Meta has overcome an existential challenge to its business that could have forced the tech giant to spin off Instagram and WhatsApp after a judge ruled the company did not have a social media monopoly.
U.S. District Judge James Boasberg issued his decision Tuesday following the conclusion of the historic antitrust trial in late May.
His decision stands in stark contrast to two separate rulings that branded Google an illegal monopoly in both search and online advertising, dealing a regulatory blow to a tech industry that for years has experienced nearly unbridled growth.
The FTC “continues to maintain that Meta competes with the same old competitors it has dealt with for the past decade, that the company maintains a monopoly among this small group, and that it maintains that monopoly through anticompetitive acquisitions,” Boasberg wrote in his ruling.
“However, regardless of whether Meta had monopoly power in the past, the agency must prove that it continues to have such power now. Today's court verdict determines that the Federal Trade Commission failed to do so.”
FTC says Facebook is committed to 'neutralizing' threats
The federal agency argued that Meta maintains a monopoly, following a saying made by CEO Mark Zuckerberg in 2008: “It’s better to buy than to compete.” True to this principle, Facebook systematically monitors potential competitors and acquires companies that it considers to be a serious competitive threat.”
During his April testimony, Zuckerberg denied claims that Facebook bought Instagram to neutralize the threat.
During questioning, FTC lawyer Daniel Matheson repeatedly referred to emails, many more than a decade old, written by Zuckerberg and his colleagues before and after the Instagram acquisition.
While acknowledging the existence of the documents, Zuckerberg has often tried to downplay their contents, saying he wrote the emails early in the acquisition process and that the notes do not fully reflect the extent of his interest in the company.
But this was not about the acquisitions of Instagram and WhatsApp more than a decade ago, which were then approved by the Federal Trade Commission, but about whether Meta now holds a monopoly.
Prosecutors, Boasberg wrote in the ruling, can win only if they prove “current or imminent violations of the law.”
The FTC complaint said Facebook also adopted policies designed to make it more difficult for smaller competitors to enter the market and “neutralize perceived competitive threats” as the world shifted its attention from desktop computers to mobile devices.
The parent company of Facebook and Instagram Meta is getting rid of fact checkers on the platforms and will instead rely on users to comment on accuracy, but experts warn the move will likely increase the spread of misinformation.
Why the decision matters to the Meta
The decision “recognizes that Meta faces intense competition,” the company said Tuesday.
“Our products benefit people and businesses and exemplify American innovation and economic growth,” Jennifer Newstead, general counsel, 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 its case in 2020 that each time the court looked at Meta's apps and competition, they changed, Boasberg said.
The two dismissal orders filed in 2021 and 2022 did not even mention the popular social video platform TikTok. Today, he “is in the spotlight as the Meta's fiercest rival.”
Quoting the Greek philosopher Heraclitus, “no man can step into the same river twice,” Boasberg said the same is true in the online world of social media.
“The environment that existed just five years ago when the Federal Trade Commission filed this antitrust lawsuit has changed markedly. While it may have once made sense to separate apps into separate social media and social media markets, that wall has since come down,” he wrote.
The head of Meta has been tasked with apologizing – on the spot – to the families of children exposed to sexual content on its social media platforms, answering questions about actions taken to protect victims from online harm.
Meta is not “out of the woods”
Emarketer analyst Minda Smiley said Meta's win “isn't necessarily surprising given the lengths it has had to go through in recent years to keep up with TikTok.”
“But from a regulatory perspective, Meta is far from a success: next year, major social networks will face historic trials in the US regarding children's mental health,” she added.
“However, 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 Meta in the long run.”
In 2012, Facebook bought Instagram, then a poor photo-sharing app with no ads and a small cult following.
The $1 billion U.S. purchase price for shares and cash was eye-popping at the time, although the deal's value fell to $750 million after Facebook's share price fell following its May 2012 initial public offering.
Instagram was the first company that Facebook bought and continued to operate as a standalone app. Before this, Facebook was known for small “acquisitions,” a variation of a popular Silicon Valley deal in which a company buys a startup to hire talent and then shuts down the acquired company.
Two years later, the company did the same with messaging app WhatsApp, which it acquired for $22 billion.
WhatsApp and Instagram helped Facebook move its business from desktop to mobile and remain popular among younger generations as competitors like Snapchat (which it also tried and failed to buy) and TikTok emerged.
However, the FTC has a narrow definition of Meta's competitive market, excluding companies like TikTok, YouTube and Apple's messaging service as competitors to Instagram and WhatsApp.
Investors did not seem surprised by the decision. Shares of the Menlo Park, Calif.-based company fell $1.52 to $600.49 in afternoon trading Tuesday, in line with broader market trends.
A coalition of media companies, including CBC/Radio-Canada, is calling on the Competition Bureau to investigate Meta's efforts to block news on Facebook and Instagram in Canada.
