A PYMNTS Company

US: FB’s plan to merge messaging services may raise antitrust concerns

 |  January 27, 2019



Facebook’s reported plans to integrate its three messaging platforms could lead to additional regulatory scrutiny.

The New York Times reported on Friday, January 25, that Facebook plans to combine the technical infrastructure behind WhatsApp, Instagram, and Facebook Messenger, though the apps will continue to function as separate services. The paper cited four people familiar with the company’s plans.

CNBC spoke with several antitrust lawyers who all said that Facebook’s move is unlikely to bring new antitrust action against the company.

Marc Rotenberg, president and executive director the Electronic Privacy Information Center, told the Times that Facebook’s plans would be “a terrible outcome for internet users,” and Representative Ro Khanna (Democrat-California) took to Twitter to voice his concern.

“This is why there should have been far more scrutiny during Facebook’s acquisitions of Instagram and WhatsApp which now clearly seem like horizontal mergers that should have triggered antitrust scrutiny,” Khanna wrote.

Facebook is facing pressure over its privacy practices and platform manipulation by foreign actors. At a hearing of international lawmakers in the UK in November, a Canadian representative suggested antitrust might be the solution to Facebook’s problems.

“What we’re regulating … are the symptoms,” said Charlie Angus, Canada’s vice chairman of the House of Commons’ standing committee on access to information, privacy, and ethics. “Perhaps the best regulation would be antitrust.”

Proponents of breaking up Facebook have suggested spinning out WhatsApp or Instagram. The company’s family of apps sees north of 2.5 billion users each month and dominates mobile traffic. But Daniel Crane, a law professor at the University of Michigan, said that combining the back-end technology of the services shouldn’t factor into that issue.”

“As a matter of antitrust law, that doesn’t really have any impact, and how Facebook chooses to organize its wholly-owned entities is not an antitrust issue,” Crane said. “The bigger question is how Facebook was allowed to own three media outlets in the first place.”

Facebook acquired Instagram in 2012 for about US$1 billion and shelled out US$19 billion for WhatsApp two years later. The company largely steered clear of regulators until last year, when the extent of its privacy problems started to become clear. CEO Mark Zuckerberg went to Washington and responded to numerous legislators’ questions about whether the company should be regulated.

When it comes to the messaging platforms, the company made previous public statements suggesting they would remain separate, which they largely have to date. A 2014 Federal Trade Commission letter regarding the proposed WhatsApp acquisition quoted a Facebook spokesperson as saying that “WhatsApp will operate as a separate company and will honor its commitments to privacy and security.” A Times story from Facebook’s 2012 acquisition of Instagram noted “both companies expressed their commitment to run Instagram as an independent service.”

A Facebook spokesperson told CNBC in an emailed statement that it’s focused on offering “fast, simple, reliable and private” messaging services that are also secure.

“As you would expect, there is a lot of discussion and debate as we begin the long process of figuring out all the details of how this will work,” Facebook stated.

Barak Orbach, a professor of law at the University of Arizona, said serious changes to antitrust law are inevitable given the evolution of the economy. The laws have not caught up with modern businesses and platforms, he said.

“Antitrust was created in the industrial revolution in the 19th century at the turn of the century,” Orbach said. “And antitrust will inevitably change in the current industrial revolution.”

Full Content: CNBC

Want more news? Subscribe to CPI’s free daily newsletter for more headlines and updates on antitrust developments around the world.