The US Federal Trade Commission today painted a picture of Meta Platforms as a monopolistic giant intent on squelching nascent rivals emerging as potential threats in the social media space by acquiring them while being willing to lose money just to keep the barriers to entry high for new competition. The FTC and Meta Platforms began a more than two-month-long trial in a Washington, DC, federal court today in which the government is trying to unravel the more-than-decade-old acquisitions of Instagram and WhatsApp.
The US Federal Trade Commission today painted a picture of Meta Platforms as a monopolistic giant intent on squelching nascent rivals emerging as potential threats in the social media space by acquiring them while being willing to lose money just to maintain high entry barriers for new competitors.The FTC and Meta Platforms began a more than two-month-long trial in a Washington, DC, federal court today in which the government is trying to unravel the more-than-decade-old acquisitions of Instagram and WhatsApp (see here).
“Users have suffered because Meta is not disciplined by competition,” FTC attorney Daniel Matheson said in opening statements in a packed courtroom at the US District Court for the District of Columbia.
Matheson’s approximately 95-minute opening statement featured several dozen exhibits showing excerpts of juicy internal e-mails in which Meta Chief Executive Officer Mark Zuckerberg, former Chief Operating Officer Sheryl Sandberg and other top product and engineering executives discussed the competitive threats to Meta — formerly Facebook — from rivals such as Instagram, WhatsApp, Path, Snapchat and others.
The FTC attorney said that Meta was faced with a sea-change of competition in 2010, thanks to the boom in mobile phones and app usage that spurred it to “buy out their rivals.”
“These kinds of transitions... [are] typically a very vulnerable and dangerous time for companies,” Zuckerberg said in an e-mail. “It’s not guaranteed that we even survive through that period.”
Matheson’s opening statement also featured investor notes in which Roelof Botha, managing partner of Sequoia Capital, made observations about the competitive viability of WhatsApp that suggested that the messaging app could “build out a social media platform either as a standalone company or via acquisition by an existing social media platform.”
The lawsuit was brought in December 2020, under the first Trump administration, and survived Meta’s motion for summary judgment in 2024. The FTC’s new chairman, Andrew Ferguson, made an appearance in court along with Daniel Guarnera, director of the agency’s Bureau of Competition.
In its opening statement, the FTC sought to drive home the point that the “personal social networking services” market is a “distinct” one where Facebook users socialize with friends and family, while those on LinkedIn network with colleagues and those on Nextdoor keep in touch with their neighbors. At the same time, users sought out YouTube for entertainment and X, formerly Twitter, for news, Matheson said.
— Instagram and WhatsApp acquisitions —
Meta’s leadership team realized in March 2012 that Instagram was trying to build a parallel network, Matheson said. Facebook was trying to develop and push its own mobile photo-sharing app.
“In the time it has taken us to get our act together on this, Instagram has become a large and viable competitor to us on mobile phones,” a 2011 e-mail from a senior Meta executive said. “Why is mobile photos app development moving so slowly? We still are getting our ass kicked by Instagram.”
Another e-mail from 2012 showed an executive saying, “Instagram could hurt us meaningfully.”
Facebook eventually acquired Instagram in April 2012 for $1 billion. At the time, Instagram had only 13 employees, including co-founders Kevin Systrom and Mike Krieger.
In an April 2012 e-mail, Zuckerberg lamented that “since we bought Instagram, I now feel like we’re ahead in photos but falling increasingly behind on messaging.”
Three months prior, Sequoia Capital sent a note to investors that WhatsApp was increasingly gaining market share in the “SMS replacement category.”
Jim Goetz, a former partner at Sequoia Capital known for being the first and only external investor of WhatsApp before it was bought by Facebook for $19 billion, advised the co-founder and former CEO of WhatsApp Jan Koum in April 2013: “Clear to us that you could get tencent, facebook and google to get into a bidding war (with microsoft and yahoo trailing).”
That Zuckerberg and his team perceived WhatsApp as a “big risk,” per a February 2013 e-mail, is what motivated Facebook's acquisition of the messaging app, the FTC attorney told US District Judge James Boasberg.
Matheson questioned the $19 billion acquisition cost of WhatsApp in 2014. He cited talking points from a February 2014 investor call which said, “why do you think this company is worth over 10 percent of Facebook’s value? How can you justify this valuation?”
The FTC attorney said Meta was perfectly willing to incur losses to protect its monopoly. The money lost was insignificant compared to maintaining the barriers to entry.
— Post-acquisition harm to consumers —
Today, according to the FTC, Meta controls 78 percent of the share of monthly active users in the market for personal social networking services, a 77 percent share of daily active users, and an 85 percent share of “time spent” online by users.
In internal communications from a later year between Zuckerberg and key company executives, he described how unchecked growth at Instagram could lead to “cannibalization” of Facebook users to the point of “network collapse.”
“There’s a real chance we may be causing network collapse of the more engaging and more profitable product ... to replace it with one that is less engaging and less profitable,” Zuckerberg said.
To arrest that threat, Matheson said, Meta reduced promotional activity and throttled ad load to make sure Instagram didn’t grow too fast, manipulating Instagram’s “social graph” to prevent it from drawing too many users away from Facebook.
Today, Meta has reduced its investment in its social media apps and it harms consumers through poor privacy and data gathering practices, increased ad loads especially for those users that sought Facebook to keep in touch with friends and family, and deciding not to invest in Facebook despite having “plenty of money,” Matheson said.
— Meta fights back —
Mark Hansen, counsel for Meta, said that not once in his hour-and-a-half-long opening statement did the FTC attorney mention TikTok which has emerged as a fierce competitor to Meta in a short span of time.
“Whatever motivated the FTC [to bring this lawsuit], it was not consumer welfare,” Hansen said, calling the case “misguided” and “indefensible” as he delivered his roughly 65-minute long opening statement.
Meta bought WhatsApp and made it better, he said. “It is another consumer welfare story, not a predatory acquisition.”
Hansen said he could not understand why the agency even included the WhatsApp purchase in the lawsuit. He warned of chilling effects on future investment and innovation should the court unwind acquisitions previously sanctioned by the agency.
Consumers have been the “big winners” since Meta was founded more than two decades ago, Hansen said. Company expert and University of Chicago economist Dennis Carlton pegged the value of consumer benefits from Meta’s Instagram and WhatsApp acquisitions at between $38.5 to $110 billion per year, the attorney argued.
But because Meta is not a monopolist who engaged in anticompetitive acquisitions of Instagram and WhatsApp, the court need not even delve into the company’s “powerful and straightforward defense” that hundreds of millions of additional users benefit from their access to valuable services at no charge, he said.
Hansen also claimed Boasberg was in “legally uncharted waters” by taking seriously the FTC’s argument that increased “ad load is a price” consumers had to pay.
Ad load refers to the amount of advertising content encountered by the user of a website, application or streaming service during a specific period.
“Seeing an ad is not like paying a dollar,” Hansen said. “Ad load as price theory was invented for this case and has no factual support.”
Hansen argued that the case is not about looking at users’ engagement with specific apps in isolation. Instead, he described a competitive landscape where digital service providers compete for “marginal minutes” of time from an average American who uses more than 40 different apps every month.
“Meta does not charge a price because it can’t,” Hansen said, claiming that companies like TikTok, YouTube and others are constantly threatening to shave away minutes of user screen time that serves as the grist for advertising-funded businesses like Meta’s.
Meta intends to counter the FTC’s “indefensible” market definition with testimony from other industry players who compete with Facebook and Instagram for those minutes, Hansen said.
He previewed evidence of temporary blackouts on TikTok, Facebook and Instagram to support his argument that the services of the apps are substitutes for one another. When TikTok temporarily shut down in the US in January 2025, traffic to Facebook increased by more than 20 percent, more than 17 percent on Instagram and over 14 percent on YouTube, which shows the platforms compete and that the FTC has a “gerrymandered” market definition.
Hansen also cited court filings from TikTok in the DC Circuit that described Facebook and Instagram as “competing platforms.”
— Procompetitive benefits —
Meta also introduced statements from Instagram and WhatsApp’s founders to support the company’s claim that its acquisitions have been a boon to consumers and competition, and without Facebook they would never have achieved user scale.
If Instagram had been a “niche photo app for photographers, we probably would be working on that app for 20 years,” Instagram founder Kevin Systrom said in an e-mail around the time of Meta’s acquisition.
“Instead what happened was it got better and better and better, and it improved, and it got to a size where it was meaningfully important to this company,” Systrom said. “So, you can choose, do you want to be unsuccessful and small and have all the autonomy in the world or no?”
Meta also introduced testimony from WhatsApp co-founder Brian Acton where he characterized any potential attempts from WhatsApp to capture social platform market share in the US as a “zero [return on investment] proposition.”
Quality on Meta apps has improved “by every objective measure” and the company has “never degraded quality below a competitive level,” Hansen said. “Only when a firm exceeds benchmarks and earns money doing so, is there monopoly power.”
Meta argued that the FTC has no proof of “overall measurable decline” in Meta app quality and that “lazy monopolists” don’t have to spend tens of billions of dollars on R&D annually to make their services better.
The evidentiary record shows that Meta’s business “has never been insulated from competition,” Hansen said, “as TikTok’s rise will clearly prove.”
Hansen also pointed back to materials used during a pre-trial tutorial that illustrated a trend of “substantial convergence” across the features of apps in the case. “That convergence has only continued.”
More than half the time spent on Meta apps is spent viewing short-form videos, Hansen said — the “same videos served by the same AI tech” used on other apps.
The FTC’s first witness is Mark Zuckerberg, who will testify this afternoon and continue to be on the stand tomorrow.
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