How Facebook might lose Instagram and WhatsApp: An Explainer

And what will happen to those apps if it does.

When the Netflix documentary The Social Dilemma this year again shed light on our collective addiction to social media and Facebook’s nefarious strategies to keep us glued to their services, a familiar cry went up: “Boycott!”. 

But many forgot a crucial fact – Instagram and WhatsApp are also owned by the tech giant. It’s this fact that has now (finally) launched two-headed antitrust lawsuits against Facebook in the US by both the Federal Trade Commission and 48 state attorneys. The former lawsuit aims to actually reverse their purchase of Instagram and WhatsApp, turning them back into independent companies up for sale.

But what is an antitrust lawsuit? Why didn’t this happen when they bought them in 2012 and 2014? Will Instagram look different if it becomes independent? MTV Australia has broken it down for you.

What are antitrust laws and how has Facebook allegedly broken them?

Antitrust laws are rules to stop any one company from having too much market power, and forming a monopoly. Most often, this means preventing big companies from buying up their competitors, merging to create superpowers or even secretly scheming with a select few other companies to box any smaller competitors out.

Facebook is accused of breaking antitrust laws with its $1 billion purchase of Instagram in 2012, and What’s App for nearly $19 billion two years later – Ian Conner, director of the FTC’s Bureau of Competition, described the behaviour as “anticompetitive conduct” in a statement. 

New York Attorney General Letitia James went further, saying the platform “used its dominance and monopoly power to crush smaller rivals and snuff out competition… [using] vast amounts of money to acquire potential rivals before they could threaten the company’s dominance.”

Facebook isn’t the only Big Tech company fighting off accusations of anti-competitive behaviour at the moment – in October, the Department of Justice filed an antitrust lawsuit against Google, charging the search engine with a long list of unlawful monopolistic practises. These include having an 80% market share of online search, using profits from its monopoly to buy agreements with companies like Apple to make it the default search engine on all its devices, and locking out online advertisers.

Why now and not when they bought the apps?

When Facebook bought Instagram in 2012, people were thinking less about the company building a monopoly and more about the overvaluation of the fledgling photo-sharing app. But a lot has changed since then – the user bases were far smaller in 2012 – and anti-Facebook and social media sentiment is riding high.

Last year, US Democratic presidential candidate Elizabeth Warren ran her campaign on a plan to break up all Big Tech companies: Amazon, Google, Apple and Facebook. Her policy included a promise to rescind Facebook’s purchases of What’s App and Instagram. Warren was unsuccessful in winning the nomination, and most of the other Democratic candidates gave alternative solutions for dealing with the bogeymen of Silicon Valley.

But the idea to invoke antitrust laws gained a lot more traction this year when emails from Facebook founder Mark Zuckerberg in 2012 surrounding the purchase of Instagram emerged in hearings for the US House of Representatives antitrust subcommittee. The quotes were pretty damning: Zuckerberg told Facebook’s then Chief Financial Officer that they were “buying time” by snatching up Instagram. 

“Even if some new competitors springs up, buying Instagram, Path, Foursquare, etc now will give us a year or more to integrate their dynamics before anyone can get close to their scale again. Within that time, if we incorporate the social mechanics they were using, those new products won’t get much traction since we’ll already have their mechanics deployed at scale,” he wrote.

Zuckerberg was aware of the possible infraction of antitrust laws when he sent a follow-up email less than an hour later: “I didn’t mean to imply that we’d be buying them to prevent them from competing with us in any way.”

What will happen to Instagram and WhatsApp?

Both Instagram and WhatsApp would return to being independent businesses if the FTC’s lawsuit was successful. The creators of both apps have already left Facebook, opposed to the direction their apps had taken under the behemoth’s umbrella, particularly over privacy and data-sharing.

The logistics of the break up are difficult to envision, but the link between services would effectively shatter – no longer would you be able to load in contacts from Facebook to either platform. There isn’t a good track record as to what the break up of Big Tech looks like in the 21st Century: attempts against Microsoft and Apple have all failed. 

Both companies will go up for sale, and it’s a sure bet Twitter will re-bid for Instagram after their failed attempt in 2012 – under close scrutiny from an energised FTC. A newly independent version of either app would likely market its distinction from Facebook, particularly on the port of pressing concerns like privacy, social media addiction and misinformation.

What does Facebook think?

Unsurprisingly, Facebook is unhappy with the lawsuits. Facebook's vice president and general counsel, Jennifer Newstead indicated they plan to fight them in court.

"Instagram and WhatsApp became the incredible products they are today because Facebook invested billions of dollars, and years of innovation and expertise, to develop new features and better experiences for the millions who enjoy those products," she said in a statement.

"The most important fact in this case, which the Commission does not mention in its 53-page complaint, is that it cleared these acquisitions years ago. The government now wants a do-over, sending a chilling warning to American business that no sale is ever final."

Buzzfeed News reports that in a company-wide meeting in October, Zuckerberg hushed employee discussion of the matter.

“I just think we should make sure that people aren't just, you know, mouthing off about this and saying things that may reflect inaccurate data, or generally just are kind of incomplete,” he said.

“You shouldn't be emailing about these things and you shouldn't really be discussing this in non-privileged forums across the company.”

Written by Josh Martin, a Melbourne-based freelance music and media writer with words in MTV Australia, NME, Junkee, Crikey, etc. Follow him on Twitter @joshuamartjourn.

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