The U.S. antitrust watchdog and dozens of states on Wednesday sued Facebook Inc., alleging that the company has illegally maintained its social networking monopoly through anticompetitive acquisitions and actions that target potential and nascent rivals.
The Federal Trade Commission argued in the complaint the social media giant's acquisitions of Instagram and WhatsApp were part of its "systematic strategy" to eliminate threats to its monopoly and said it is seeking court actions that could lead to the forced sale of the photo-sharing and mobile messaging apps.
"Today's enforcement action aims to restore competition to this important industry and provide a foundation for future competitors to grow and innovate without the threat of being crushed by Facebook," Ian Conner, director of the FTC's Bureau of Competition, said in a statement.
New York Attorney General Letitia James, who leads a bipartisan coalition of 48 states and districts that filed a similar lawsuit, insisted that Facebook's acquisition of its rivals has been conducted in a "predatory manner" and its monopoly has been harmful to consumers as it led to reduced privacy protections and services.
Facebook refuted the claims, calling the lawsuits filed by the FTC and state attorneys general "revisionist history" because the two acquisitions in question were reviewed and cleared by relevant antitrust regulators.
"Now, many years later, with seemingly no regard for settled law or the consequences to innovation and investment, the agency is saying it got it wrong and wants a do-over," Facebook said in a statement. "In addition to being revisionist history, this is simply not how the antitrust laws are supposed to work."
The latest development came as U.S. tech giants have come under increasing scrutiny over their market power, with the Justice Department filing an antitrust lawsuit against Google LLC in October alleging the technology behemoth has unlawfully monopolized online search services to harm competitors and consumers.
Facebook, founded in 2004 by Mark Zuckerberg and other students at Harvard University, operates a social networking service that facilitates sharing content online without charging users a fee.
The company monetizes its business by selling advertising to firms, taking advantage of the vast trove of data it collects about users, their friends and their interests, according to the New York attorney general.
One of Facebook's alleged strategies is to acquire smaller rivals and potential rivals before they can emerge as threats.
Facebook acquired Instagram, a rapidly growing photo-sharing startup, for $1 billion in 2012, despite the company valuing itself at only $500 million. It acquired Whatsapp for around $19 billion in 2014.
Facebook has also allegedly rescinded and blocked access to its site for apps created by third-party developers that it viewed as actual or potential competitive threats, after years of promoting open access to its platform.
"Instead of competing on the merits, Facebook used its power to suppress competition so it could take advantage of users and make billions by converting personal data into a cash cow," James said.
"Almost every state in this nation has joined this bipartisan lawsuit because Facebook's efforts to dominate the market were as illegal as they were harmful," she also said.