Düsseldorf, Berlin Both the US government and 46 states are opposing Facebook in court. You accuse the Internet company of unfair competition. “Facebook has used its monopoly power to destroy smaller rivals and wipe out the competition, all at the expense of everyday users,” said New York Attorney General Letitia James at a press conference on Wednesday evening. She leads the non-partisan alliance of the states against Facebook.
The American Federal Trade Commission (FTC) even explicitly calls for the breakup in its own lawsuit. She accuses Facebook of a “systematic strategy” to secure its own market power with acquisitions. Facebook boss Mark Zuckerberg could doomed internal emails.
The reversal of the takeover of the Instagram photo network in 2012 for around one billion dollars and the 22 billion purchase of the WhatsApp chat service in 2014 – for a long time only a threatening scenario – is now actually being negotiated. It is still considered unlikely that there will be a spin-off. The discussion could, however, result in tough conditions and lead to the global antitrust proceedings and regulatory projects being pushed ahead even further.
The Federal Cartel Office announced abuse proceedings against Facebook on Thursday. The authority wants the absolutely necessary linking of virtual reality products from Oculus check with a Facebook account. Zuckerberg took over the provider of headsets for immersing themselves in virtual game worlds, with which Facebook users could also meet in virtual reality (VR) in 2014, for around two billion dollars.
“With its social network, Facebook is the dominant player in the German market and is already a major player in the still young and growing VR market,” said Andreas Mundt, President of the Federal Cartel Office. “We want to investigate whether and to what extent the coupling affects competition in the two areas.” The signal is clear: In future, the authority wants to intervene in good time.
Tailwind for EU regulators
The lawsuits of the US authorities against Facebook and previously against Google also bring movement into the regulatory discussions in Europe. That is “tailwind for the projects of Peter Altmaier in Germany and Margrethe Vestager at the EU level”, says Rupprecht Podszun, Professor of Competition Law at the Heinrich Heine University in Düsseldorf. “The procedure in the USA shows that the initiatives in Germany and the EU are not protectionism.”
In Germany, a reform of antitrust law is about to be adopted. The Bundestag only improved in individual places, said Podszun, who was heard as an expert. In Brussels, EU Commissioner Vestager wants to present plans for platform regulation next week. Both legal initiatives are striving for stricter requirements for “gatekeepers”, to which, in addition to Facebook, Google, Amazon, Apple and Microsoft counting.
Vestager said Thursday it was “very interesting what is happening in the US now”. The legal bases are different there. It is true that the EU Commission also has the option of ordering the sale of company parts. “But we would have to prove that this would be the only way to solve a competition problem,” Vestager said before the Economic Committee of the European Parliament. “I don’t think we’re ready.”
The chances of success of the demolition demands in the USA are also questionable. “In general, reversals are very problematic after such a long time, and the allegations must be substantial,” says the cartel expert Sebastian Louven.
Facebook will defend itself hard: The takeovers have been examined by the authorities, the company said on Wednesday. Many years later, the FTC now says it was wrong – “regardless of applicable law or the consequences for innovation and investment“. Billions of dollars and millions of hours have been invested. “No American antitrust enforcement officer has ever brought a case like this before, and with good reason.”
However, there is an allegation that Facebook had anti-competitive intentions from the start. This is what e-mails from CEO Zuckerberg to his former CFO suggest. In it he writes: “Even if some new competitors emerge, by buying Instagram, Path, Foursquare, etc., we will now have a year or more to integrate their dynamics before anyone gets close to their size again.”
Exchange expert Koch: “If Facebook has to outsource Instagram, the business case would be at risk”
If Facebook takes over their mechanics in the meantime, “these new products will not get much traction”. Shortly thereafter, Zuckerberg sent another email that can be interpreted as an admission of guilt: “I didn’t mean to imply that we would buy them to prevent them from competing with us in any way.”
Antitrust law expert Louven attaches great importance to this. In the case of a pharmaceutical merger, anti-competitive intentions were proven by a similar message. “That could be even more serious here, because the advantage for your own and better integration is addressed,” says Louven. “Even then, Facebook saw itself in a position to scale the integrated offers faster than the competition and thus to switch it off.”
Nevertheless, Louven is also skeptical about breaking up. In order to justify this, the competition that would have developed without the merger would have to be restored. “Remedial measures for the benefit of competition, competitors or consumers are closer,” says Louven. Conceivable are other companies’ access claims to data, requirements for interoperability, i.e. the interaction of different systems, and obligations to make it easier for users to switch between different services.
“In Germany there is already an order from the Federal Cartel Office on so-called internal unbundling,” explains the lawyer. It must be ensured that users really have the choice of whether their data is merged on Facebook, WhatsApp and Instagram. “The procedure in the USA will enrich this debate here.”
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