The United States Federal Trade Commission (FTC) has challenged Facebook’s monopolistic practices by accusing the company of engaging in an illegal buy-or-bury scheme.
For more than a decade, Facebook has dominated the social media and digital platform landscape. Throughout its history, Facebook has acquired over 91 different companies, dipping its fingers into fields such as instant messaging (WhatsApp), virtual reality (Oculus), photo media (Instagram), cryptocurrency (DIEM), and a whole lot more. These mergers and acquisitions were designed to build Facebook’s platform and benefit consumers. However, the FTC alleges that all of these acquisitions were resorted to in a buy-or-bury fashion, where Facebook purposefully bought out smaller competitors to secure its market position. Moreover, Facebook engaged in surveillance-based advertising by luring app developers to its platform and harvested innovative ideas before burying anything that could be deemed a threat to its overall platform.
The rationale behind the FTC’s complaint is that Facebook has not been able to attune itself to mobile marketplaces. This issue has been prevalent since 2010 when smartphones saw widespread adoption. At the time, Facebook was solely reliant on desktop-based technology and lacked the business acumen to translate its platform to mobile phones. This is where we saw Facebook scoop up competitors like Instagram (2012) and WhatsApp (2014) to revitalise its brand image. According to the FTC, these key acquisitions saw Facebook beginning to harm the competitive landscape and in turn negatively affect consumer choice. Similarly at this time, developers who previously relied on Facebook’s open-access policies were forced into conditional contracts that prevented any work on competitive products. This permitted Facebook to insulate itself from competitive advancements whilst improving its own technology. The FTC provided a detailed report featuring statistics and data points to illustrate Facebook’s dominance as a digital platform.
By virtue of its operation, Facebook has installed high barriers of entry for competitors whilst hampering consumers. Most recently, heavy consumer complaints have been circulating with regards to the Oculus virtual reality headset. Old and new users of the headset are required to sign in with Facebook accounts or risk losing functionality. The German Bundeskartellamt has already begun an investigation into this which only cements the FTC’s position against Facebook’s dominance. Additionally, competition and consumer regulatory bodies in Australia and the United Kingdom have brought cases against Facebook and its monopolistic practices.
As we continue to operate in a digital environment, it will become imperative that companies such as Facebook are growing innovation rather than hampering alternative platforms and controlling consumers. It will be interesting to see how Facebook responds to these allegations.
