom for the trial’s opening. Earlier Monday, while cautioning against over regulation, he told Fox Business “the antitrust laws can help make sure that no private sector company gets so powerful that it affects our lives in ways that are really bad for all Americans.”
A final decision will hinge on how social media is defined, and whether Meta dominates that market. The FTC will focus on how people communicate with friends and family — what it calls the “personal social networking services” market, which it claims is composed primarily of messages and media shared between close contacts.
The FTC argues that Meta’s purchases of Instagram and WhatsApp are “killer acquisitions” that prevented those companies from competing. To support its case that Meta is a monopoly, the FTC will argue that the quality of its apps has declined, most noticeably with increased ads and weakened privacy protections.
In 2010 “Meta was faced with a sea change in competitive conditions,” Matheson said, referring to the growing mobile market. “They decided that competition was too hard and it would be easier to buy out their rivals than to compete with them.”
Meta bought WhatsApp in part to fend off an offer from Alphabet Inc.’s Google which was also considering buying the company, according to Matheson. And Meta also considered buying Snap Inc. for $6 billion in 2013, though the Snapchat owner turned the offer down. The number was not previously known, as reports at the time pegged the discussions as for half that much.
Snap representatives didn’t immediately respond to a request for comment Monday.
In his opening argument, Matheson said the FTC will highlight “smoking gun” emails from Meta execs including Zuckerberg, particularly one from 2012 where he described the Instagram deal as a way to “neutralize a competitor.”
After Meta bought Instagram it “fundamentally manipulated the experience” offered by the service, Matheson said, allowing it to avoid cannibalizing its own more profitable Facebook product. While that is a “rational business decision,” Matheson said it “offends the policy” of the antitrust laws.
Meta has pushed back aggressively against the FTC’s claims, arguing that it competes intensely with a variety of platforms, including ByteDance Ltd.’s TikTok, Snap’s Snapchat, Google’s YouTube, Apple Inc.’s iMessage and Elon Musk’s X.
The agency says that only Snapchat competes with Meta, and that a number of other past competitors, including MySpace, are now defunct.
The FTC may have a tough time in court. Although Boasberg denied Meta’s motion to throw out the case in November, he said “prevailing here, however, does not obscure the fact that the commission faces hard questions about whether its claims can hold up in the crucible of trial.”
Meta also argues that the FTC had a chance to challenge the deals — for Instagram in 2012 and WhatsApp in 2014 — and permitted them to proceed.
The FTC opened an investigation into Meta in 2019 during the first Trump administration and sued the company in December 2020. Former FTC Chair Lina Khan under the Biden administration advanced the case, which is now in the hands of Ferguson, who was named by President Donald Trump to head the agency in January.
The case will test the government’s ability to police competition in the fast-moving tech sector, which has evolved significantly. Since 2019, Musk purchased Twitter Inc., TikTok became one of the most dominant social media apps in the world, and Meta launched rival products to compete with both of them.
(updates with FTC lawyer starting in second paragraph.)
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