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Summary
- The US Federal Trade Commission and a 46-member bipartisan group of states and districts has filed antitrust lawsuits against Facebook Inc (NASDAQ: FCBK, FCBK:US) which seek to split the social media company.
- The antitrust lawsuit accuses the Silicon Valley giant of misusing its monopoly powers as a dominant player in the social networking landscape to quash competition and smaller businesses.
- Zuckerberg bought image-sharing app Instagram in 2012 in US$ 715-million deal, and messaging service platform WhatsApp for US$ 22 billion a couple of years later.
- Stocks of Facebook Inc, which jumped over 35 per cent this year, slumped about two per cent between Wednesday and Thursday.
Mark Zuckerberg’s Facebook Inc (NASDAQ: FCBK, FCBK:US) seems to be in hot water with the Federal Trade Commission (FTC) in the United States.
The FTC and a 46-member bipartisan group of states and districts, on Wednesday, December 9, filed antitrust lawsuits against Facebook, which seek to split the social media company. In other words, the FTC and the coalition group wants Facebook to divest of its acquired businesses of Instagram and WhatsApp.
The antitrust lawsuit accuses the Silicon Valley giant of misusing its monopoly powers as a dominant player in the social networking landscape to quash competition and smaller businesses.
What happens if Facebook divests its businesses of Instagram & WhatsApp?
Zuckerberg acquired the image-sharing app Instagram in 2012 for US$ 715-million deal. A couple of years later, Facebook acquired messaging service platform WhatsApp for about US$ 22 billion.
© Kalkine Group 2020
The FTC commission, in its latest complaint, attacked Facebook for “anticompetitive behavior”, saying that the company made these deals to “squelch” threats from competitors and smaller companies.
Facebook generates a huge chunk of its revenue from Instagram. And WhatsApp is where the tech giant is spinning its digital commerce business. Hence, it is safe to say that having to give up these two platforms would hamper Zuckerberg’s empire to a great extent. The company is also planning to launch its cryptocurrency - Libra blockchain - in 2021.
Stocks of Facebook Inc, which jumped over 35 per cent this year, slumped about two per cent between Wednesday and Thursday.
So, is Facebook splitting up?
The short answer is, we don’t know that yet. The result of the FTC antitrust lawsuits is yet to be released and until it does, Facebook Inc’s future is unknown.
However, it should be kept in mind that Facebook did not make its acquisitions in the vacuum. When it had proposed its deals to acquire Instagram and WhatsApp, the FTC had greenlit them. The company could now use these approvals in its defense against the lawsuits.
Facebook came under much scrutiny in the last couple of years following the acquisitions, especially when the FTC launched a fresh probe into accusations of antitrust violations last year.
Around October this year, the United States Justice Department set in motion lawsuits against Facebook and three other tech giants, including Google, Apple Inc, and Amazon Inc for abusing their weight to disrupt competition.
