The trial that can break Instagram and WhatsApp from Meta
Antitrust trials in US courts may be the country’s greatest contribution to humanity after eggs benedict and the golden age of Hollywood.
On Monday (14th), one of the most anticipated trials in recent times began, in which the Federal Trade Commission (FTC) accuses Meta of monopolizing the personal social networking market by blocking potential competitors through its billion-dollar acquisitions of Instagram and WhatsApp. One possible remedy is the breakup of the company, restoring Instagram and WhatsApp as independent alternatives and rivals to Facebook.
The US legal system, which follows a common law model, relies on precedents to guide judgments. In “sui generis” cases, there is considerable room for deliberation.
This is particularly relevant to one of the core issues at hand: the definition of Meta’s market. The FTC has posited that the company holds a monopoly in the so-called market for “personal social networking services” (PSN), which distinguishes social platforms used to keep in touch with “friends and family” from more specialized ones like LinkedIn (professional), TikTok (short videos), and Nextdoor (neighbors).
It may seem like a trivial detail, but it is vital: if the FTC’s argument holds, Meta’s share of the PSN market would be substantial. If Meta’s argument prevails, this market expands, diluting the market shares of Facebook, Instagram, and WhatsApp.
The other battleground concerns the costly acquisitions that Mark Zuckerberg made of rivals that, at that time, in the first half of the 2010s, were emerging as significant potential competitors to Facebook.
Meta claims that the acquisitions of Instagram (USD 1 billion in 2012) and WhatsApp (USD 19 billion in 2014) were beneficial to users and did not result in a decline in the services’ quality or development.
Here, too, the “modus operandi” of big tech imposes new challenges on US antitrust laws, which have traditionally focused on prices paid by the end consumer. This does not apply to social platforms, as they are free to use.
The FTC argues that the “price” consumers pay for Meta’s anticompetitive practices is the so-called “ad load tax,” meaning the significant increase in the number of ads relative to organic content, which would signal a degradation of services.
***
These trials provide a rare opportunity to witness the unscrupulousness of the C-Levels of powerful companies like Meta in all its raw glory. The transparency rules that publicly traded companies must adhere to ensure that all corporate communication is preserved. As a result, the FTC — and now all of us — have access to revealing email exchanges between Zuck and his lieutenants.
The FTC’s strongest asset is the incriminating emails from Zuck himself. One must concede to his clarity of thought and willingness to create evidence against himself.
In 2018, for example, he complained that the “ad load” on Facebook was greater than on Instagram, and that “we should even have a higher ad load on IG [Instagram] while we have this challenge so we can replace some ads with [People You May Know] on FB [Facebook] to turn around the [engagement] issues we’re seeing.”
In another message directed to the company’s board, Zuck referred to the “ad load” as a “tax,” meaning something that people would pay (with their attention) in exchange for the organic content that attracts them to the apps. This is in stark contrast to Meta’s official narrative that people enjoy and/or prefer targeted ads.
Also in 2018, Zuck toyed with the idea of spinning off Instagram into a new company on his own initiative, stating that despite concerns, such a move is often beneficial and that “synergies” are usually overestimated by executives, and that, in any case, there was already pressure for a breakup — which could be seen as an admission of market monopolization.
There are other, more revealing messages regarding the acquisition of Instagram:
“Even if some new competitor[] springs up, buying Instagram, Path, Foursquare, etc now will give us a year or more to integrate their dynamics before anyone can get close to their scale again. Within that time, if we incorporate the social mechanics they were using, those new products won’t get much traction since we’ll already have their mechanics deployed at scale.” (Early 2012.)
“Yeah, I remember your internal post about how Instagram was our threat and not Google+. You were basically right. One thing about startups though is you can often acquire them. I think this is a good outcome for everyone.” (April 2012.)
“[…] Instagram was growing so much faster than us that we had to buy them for $1 billion…” (November 2012.)
So good!
In a bold strategy, the FTC’s lawyers called Zuck to provide the first testimony. It must be top-notch entertainment to see him sidestep in an attempt to contradict his past self in such a way that both positions sound coherent.
***
The FTC’s accusation against Meta was made years ago, during Joe Biden’s administration. Donald Trump’s election likely sparked Zuck’s interest in the possibility of having the case dismissed, and he didn’t even try to hide this intent, regularly meeting with Trump, donating USD 1 million to the president’s inauguration, and paying USD 25 million to settle a lawsuit brought by Trump against Meta. The CEO of Meta also offered USD 450 million and later nearly USD 1 billion to the FTC to end the antitrust case, as reported by the Wall Street Journal.
“Mark bought his way out of competing, so I’m not surprised that he thinks he can buy his way out of law enforcement, too,” said former FTC chair Lina Khan to the WSJ. “His proposed remedy, like his market strategy, is: ‘let my illegal monopoly keep monopolizing.’”
When the main representative of the accused party goes to great lengths to avoid a trial, it’s a sign that they may not have much confidence in their arguments.
The trial is expected to last until July. After that, we will wait some time (months?) for the court’s decision, and then, in the event of a conviction, negotiations for the implementation of remedies will follow. In other words, it will take a while.
I highly recommend the coverage by the newsletter Big Tech on Trial. In the absence of live broadcasts of the sessions (and even if there were, the patience to follow them in full), it offers a detailed, educational, and entertaining daily read — almost as enjoyable as a good classic Hollywood film.