Meta in antitrust trial that could force it to break off Instagram and WhatsApp

Meta chief Mark Zuckerberg is giving evidence in a historic antitrust trial that could force the tech giant to break off Instagram and WhatsApp.

The Federal Trade Commission called Mr Zuckerberg as its first witness as it seeks to prove that Meta acquired Instagram and WhatsApp – startups it bought more than a decade ago – to preserve its monopoly in the social networking space.

In opening statements, FTC lawyer Daniel Matheson said Meta has used its position to generate enormous profits even as consumer satisfaction has dropped.

He said Meta was “erecting a moat” to protect its interests by buying the two startups because the company feared they were a threat to Meta’s dominance.

Mr Zuckerberg and other key Meta witnesses will give evidence throughout the trial.

“We’re going to give them their chance to tell their side of the story,” Mr Matheson said.

Mark Hansen, a lawyer for Meta, said the FTC was making a “grab bag” of arguments that were wrong. He said the firm has plenty of competition and has made improvements to the startups it acquired.

“This lawsuit, in summary, is misguided,” he said, adding: “Any way you look at it, consumers have been the big winners.”

The trial will be the first big test of President Donald Trump’s Federal Trade Commission’s ability to challenge Big Tech.

The lawsuit was filed against Meta — then called Facebook — in 2020, during Mr Trump’s first term as president. It claims the company bought Instagram and WhatsApp to squash competition and establish an illegal monopoly in the social media market.

Meta, the FTC argues, has maintained a monopoly by pursuing Mr Zuckerberg’s strategy, “expressed in 2008: ‘It is better to buy than compete’. True to that maxim, Facebook has systematically tracked potential rivals and acquired companies that it viewed as serious competitive threats”.

Facebook also enacted policies designed to make it difficult for smaller rivals to enter the market and “neutralise perceived competitive threats”, the FTC says in its complaint, just as the world shifted its attention to mobile devices from desktop computers.

“Unable to maintain its monopoly by fairly competing, the company’s executives addressed the existential threat by buying up new innovators that were succeeding where Facebook failed,” the FTC says.

At the hearing, Mr Matheson focused on a June 2011 communication sent to colleagues that illustrated Mr Zuckerberg’s frustration with a lack of progress on developing a photo-sharing app to compete with Instagram.

“The way I read this message is that I’m not happy about how we’re executing on that project,” Mr Zuckerberg said.

Mr Matheson followed up by asking if that was because of Instagram’s rapid growth.

“That does seem to be what I’m highlighting,” Mr Zuckerberg replied, adding that he is always urging his teams to do better.

Mr Zuckerberg sometimes said he could not remember details about documents Mr Matheson showed him. Later in the day, the Meta chief executive appeared frustrated when Mr Matheson asked him about concerns he expressed about how fast Instagram was growing.

“I don’t have the full timeline of Instagram’s development in my head,” Mr Zuckerberg said when Mr Matheson asked him about his mention of its growth. “You could probably get that better from somebody else.”

Facebook bought Instagram — then a photo-sharing app with no ads and a small cult following — in 2012. The billion-dollar cash and stock purchase price was eye-popping at the time, though the deal’s value fell to 750 million dollars after Facebook’s stock price dipped following its initial public offering in May 2012.

Instagram was the first company Facebook bought and kept running as a separate app. Until then, Facebook was known for smaller “acqui-hires” — a type of popular Silicon Valley deal in which a company purchases a startup as a way to hire its talented workers, then shuts the acquired company down.

Two years later, it did it again with the messaging app WhatsApp, which it purchased for 22 billion dollars.

WhatsApp and Instagram helped Facebook move its business from desktop computers to mobile devices, and to remain popular with younger generations as rivals like Snapchat (which it also tried to buy) and TikTok emerged.

However, the FTC has a narrow definition of Meta’s competitive market, excluding companies like TikTok, YouTube and Apple’s messaging service from being considered rivals to Instagram and WhatsApp.

Meta says the FTC’s lawsuit “defies reality”.

“The evidence at trial will show what every 17-year-old in the world knows: Instagram, Facebook and WhatsApp compete with Chinese-owned TikTok, YouTube, X, iMessage and many others,” the company said in a statement.

“More than 10 years after the FTC reviewed and cleared our acquisitions, the commission’s action in this case sends the message that no deal is ever truly final. Regulators should be supporting American innovation, rather than seeking to break up a great American company and further advantaging China on critical issues like AI.”

In a filing last week, Meta also stressed that the FTC “must prove that Meta has monopoly power in its claimed relevant market now, not at some time in the past”. This, experts say, could also prove challenging since more competitors have emerged in the social media space in the years since the company bought WhatsApp and Instagram.

Meta’s fate will be decided by US District Judge James Boasberg, who late last year denied the firm’s request for a summary judgment and ruled that the case must go to trial.