Antitrust Case Against Facebook & Google: All You Need To Know
The two Big Tech giants face its biggest hurdle, as the US government challenges their practices in maintaining their respective dominant positions.
The United States Federal Trade Commission (FTC) and a coalition of 46 states filed an antitrust lawsuit against social media giant Facebook on 9th December, seeking to break up the company by forcing it to sell Instagram and WhatsApp.
Facebook's acquisition of WhatsApp and Instagram in the past decade has been seen as a method to monopolise the social media market by crushing future competition, and for good reason - both these apps are now some of the most popular ones to exist, and WhatsApp is nearly at par with Facebook in terms of usage. Ian Conner, the Director of FTC's Bureau of Competition feels that Facebook's action wilfully deny consumers the benefit of competition. "Our aim is to roll back Facebook's anticompetitive conduct and restore competition so that innovation and free competition can thrive," he said in a statement.
In October, the US Department of Justice along with 11 state attorneys also filed an antitrust case against Alphabet Inc.'s Google for monopolising the search ad market and engaging in anti-competitive behaviour. A group of 10 US state attorneys also joined in on the antitrust suit against Google on Wednesday, and even accused the company of allegedly colluding with its arch rival Facebook to shut out rival ad exchanges. That's not all - since 2010, the European Union has filed three separate antitrust cases against Google for violating its antitrust laws, which has led to formal charges and fines of up to $10 billion.
"If the free market were a baseball game, Google positioned itself as the pitcher, the batter and the umpire," said Texas Attorney General Ken Paxton, who led the lawsuit on Wednesday, on a video posted on Twitter.
The two Big Tech giants, who have dominated the digital advertisement arena for more than a decade, are for the first time facing such a slew of offensives by their own government.
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What Is Antitrust Law?
Antitrust law, or anti-monopoly law or competition law, refers to a law made to regulate anti-competitive behaviour by companies, and is implemented in some form or other in many countries. Such a law is intended to stop cartel-like behaviour that represses free trade, abusive behaviour of a dominant player that seeks to uphold its position (such as predatory pricing), and to supervise mergers and acquisitions, especially of potential future competition.
India also has its own antitrust law under the Competition Act, 2002, which replaced the Monopolies and Restrictive Trade Practices Act, 1969. The Competition Commission of India is a statutory body of the Indian government responsible for enforcing the act.
Last year, the CCI ordered an antitrust investigation against Google for misusing Android's dominant position in the smartphone operating system market to block out potential rivals by forcing companies to sell smartphones with Android.
How The Suits Faced By Google And Facebook Differ
Many believe that the suit faced by Google is an exact clone of the US vs Microsoft case of 1998. More than two decades ago, Microsoft faced a lawsuit by the DoJ for coaxing manufacturers to enter agreements to install its Internet Explorer browser by default on its operating systems. Witness statements revealed that top-level Microsoft executives were looking to block avenues for now-defunct rival Netscape Communications Corporations.
DoJ won the lawsuit at trial, and Microsoft was ordered to break up as a company into two separate units - one that sold operating systems, and another that sold software. After an appeal by Microsoft,the court reversed its decision to break up the company, and settled with Microsoft agreeing to encourage competition rather than stifle it.
Now, the tables are turned. Google finds itself as the dominating entity in the search engine market, with an 88% market share. It's closest rival is none other than Microsoft with its Bing search engine that has a mere 6% market share. The DoJ alleges that Google has paid billions to smartphone manufacturers and internet browser makers to have its search engine as default, and penalising them for doing otherwise. If they follow the framework set by the Microsoft case, it should be open and shut.
The lawsuit by FTC against Facebook is completely different, and enters unfamiliar territory in terms of legal framework. The acquisition of Instagram and WhatsApp - that are currently under review - were previously approved by the same agency in 2012 and 2014, respectively. It makes a unique argument stating that these two acquisitions as a whole indicated a larger strategy by Facebook to gain a monopoly over then growing social media market.
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What Happens Now?
For Google, this is the first time the company faces a bipartisan effort to regulate its monopoly over the search engine and ad search market. If the DoJ wins, Google will be forced to curtail its behaviour of crushing competition, similar to what Microsoft faced nearly two decades ago. This could also be an opportunity for Microsoft's Bing search engine to shine, after being in Google's shadow for over a decade.
Google, however, rejected the claims made in suit, and sought to defend itself. "We've invested in state-of-the-art ad tech services that help businesses and benefit consumers. Digital ad prices have fallen over the last decade. Ad tech fees are falling too. Google's ad tech fees are lower than the industry average. These are the hallmarks of a highly competitive industry," said a company spokesperson in a statement in response to the lawsuit. Facebook has not yet commented on the accusations of colluding with Google to rig the ad market.
The FTC's case against Facebook is a lot more complex, and its fate is very much uncertain. The agency's efforts to break up Facebook are also quite ambitious; big corporate break-ups are, after all, quite rare. The last such instance was in the early 1980s when AT&T was forced to give up control over its regional telecommunications network known as the Bells.
In response to the lawsuits, Facebook CEO and co-founder Mark Zuckerberg wrote a post to employees saying, "Our acquisitions of Instagram and WhatsApp have dramatically improved those services and helped them reach many more people. We compete hard and we compete fairly. I'm proud of that."
The breaking up of Facebook will prove to be a lot more difficult because of its continued efforts to merge Instagram and WhatsApp with its parent company, making it behave like a single entity. Insiders have told the US media that the technical merging of the apps have made them a lot more intertwined.
"Instagram is no longer viable outside of Facebook infrastructure. They spent six years moving things over. They just can't undo it with a click of a button. It would take years," former Facebook engineer Dmitry Borodaenko told The Washington Post.
Despite the uncertainty in this case, it may provide a watershed moment in the US history of regulating Big Tech corporations if it succeeds to put a leash on Google and Facebook.
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