F.T.C. Is Said to Consider an Injunction Against Facebook

F.T.C. Is Said to Consider an Injunction Against Facebook
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Such an action would seek to block a technical integration of WhatsApp, Facebook Messenger and Instagram, people familiar with the matter said.

The Federal Trade Commission is considering seeking a preliminary injunction against Facebook to prevent the social network from integrating several of its messaging services, according to three people with knowledge of the matter.

The agency has discussed how the Silicon Valley company is stitching together the technical infrastructure underlying WhatsApp, Instagram and Facebook Messenger, said the people, who spoke on the condition of anonymity because the talks are confidential.

The F.T.C. is weighing whether such an integration would make it harder to potentially break up Facebook, they said, especially if the agency determines that the company’s acquisitions of some of those apps reduced competition in social networking. The agency has not made a final decision about what to do, the people said.

The F.T.C. and Facebook declined to comment. The potential injunction was reported earlier by The Wall Street Journal.

Facebook and other big technology companies — Google, Apple and Amazon — have been under growing scrutiny for how they are wielding their power. Facebook has attracted particular attention for its dominant position in social networking and how it bought smaller rivals such as Instagram and WhatsApp over the years, which buttressed its lead.

In July, Facebook disclosed that the F.T.C. was investigating it over antitrust concerns. The Justice Department, Congress and state attorneys general are also examining whether Facebook has acted anticompetitively.

Leading antitrust academics and others have laid out a case to regulators for breaking up Facebook by unraveling its acquisitions of Instagram and WhatsApp. They have argued that the company made “serial defensive acquisitions” to protect its edge in the market for social networks.

But seeking an injunction of this kind would be an uncommon step for a federal antitrust agency because officials rarely consider unwinding mergers that have already closed. A majority of F.T.C. commissioners would need to approve the move in a formal vote, said an agency official who was not authorized to speak publicly.

The agency would also face a high bar in court to show that Facebook was about to violate antitrust laws or already had, this person said. A court is unlikely to issue an injunction simply to give the commission more time to investigate, the person said.

The F.T.C. discussed seeking an injunction after Mark Zuckerberg, Facebook’s chief executive, disclosed he was working to unify the technical systems of WhatsApp, Instagram and Facebook Messenger. The integration would allow Facebook’s more than 2.7 billion users to communicate across the platforms, so messages sent through WhatsApp could be received by users who have Facebook accounts and forwarded, in turn, to people on Instagram.

In March, Mr. Zuckerberg said he was trying to unify the apps so that people could engage more easily in private and encrypted communications.

“We’re building a foundation for social communication aligned with the direction people increasingly care about: messaging each other privately,” he said in an interview at the time. “I believe a privacy-focused communications platform will become even more important than today’s open platforms.”

But regulators and lawmakers have been concerned that the moves may make it more difficult to disentangle the apps in the future.

In practice, the back-end infrastructure of many Facebook properties has been shared for some time. Facebook and Instagram both use the same architecture to run their advertising businesses, for example.

If the F.T.C. thinks “that there is any plausible case for challenging previous transactions,” said Gene Kimmelman, a former Department of Justice antitrust official, “seeking an injunction to prevent integration is critical because otherwise they mix the assets together.”

“It’s a little bit like scrambling an egg,” added Mr. Kimmelman, now a senior adviser at the consumer group Public Knowledge.

Facebook announced that it was buying Instagram, a photo-sharing app with only a baker’s dozen full-time employees, for $1 billion in 2012. The app quickly swelled to more than one billion users and is now widely seen as the crown jewel of the Facebook empire.

Mr. Zuckerberg made another audacious bet in 2014 with the $22 billion purchase of WhatsApp, an app that sends text, video and photo messages. WhatsApp is especially popular internationally. Wall Street analysts have said the app, which brings in little revenue, could become a big moneymaker.

Both deals were approved by the F.T.C.

Joseph Simons, the agency’s chairman, has recently said it is open to breaking up big tech companies but has also highlighted the challenges of unwinding mergers of the firms. He has publicly said Facebook’s plan to integrate its apps would pose challenges if regulators wanted to split up the social network.

The F.T.C. has previously faced criticism over whether it has acted aggressively enough against big tech companies.

In July, the agency announced a record $5 billion fine against Facebook to settle privacy violations with users’ data. But Democratic lawmakers and consumer groups said the action was inadequate and would not deter the company from harming users because the agreement did not force changes to social network’s core business of collecting data for targeted advertising.

Source: NY Times

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