Facebook owner Meta wins antitrust case in America, will not have to withdraw from Instagram, WhatsApp

Meta has overcome an existential challenge to its business that forced the tech giant to shut down Instagram and WhatsApp after a judge ruled the company does not hold a monopoly in social networking.

U.S. District Judge James Boasberg issued his ruling Tuesday after the landmark antitrust trial ended in late May.

Their decision is a sharp contrast to two separate rulings that branded Google an illegal monopoly in both search and online advertising, dealing a regulatory blow to the tech industry that had enjoyed nearly unbridled growth for years.

Boasberg wrote in his decision, the Federal Trade Commission “continues to assert that Meta competes with legacy rivals that have existed for the past decade, that the company holds a monopoly among that small group, and that it has maintained that monopoly through anti-competitive acquisitions.”

“Regardless of whether Meta has enjoyed monopoly power in the past, the agency must show that it still has such power. Today’s decision by the Court determines that the FTC has not done that.”

FTC says Facebook aims to ‘neutralize’ threats

The federal agency had argued that Meta maintained a monopoly by following an expression by CEO Mark Zuckerberg in 2008: “‘It is better to buy than to compete.’ True to that adage, Facebook has systematically monitored potential rivals and acquired companies it views as serious competitive threats.”

During his April testimony, Zuckerberg rejected claims that Facebook bought Instagram to neutralize a threat.

In his inquiry, FTC attorney Daniel Matheson repeatedly brought up emails — many of them more than a decade old — that were written by Zuckerberg and his associates before and after Instagram’s acquisition.

While acknowledging the documents, Zuckerberg has often tried to minimize the content, saying that he wrote the emails early in the acquisition process and that the notes did not fully cover the scope of his interest in the company.

But the case was not about its acquisition of Instagram and WhatsApp more than a decade ago, which was cleared by the FTC at the time, but rather whether Meta now had a monopoly.

Prosecutors can only win if they prove a “present or imminent legal violation,” Boasberg wrote in the ruling.

The FTC’s complaint says Facebook also created policies to make it difficult for smaller rivals to enter the market and to “neutralize perceived competitive threats” as the world shifted its focus from desktop computers to mobile devices.

Why does this decision matter for META?

“This decision recognizes that Meta faces intense competition,” the company said Tuesday.

“Our products are beneficial to people and businesses and exemplify American innovation and economic growth,” Chief Legal Officer Jennifer Newsted said in a statement.

“We look forward to continuing to partner with the administration and invest in America.”

The social media landscape has changed so much since the FTC filed the lawsuit in 2020 that each time the court examined Meta’s apps and competition, they had changed, Boasberg wrote.

The two opinions to dismiss the case – filed in 2021 and 2022 – did not even mention the popular social video platform TikTok. Today, it “takes center stage as the meta’s staunchest rival.”

Quoting the Greek philosopher Heraclitus, “No man can step into the same river twice,” Boasberg said the same is true for the online world of social media.

He wrote, “The landscape that existed only five years ago when the Federal Trade Commission brought this antitrust lawsuit has clearly changed. While it might once have made sense to split up social networking and social media apps into separate markets, that wall has been torn down.”

Meta not ‘out of the woods’

eMarketer analyst Minda Smiley said Meta’s win “isn’t necessarily surprising, given how far it has moved in recent years to keep up with TikTok.

“But from a regulatory perspective, META is far from difficult: next year, major social networks will face historic trials in the US regarding children’s mental health,” he said.

“Still, today’s win is certainly a boost for the company as it grapples with criticism and questions about how its massive AI spending will ultimately benefit the meta in the long run.”

Facebook bought Instagram in 2012 – which at the time was a useless photo-sharing app with no ads and a small cult following.

The US$1 billion cash and stock purchase price was attractive at the time, although the deal value dropped to $750 million after Facebook’s stock price declined following its initial public offering in May 2012.

Instagram was the first company that Facebook bought and ran as a separate app. By that time, Facebook was known for small “acquisition-acquisitions” – a type of popular Silicon Valley deal in which a company buys a startup as a way to hire its talented employees, then spins off the acquired company.

Two years later, it did it again with messaging app WhatsApp, which it bought for $22 billion.

WhatsApp and Instagram helped Facebook move its business from desktop computers to mobile devices, and remain popular among younger generations as rivals such as Snapchat (which it also tried to buy, but failed) and TikTok took on.

However, the FTC has a narrow definition of Meta’s competitive market, excluding companies like TikTok, YouTube and Apple’s messaging service from consideration as rivals to Instagram and WhatsApp.

Investors did not seem surprised by this decision. Shares of the company, based in Menlo Park, California, were down $1.52 at $600.49 in afternoon trading Tuesday, in line with broader market trends.