Instagram and WhatsApp are at risk in Meta’s FTC trial

Mark Zuckerberg’s social media empire reached billions of people thanks to his strategic purchases of Instagram and WhatsApp in 2012 and 2014, respectively.

The company and its CEO were criticized by senators from both parties for their interactions with the Chinese government and Mark Zuckerberg’s alleged lack of candour with Congress, just days before the Federal Trade Commission’s historic antitrust case against Meta Platforms is scheduled to start in federal district court here.

Over ten years later, the US Federal Trade Commission is suing those transactions in a historic antitrust case that will go to trial on Monday. The commission claims that the purchases were unlawful, should never have been authorized, and ought to be dismantled.

In actuality, Facebook and Mark Zuckerberg have consistently misled the American people. At the hearing of the crime and counterterrorism subcommittee, which he heads, on Wednesday, Sen. Josh Hawley (R-Missouri) stated, “And I think as we’ll see today they have lied to Congress as well.” “This needs to end now. This committee has thus started a thorough inquiry into Facebook’s possible unlawful activity. The hearing today is the first phase of that inquiry.

The FTC contends that it was a mistake to let such transactions happen years ago and that Meta’s acquisitions of Instagram and WhatsApp were “killer acquisitions” that stopped those businesses from competing. The FTC will contend that Meta’s applications have become less effective, primarily due to a rise in advertisements and a weakening of privacy safeguards, in order to bolster its case.

An existential danger to Meta’s hegemony is the FTC’s case, which will begin before US District Judge James Boasberg in Washington. A split would upend years of integration between the market leader’s applications and Facebook, destabilize some of the most well-known digital goods in the world, and cast doubt on the way the government reviews and authorizes transactions.

With a market valuation of $1.3 trillion and a reliance on Instagram advertising income, a split may wipe off hundreds of billions of dollars in market value.

A procession of senior eyewitnesses including Zuckerberg and former Chief Operating Officer Sheryl Sandberg, will testify at the widely followed trial. 

In a statement, Meta expressed its confidence that the data would demonstrate that the acquisitions of Instagram and WhatsApp have benefited consumers and competition. The FTC was also criticized by the corporation for contesting the agreements over ten years later.

According to FTC spokesman Joe Simonson, “the Trump-Vance FTC could not have been more prepared for this trial.” “Some of the most gifted and diligent lawyers in the nation work for this firm.”

Since the FTC’s action was launched under the first Donald Trump presidency, the fast-paced tech industry has undergone tremendous change, and this case will test the government’s authority to enforce competition in this area. Since then, TikTok has become one of the most popular social media applications worldwide, Twitter Inc. was acquired by billionaire Elon Musk, and Meta has introduced competing products to take on both of them.

Over the past few months, Zuckerberg has been pleading with the Trump administration to relax content regulations and do away with DEI and fact-checking programs. Although analysts think Trump is unlikely to get in at this point, the Wall Street Journal stated that he has privately advocated for Trump to step in and settle the issue.

However, that does not exclude Trump from adding his voice later. According to analysts, Trump may try to persuade the FTC commissioners to reach a settlement during an appeals process if Meta loses. In March, Trump dismissed the two Democratic members of the panel, further demonstrating his control over the organization. The two surviving Republicans are running the agency while those commissioners are battling their removal in court.

According to Jennifer Rie, a senior litigation analyst at Bloomberg Intelligence, “those commissioners would think that if he simply decided to speak up and fire the two Democrats, then they could definitely be fired, too.” “So if they fail to perform his bidding, or rise up against him, they are at risk of being fired.” 

FTC Chair Andrew Ferguson told the press in Washington this past week that he would follow legal instructions if Trump ordered him to withdraw the lawsuit, but he would be shocked if that occurred. Last month, Ferguson told Bloomberg TV saying the agency is “gearing up for trial.”

Alphabet’s Google will defend why it shouldn’t be broken up after a judge concluded it illegally monopolized the internet search market two floors above Boasberg’s courtroom, one week after the Meta trial begins. The charges demonstrate that significant antitrust actions brought against digital firms during Trump’s first term are not being backed down by the current administration.

The definition of social media and whether Meta controls that market will determine the outcome of the Meta lawsuit. According to the FTC, the “personal social networking services” industry, which consists mostly of media and communications sent between intimate connections, would be the focus of its investigation.

According to the agency, the two businesses that compete with Meta are Snapchat, owned by Snap Inc., and MeWe, a considerably smaller business. Additionally, it lists other now-defunct rivals, such as MySpace.

Hundreds of emails and other internal correspondence on the company’s development strategy over the past 15 years will be made public during the trial. One such message is Zuckerberg’s stated justification for the Instagram deal, which is included in the FTC complaint: “It is preferable to buy than to be at rival.”

Meta would disagree and say that it faces tremendous competition from multiple companies outside Snap, including Elon Musk’s X, TikTok and YouTube, which is controlled by Google. Meta has spent years copying popular features from other platforms, a technique it will claim reflects a purposeful attempt to stay up with user requirements in a tough industry.

Despite the FTC’s insistence that Instagram and TikTok are not rivals in the social networking space, Meta intends to demonstrate that they are by pointing out that TikTok’s brief suspension in January caused a surge in the use of its products. In order to support its interpretation of the “competitive landscape,” the FTC will be permitted to incorporate testimony from TikTok and Pinterest.

During a pre-trial product demo last week, with a high-profile case Boasberg acknowledged that he is not an expert in Meta’s offerings, asking, “what’s the point” of clicking “like” on a post and admitting that he has never had an account with the company. However, he doesn’t shy away from high-profile cases, including a case that involves top US officials and White House advisers addressing the imminent military action in Yemen via a Signal chat, as well as ongoing legal proceedings over the government’s controversial deportation orders to Venezuela, which have prompted public rebukes from Trump.

It can take years for Meta to be resolved. Boasberg will first determine if Meta’s purchases were illegal. A second round of hearings on how to correct the market would be held if he discovers that the corporation did.

Meta’s battle with the FTC is not limited to this lawsuit. In addition, the FTC is charging Meta for breaking the terms of a 2019 privacy deal in which the business settled claims that it had broken a previous agreement centred on its data security procedures by paying a record $5 billion penalty. Later this summer, Meta will also have to deal with a similar investor complaint in Delaware.

Shweta Khajuria, an analyst at Wolfe Research LLC, stated in an interview with the press, that investors are hoping Trump can assist shape the conclusion now that his relationship with Zuckerberg has improved. Khajuria noted that many on Wall Street have been anticipating a settlement in the antitrust lawsuit.

Investors aren’t preparing for a split, Khajuria stated. “A settlement would be preferable to extending this, which would put a burden on the stock.”