Sherman Anti-trust Act
Recently, the UC FTC (Federal Trade Commission) filed an anti-trust lawsuit against Facebook under Sherman Anti-trust Act. The social media giant is under the scanner for its acquisition of Instagram and Whatsapp.
Why was the lawsuit filed against Facebook?
According to the lawsuit, the actions of Facebook deny consumers the benefit of competition. The aim is to roll back anti-competition conduct of Facebook and restore the competition so that innovation can thrive.
About the Sherman Act
The Sherman Act is an anti-trust Act of the USA, passed in 1890. It was a move to prevent the creation of monopolies in the industries through use of contracts, conspiracies and other business practices that restricted trade. Its main purpose was to promote healthy competition in the US economy.
The lawsuit has been filed under Section 2 of the Sherman Act. Section 2 prohibits companies from using anti-competitive means to maintain monopoly.
In 2012, Facebook acquired Instagram for 1 billion USD and WhatApp for 19 billion USD. According to the lawsuit, Facebook restricted the access to third party software developers access to valuable interconnections to its platform.
The accusation of the FTC is largely true. Facebook has shut down API access for Twitter video app Vine. Instagram came at a time when users were switching from desktop computers to smartphones. Users were embracing photo-sharing feature of Instagram. This was recognised by Facebook as threat to its monopoly power. To eliminate the threat, Facebook chose to buy the application.
Facebook also made an unsuccessful attempt to buy Snapchat when Snapchat was rising as its potential competitor. Later Facebook copied its most popular feature and created “Stories” feature in Instagram. Today Instagram has billion users and Snapchat has only 250 million users.
Facebook did the same with Whatsapp too. Whatsapp dominated the mobile messaging space. It currently has more than 2 billion users.