How big is too big? And when does a company become so big that the government is forced to step in and make it smaller? Politicians have been struggling with those questions for at least a hundred years. But as the latest generation of tech companies has taken shape, the questions are becoming more and more relevant to internet giants like Google and Facebook. There’s a new movement in Washington to break up those companies, whether through a Justice Department lawsuit or an old-school appeal to the Sherman Antitrust Act. It’s a struggle Microsoft fended off in the ‘90s, and it has only grown more urgent in the years since. As Amazon has taken a stranglehold of online retail, Jeff Bezos’ company has started to attract antitrust attention as well, with figures like Sen. Elizabeth Warren and Lina Khan taking aim at Amazon’s cutthroat competitive strategies. If it succeeds, it would be one of the most ambitious government projects in a generation — but success is still a long way off.
While the FTC has tried to frame Meta stuffing its apps with ads as a consumer harm, Zuckerberg contends that the company’s users enjoy them. Over time, he says, people tell the company that the quality of ads “has basically approached the quality of the organic content.”
With the rapid growth of Snapchat Stories, Zuckerberg told his team in 2014: “We need to take this new dynamic seriously -- both as a competitive risk and as a product opportunity to add functionality that many people clearly love and want to use daily.” Because of Stories, he wrote, “Snapchat is now more of a competitor for Instagram and News Feed than it ever was for messaging.”
The Meta CEO says that the way they were able to grow Instagram post-acquisition gave him confidence he could do the same for other apps, like Snapchat. In 2013, he told his team about an offer to buy the app that Snap CEO Evan Spiegel ultimately rejected.
“For what it’s worth, I think if we had bought them, we probably would have accelerated their growth,” Zuckerberg testifies. “But that’s obviously a speculation.”
The FTC is presenting documents from 2013 in which Zuckerberg and another executive, Javier Olivan, discussed messaging app competitors and what they’d need to do to keep up. Olivan wrote that he had spent “sleepless nights” worrying about WhatsApp’s growth and warns that “it might be now or never” to improve Meta’s services, given how fast these guys keep growing / the ambitions they are signaling.
In January 2013, Zuckerberg said he thought his team “should block WeChat, Kakao and Line ads. Those companies are trying to build social networks and replace us. The revenue is immaterial to us compared to any risk.” On the stand, he acknowledges that “we worried about them broadly competing with us” ahead of his purchase of WhatsApp.
Zuckerberg concedes that in a perfect world, he probably would have preferred Facebook’s in-house Instagram competitor to succeed so that he didn’t have to shell out for Instagram.
“$1 billion is very expensive,” he says.
We got a brief glance into some more casual conversation between Zuckerberg and his then-COO Sheryl Sandberg. “I want to learn settlers of catan too so we can play,” Sandberg messaged her boss in November 2012. “I can definitely teach you Settlers of Catan,” Zuckerberg replied. “It’s very easy to learn.”
The Meta CEO is testifying about a February 2012 exchange with then-CFO David Ebersman, who said one (potentially bad) reason to buy a company is to “neutralize a potential competitor.” Seeming to ignore Ebersman’s opinion, Zuckerberg said that was one of the reasons he’d actually consider buying Instagram.
On the stand, Zuckerberg says that when you buy a company, you’re obviously taking a competitor off the market, but he thinks Meta maximized Instagram’s value.
The government just posted slides from its opening statement. They give a good roadmap of who we’ll hear from in the coming weeks. The presentation also previews some of the internal Meta documents we’ll see and how the FTC thinks it can win its case.
[ftc.gov]
In a February 2012 message, Mark Zuckerberg floated the idea of acquiring Instagram but not doing much with it so that new competitors wouldn’t creep into the market. On the stand, Zuckerberg deflects this as early thinking and says Facebook ultimately didn’t take this route. The FTC’s attorney points out that this was only a couple of months before the acquisition. From Zuckerberg’s message at the time:
“By not killing their products we prevent everyone from hating us and we make sure we don’t immediately create a hole in the market for someone else to fill but all future development would go towards our core products.”
Zuckerberg is walking through his mindset in February 2012 when he was considering acquiring the rapidly growing photo app. He asked colleagues if a purchase might be worth it even if it costs $500 million. “Theoretically we could go build this technology, but I’m worried we’re so far behind,” he wrote. Zuckerberg testifies he was considering this move ahead of their IPO when, for the first time, the company would have money to consider buying some products.
The FTC is pointing to internal messages from 2011 where Zuckerberg complained that the company was moving too slow on its Facebook Camera app while Instagram was growing rapidly. It turns out, according to messages from other executives at the time, that this was in part because Facebook had interns working on the critical project, rather than more experienced engineers.
There are no fireworks yet. The government is working to elicit answers that might help it establish its view that the relevant part of the social media market Meta dominates is about connecting with friends. Zuckerberg testifies that engaging with friends’ posts is not as much a part of the experience as it was in the past, but concedes that as the service has grown, it’s still a big part of users’ experiences in absolute terms.
The FTC just called the Meta CEO as its first witness. The government has budgeted several hours for him to testify, so he’ll likely cover a lot of ground.
The company accuses the government of backing into a view of the social media market that makes it look like a monopoly, while ignoring robust competitors. It also charted how TikTok’s brief time offline in the US led users to flee to other apps, including its own. See for yourself.
Meta’s attorney Mark Hansen paints the government’s case as one comprised of made-up theories about how both the social media market and the law work. He accuses the government of ignoring TikTok’s massive role in social media by excluding it from its definition of the market that Meta allegedly monopolized.
He’s also dismissive of the idea that Meta users pay for the services by consuming ads, saying they can just scroll past them.
Prior to buying those nascent apps in 2012 and 2014, Facebook recognized both as significant competition, Federal Trade Commission attorney Daniel Matheson argues to open the government’s case.
The FTC will present evidence, such as emails from CEO Mark Zuckerberg, the apps’ founders, and investors, allegedly showing that Instagram and WhatsApp would have grown without Facebook’s help, and that the company’s motive was to take potential rivals out of the market.
I’m here with my colleague Alex Heath at the federal courthouse in Washington, DC where the Federal Trade Commission and Meta are set to lay out their opening arguments beginning at 9:30 AM Eastern Time. Meta is fighting charges that it illegally monopolized a subset of the social media market through its acquisitions of Instagram and WhatsApp years ago.
We’ll keep you updated with the most notable news throughout the day.
Mark Meador, a former staffer for Sen. Mike Lee (R-UT), was confirmed to the Federal Trade Commission. He’ll join Republican Chair Andrew Ferguson and Republican commissioner Melissa Holyoak. Meanwhile, the two Democrats President Donald Trump attempted to fire from the commission are fighting for their jobs back. Under the law, no more than three commissioners can be from a single party.
The Alphabet Workers Union’s announcement of the agreement follows an unfair labor practice charge it filed last year over Google restraining employees from discussing the trial. The company is due in court this month for the remedy phase, which could see it being forced to sell Chrome.
...it is essential that workers are able to discuss these impacts, participate in the deliberations, and, if they choose, bargain collectively around the implementation of any eventual remedy.
[alphabetworkersunion.org]
Things are about to get even more turbulent for the tech industry.
FTC staffers have continued to work on the investigation in recent weeks according to Bloomberg, a sign that Trump-appointed FTC Chairman Andrew Ferguson is going to prioritize scrutiny of tech giants.
The probe, launched under Biden in November, is looking into Microsoft’s AI projects (including its partnership with OpenAI), cloud and software licensing business, and cybersecurity services. These investigations can take years to conclude, giving Microsoft plenty of opportunities to kick up a stink about it.
[bloomberg.com]
That’s one of the minor changes the Justice Department made to its proposed final judgement in its antitrust case. The DOJ Antitrust Division is still operating under an acting chief as President Donald Trump’s nominee Gail Slater awaits confirmation. But so far, the government made only small tweaks to its asks based on discovery. It’s no longer asking that Google divest AI investments, for example, but that it give a heads up on future ones.
[storage.courtlistener.com]
The DOJ sees the proposed acquisition of AI-native network company Juniper Networks as a way for HPE to scoop up a “smaller, innovative rival,” and further consolidate a market in enterprise networking. The companies called the DOJ’s assessment “fundamentally flawed” in a joint statement, and promised to defend the deal.
[justice.gov]
The Federal Trade Commission and Justice Department didn’t take a position on the appropriate outcome, but write in a statement of interest that holding a seat on two competing boards can violate antitrust law — even if the board member foregoes one. At issue is Reid Hoffman’s simultaneous participation on the OpenAI and Microsoft boards.
The Japan Fair Trade Commission is expected to announce that Google’s preferential Search deals with smartphone makers are anticompetitive, reports Nikkei Asia.
Like in the US, Google will get to weigh in after the JFTC releases its verdict. The regulator will “notify Google of the draft of its order, hear the company’s opinion and make a final decision,” writes Nikkei.
