FTC, State AG Antitrust Case Puts Innovation in the Crosshairs, Says ITIF

December 9, 2020

WASHINGTON—In response to a set of antitrust lawsuits announced today against Facebook by the Federal Trade Commission and a coalition of states, Robert Atkinson, ITIF's President, released the following statement:

Today’s antitrust actions threaten both U.S. competitiveness and U.S. consumers. 

Silicon Valley enjoys tremendous success globally in part because U.S. tech firms innovate quickly, including through acquisitions that allow them to bring in new talent, intellectual property, and more users. Companies and investors are going to lose faith in regulators if policymakers want to reverse course on prior decisions and call a mulligan this late in the game. 

Moreover, the proposed remedy—divesture of Instagram and WhatsApp—would cause a massive disruption to these services, negatively impacting consumers and businesses who rely on their services. For example, Facebook has invested heavily in cyber security and content moderation across its platforms.

In addition, the first principle of antitrust action is to define the relevant market. In this case, the relevant market is not social media—it’s the advertising market, where there is significant competition for both advertisers and consumers. Even if the FTC only considers the consumer side of the market, a wide array of Internet platforms bid for the time of consumers, including new and fast-growing ones like TikTok.

Finally, consumers have not been harmed. Facebook, Instagram, and WhatsApp are all free to consumers. Indeed, prior to Facebook’s acquisition of WhatsApp, consumers had to pay for the service, and now they benefit from network externalities. 

Antitrust regulators should take appropriate action if they find evidence of illegal conduct, but there is no evidence of that here. Forced divestitures of long-past acquisitions which have benefited consumers is not that. It won’t benefit consumers, but it will hurt U.S. competitiveness in the Internet platform industry.