The Unintended Consequences of Breaking Up Facebook

Last week, the Federal Trade Commission and 48 state and district attorneys general filed antitrust cases against Facebook, alleging it had unfairly gained dominance in the social media space, including through its acquisitions of Instagram and WhatsApp. Is such a case in the best interest of consumers and the future of the technology market?

Based on publicly available information, many of the key standards for a suit that have guided American antitrust historically are not met in this case. As such, we should be concerned about the potential consequences a successful antitrust action could have for consumers and innovation.

First, the limited competition, higher prices and decreased innovation associated with a monopolist behavior are not seen here. Instead, Facebook and its subsidiaries are competing with other social-media options such as Snapchat and Twitter. Further, and more to the point, Instagram and WhatsApp remain free services to the consumer, and Facebook has the resources to invest in improving these products. Separate smaller companies with fewer resources may be unable to maintain their services for free, may need to find ways to leverage consumer data more and may not be able to dedicate as many resources to content moderation. The result is that consumers may technically have more choices but would also have inferior products or higher prices.

Second, while Instagram and WhatsApp may now be successful platforms, it’s important to remember that they were not sure bets when these acquisitions occurred. In fact, comics pilloried the Instagram acquisition and investment advisers questioned the high price paid for WhatsApp. While these apps may have gained tremendous popularity since the acquisition, it is hard to predict if they would have risen to become competitors to Facebook or drifted away like many startups in the process. Far from a kill zone, being acquired has become another option for startups seeking to improve an existing product rather than simply compete. Reviewing and undoing such acquisitions after the fact could chill this strategy beyond just Facebook and fails to consider the unknowns of the counterfactual.

Third, the social media, advertising and messaging markets remain incredibly dynamic, and Facebook could easily be a shadow of itself in a few years due only to competition. A little over a decade ago, critics asked if MySpace was a monopoly and demanded interoperability with AOL’s instant messaging service out of misplaced concerns of market domination. But it was innovation, not antitrust action, that gave rise to a new internet ecosystem. Now Facebook is losing popularity with Gen Z and facing new competition from a range of services such as the platform TikTok and the messaging service Signal. If we focus only on the market as seen through the lens of existing giants, we may miss the seismic changes occurring right now because of innovation.

Fourth and finally, these suits and the growing impetus for antitrust actions against “Big Tech” threaten to undermine the consumer welfare standard, which has provided an objective basis for antitrust action. A growing chorus of bipartisan voices is criticizing tech. This latest action follows a previous case filed against Google by the Department of Justice and a group of Republican attorneys general, as well as a Democrat House Judiciary Committee report that called for dramatic changes to antitrust law and action against tech giants.

But expanding the definition of consumer harm to fit concerns about Facebook’s acquisitions could have far-reaching consequences for antitrust. Accepting such a change could allow far more zealous enforcement that prevents businesses from acting in ways that would benefit consumers under more traditional definitions. The current standards have shown themselves to provide an adaptive and objective framework that provides certainty for businesses and protection for consumers in a way that previous antitrust frameworks failed to do.

As we approach a new administration and a new Congress, many debates remain over various tech policy issues. Through those debates, policymakers must continue a principled approach to antitrust and use the appropriate tools when it comes to addressing concerns about issues such as content moderation and data privacy. The consequences of unwinding mergers or changing the approach to antitrust could extend well beyond Facebook and the social media market and chill innovation more broadly. We all will be the poorer for that.


Jennifer Huddleston is the director of technology and innovation policy at the American Action Forum.

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