I guess you won’t be surprised to hear that the world’s most popular social network Facebook has been sued again. I’m telling you what’s going on, what Mark Zuckerberg’s company is accused of, and what might be the consequences.
Who and why sued Facebook?
According to the Wall Street Journal, on November 9th, a lawsuit was filed against the IT corporation. The US Federal Trade Commission alongside 46 states accuses the company of suppressing competition in the market and creating a monopoly.
The accusers are sure that Facebook has bought Instagram and WhatsApp to prevent these startups from getting stronger in the segment and become dangerous rivals with impressive potential. This, according to the FTC, steals the advantages of competition from consumers.
What are the plaintiffs pursuing?
Accusing Facebook of violating the labor legislation, the regulators insist on Facebook selling Instagram and WhatsApp. I remind you that the photo exchange service was bought in 2021 for 1 billion USD, while the messenger – in 2014 for 19 billion USD.
How does Zuckerberg’s team react?
In the office of the IT giant, they remind that both mergers were scrutinized and approved by all the necessary regulators.
With Instagram, it was the FTC, and with WhatsApp – the European Commission. At that time, neither regulator noticed any evidence of a real or potential threat for competition in the sphere.
As the WSJ puts it, the founder of the social network is sure of his victory. He thinks that after the merger, both services became better and more popular. Rivalry in the niche is called severe but fair.
Might the apps really be sold?
Of course, there is a possibility that the FTC and states will win but it is tiny. We must realize that over these years, Instagram and WhatsApp have become intrinsic parts of Facebook.
This means they share data storage and processing centers, legal support, content moderation systems, safety systems, and advertising algorithms. We can already predict that the fight will be long and tiring.
What’s with the stocks?
In the market history, there might be cases when lawsuits had a positive effect on a company’s stocks, but with Facebook, it is the other way round. Since December 9th, when the news about the lawsuit appeared, the stock price of the company has been falling: from 283.4 USD to 273.5 USD per stock.
Anti-monopoly lawsuits against major players of the IT market have been around for a couple of years. One example is the meeting of Alphabet, Facebook, and Twitter heads with the US Senate Committee on Trade. That day these IT companies dropped in price by over 100 billion USD.
New lawsuits against Mark Zuckerberg are already harming the company’s stocks. However, as long as there is no information about any strong evidence supporting the plaintiffs, it is hard to imagine that they will succeed.
The mergers happened quite a long time ago; moreover, they have been checked thoroughly by corresponding regulators. By now, these services have been fully integrated into the structure of the corporation, hence the split demanded by the claimants will be a painful task.
Experts say that the process will last long: any decision might take years to make, and the company is most likely to win.