Is Facebook a Monopoly?
Facebook (NASDAQ: FB) the social media company occasionally deemed a ‘monopoly’ by governments worldwide, influences 3 billion people around the world. They also work with more than 200 million businesses throughout their social media platforms.
FB seems to be on the brink of new controversies quite frequently over their unclear data policies for their users, and shady business with private data.
Complications With Antitrust
The U.S. government recently has been recognizing Facebook as a social media monopoly, this is why the Federal Trade Commission (FTC) has sued Facebook, because of them buying up their competitors such as WhatsApp and Instagram to eliminate competition in the industry.
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Facebook has attempted to dismiss the lawsuits, claiming they were a part of “relentless criticism” of the company. However, the government is continuing to hold big technology companies accountable.
Facebook isn’t the only company to be under criticism, Google’s parent company Alphabet is also facing legal action from the FTC. Regardless of what comes out of these lawsuits, it will impact FB shareholders and social media users for many years.
The Reason
Facebook’s antitrust lawsuit didn’t just come out of nowhere, it’s because they have made massive acquisitions that promoted anti-competitive characteristics. Instagram and Whatsapp were both acquired which gave the company a tight grasp over many social media platforms. These platforms harvested data simultaneously from their billions of users worldwide.
Instagram was acquired for $1 billion in 2012 and Whatsapp for $22 billion in 2014 after Facebook’s CEO Mark Zuckerberg realized they would have competition that could destroy their leading position entirely. These platforms may seem like different companies from the front-end interfaces, but the back-end data is integrated heavily with each other. Facebook has also been very bleak with what they do with user’s data.
This is why the FTC is asking the courts to reverse the acquisitions from Facebook of Instagram and Whatsapp, they truly believe it’s the most beneficial outcome.
The U.S. government has been recognizing the roles which big technology companies such as Facebook, Google, Apple, Amazon, and Microsoft play. They also believe that these companies are uncontrollable and bring too much combined value to the new digital economy.
The Potential Outcome
These lawsuits might take Facebook’s core business model and distort it dramatically if these reversed acquisitions are put in place. This would mean a significant cut from Facebook’s valuation, and undoubtedly massive backlash from investors. Although if the acquisitions were to be reversed, we may get to see Instagram and Whatsapp initiate their own public offerings allowing investors to buy shares in the individual companies.
These split-up companies may even become monopolies of their own one day which may create further problems for the FTC. After all, you didn’t eliminate the problems, you just divided them up.
It’s important to note that it’s within the FTC’s best interest to enforce antitrust laws because not only does it prevent monopolies, it also protects consumers. These laws maintain a competitive marketplace for all companies so those big corporations cannot target competitive threats through acquisitions, and instead build goods and services through their own resources.
Overall, It’s uncertain if these lawsuits will be successful, or how long this process may take. However, there may be a volatility storm coming for shareholders of Facebook if tensions continue to rise. There is a lot at stake for Facebook since its entire business foundation could be destroyed. If the FTC is successful, we may finally have more competitive corporations looking to make the best social media environments through their own resources. This will undoubtedly be a lengthy battle between the FTC and Facebook as it may take a very long time to see any real results take place.
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