Meta overcame an existential challenge for its business that could have forced the tech giant to spin off Instagram And whatsapp after a judge ruled that the company does 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 has failed to do so.”
The federal agency argued that Meta maintained a monopoly by 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 “a current or imminent violation 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.
Meta said Tuesday's decision “recognizes that Meta faces stiff competition.”
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“Our products benefit people and businesses and exemplify American innovation and economic growth. We look forward to continuing to partner with the administration and invest in America,” Jennifer Newstead, general counsel, said in a statement.
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 “holds the spotlight as the Meta's fiercest competitor.”
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 landscape that existed just five years ago when the FTC filed this antitrust case has changed markedly. While it may once have made sense to separate apps into separate social media and social media markets, that wall has since come down,” he wrote.
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 landmark 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 low-quality photo-sharing app with no ads and little cult following. The $1 billion stock and cash purchase price 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. Until now, Facebook had been 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, California-based company fell $1.52 to $600.49 in afternoon trading Tuesday, in line with broader market trends.
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