US regulator wants to break up Facebook, but faces an uphill battle

A US regulator wants to break up Facebook following the growth of Instagram and WhatsApp, a move which could have significant implications for Ireland, if successful.
US regulator wants to break up Facebook, but faces an uphill battle

Facebook is likely to argue that breaking up Facebook, Instagram, and WhatsApp would be incredibly difficult in a technical sense.

Facebook executives’ worst nightmare is upon them. US regulator, the Federal Trade Commission (FTC), has declared the social network an illegal monopoly, and said it should be broken up. 

The FTC and more than 40 states in the US called for the unwinding of the company's Instagram and WhatsApp acquisitions, which have allowed it to achieve unprecedented power over global communication and culture.

Facebook protested, saying that these deals were done years ago, in 2012 and 2014, and the acquisitions passed competition scrutiny then, and Facebook argued the US government does not get to request a do-over now.

The outcome of this legal move and a similar US move against Google could have implications for Ireland. 

Facebook last year put through €34.3bn in turnover from some of its global operations through Facebook Ireland and posted a pre-tax profit of €481.8m through the company. Facebook Ireland paid corporation tax of over €173m to post a net profit of around €308m, the recently filed accounts also show.  

But behind the scenes, the company is likely to make a more nuanced argument over the FTC move: That these products are no longer distinct entities, and breaking them up would be incredibly difficult in a technical sense. While the products are distinct to users, they share back-end resources, including servers, advertising, operations, and more.

The integration of both Instagram and WhatsApp into the larger Facebook architecture happened quickly, even though Facebook CEO Mark Zuckerberg had assured the companies' founders that they would maintain relative independence.

Right after Instagram entered Facebook headquarters in September 2012, the tiny photo-sharing app started relying on its parent for some basic grown-up company things, like spam filters, content moderation, legal help, and translation of the app into other languages. It took Instagram’s technical team years to transfer all of its photos from Amazon cloud storage to Facebook’s data centres.

And while Instagram initially planned to build its own advertising products, starting in 2015, Mr Zuckerberg pressured them to use the same ad-buying system as the main social network. 

WhatsApp, too, has relied on Facebook for infrastructure that has supported its growth to 2bn users and beyond. And WhatsApp is dependent on Facebook for content moderation. 

Facebook integrated the products even further — working on an ambitious technical project to merge the chat functions on WhatsApp, Instagram, and Facebook Messenger.

Instead of a group of distinct platforms, Mr Zuckerberg has essentially created a massive network, with little distinction between an Instagram or WhatsApp user. He sees us all as users of Facebook, through whichever portal we prefer.

What that means is that a few months or years from now, we might not be looking at a breakup, but rather a long, painful negotiation between Facebook and the FTC about whether a breakup is even possible or reasonable. 

The US is also moving against Google. In October, the US Department of Justice and no fewer than 11 US attorneys general sued Google on competition grounds, alleging the search and ad giant is "unlawfully maintaining monopolies through anticompetitive and exclusionary practices in the search and search-advertising markets". 

Analysts expect that the new White House administration under president Joe Biden will pursue the lawsuit. 

Meanwhile, the French privacy watchdog has handed out its biggest ever fine of €100m to Google for breaching the country’s rules on online advertising trackers, or cookies.

The CNIL said today it had also fined e-commerce giant Amazon €35m for breaking the same rules. 

Bloomberg, Irish Examiner, and Reuters staff

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