Government might try to block Facebook integration of Instagram, WhatsApp
Regulators are considering a plan to stop Facebook from further integrating Instagram and WhatsApp, a sign that Washington is ready to take drastic steps to police big tech companies, according to antitrust experts. Any regulatory action is still far off, and would face a number of hurdles, but in the most extreme scenario Facebook could be forced to divest WhatsApp and Instagram or rearrange its business relationship with the companies.
Such a move could also leave the company more vulnerable to being broken up.
On Thursday, The Wall Street Journal reported that the Federal Trade Commission could seek an injunction against Facebook in the new year. If approved, it would prevent Facebook from further integrating all the parts of its business—something critics say is a strategy to make it harder for the government to break up the company. The injunction would be one of the most forceful actions yet against Facebook, which was already hit with a $5 billion fine in the U.S. this year over data lapses that left user information vulnerable.
Facebook declined to comment on the news.
Regulators pursued Facebook over its dealings with Cambridge Analytica, the third-party data firm that illicitly harvested profiles of up to 87 million Facebook users. Now, Facebook is under further investigation, with some lawmakers calling for the breakup of the company that is viewed as dominant in the social media space, especially since it bought Instagram and WhatsApp. Washington has been aggressively investigating big tech companies, not just Facebook but Google, Amazon and Apple, too.
“This could be one of the more muscular acts of the agency in a long time,” says David Carroll, associate professor of media design at the School of Art, Media, and Technology at The New School's Parsons School of Design. “Part of the realization that fines have no effect so prohibiting conduct is the only viable tool in the toolkit.”
An injunction would not be easy, however. Seth Bloom, of Bloom Strategic Counsel, has been involved in antitrust cases since the late 1990s, when the Department of Justice broke up Microsoft. In that case, regulators found that Microsoft was bundling its Windows operating system with software services, creating an unfair advantage in the computer market. In a settlement, Microsoft was required to share its application programming interfaces with third-party companies. As for Facebook, a similar judgment would be far off. The Federal Trade Commission would have to vote to seek the injunction, and then a judge would have to agree, after Facebook mounts a defense. Appeals would be likely.
“They have to file a lawsuit,” Bloom says. “They can’t just do it unilaterally. It’s not something that would happen instantaneously.”
Regulators have to prove that Facebook’s integration has given it unfair competitive advantages. “I think it would be a difficult case of them to make to show that further integrations will harm competition,” Bloom says.
Presidential candidates have advocated for breaking up the social network, and new laws have been introduced to subject the company to more government oversight. Last month, Senator Mark Warner introduced a bill that would force platforms like Facebook to embrace “interoperability.” The law would create a playing field where rivals would have access to all the same tools that Facebook developed to integrate with Instagram. That way Facebook wouldn’t have special advantages.
Facebook is already starting to embrace certain elements of “interoperability,” too. Just this month, it built a new way for its users to transfer photos and videos to a rival service, Google, and it plans to extend that sharing to other platforms next year.
Facebook’s integration with Instagram and WhatsApp are perhaps most noticeable on the ad side of the business. Advertisers can set campaigns to run across all Facebook apps, and they can message customers on all apps from one central location.
“Facebook has positioned this as a benefit to advertisers, because they can easily select where they want their ads to appear, and Facebook can then target those ads across its properties, using its sophisticated algorithms to show ads in the places where they will get the most response,” Debra Aho Williamson, principal analyst at eMarketer, in an e-mail statement. “As a result, Facebook has been able to grow its ad revenue significantly."
Brian Wieser, GroupM’s global president of business intelligence, says that that an injunction would take a long time to enforce, if it ever even passes the legal hurdles. So, any potential effects on advertising, if there were any, are still far off.
Wieser says that antitrust action can benefit advertisers and investors. Creating more competition gives advertisers a more level playing field from which to operate, for instance. There could also create more independent platforms to support.
“There are concerns that regulators have in general about large tech companies,” Wieser says. “There will be moves to limit their size and in some cases force breakups. But these things take a very long time to play out and in many cases create value for investors and possibly advertisers.”