US government calls for breakup of Facebook's empire - including Instagram and Whatsapp

A demonstrator protests outside the home of Mark Zuckerberg. Credit: AP

The US government is to try and force Facebook to break up its dominance of social media by selling off its Instagram and WhatsApp messaging services.

Federal regulators have moved to sue Facebook in an anti-trust lawsuit, announced by the Federal Trade Commission and New York Attorney General Letitia James.

In a separate case, 48 states and districts accused the company of abusing its market power in social networking to crush smaller competitors.

Mark Zuckerberg's company took over Instagram in 2012 and WhatsApp in 2014.

Facebook founder Mark Zuckerberg. Credit: PA

"It’s really critically important that we block this predatory acquisition of companies and that we restore confidence to the market," Ms James said during a press conference announcing the lawsuit.

The FTC said Facebook has engaged in a “a systematic strategy” to eliminate its competition, including by purchasing smaller up-and-coming rivals like Instagram and WhatsApp.

Ms James echoed that in her press conference, saying Facebook “used its monopoly power to crush smaller rivals and snuff out competition, all at the expense of everyday users”.

ITV News Washington Editor Alex Chandler has analysis on the move:

The US government v Facebook - could this be the business battle of the century?

Facebook has touched billions of lives around the world since its arrival on the social scene 16 years ago. It has also become an $800 billion business with an acquisitive nature when it comes to other innovative tech companies.

Now the Federal Government in the shape of the Federal Trade Commission, and 48 US states have launched extraordinary legal action against the company. Their claim is that Facebook created an illegal monopoly by aggressively buying up its competitors. 

In particular, they are concerned the $1billion purchase of Instagram in 2012, and the $19 billion paid for WhatsApp in 2014 deprived consumers of their right to choice, and concentrated market power in the hands of Facebook. Prosecutors want to break up Facebook and restrict future deals.

Facebook and the tech giants have been in the sights of American politicians for some time.

Credit: AP

These lawsuits stem from a year long investigation into the company's business practices.

During the election, President Trump accused the social media companies of unfairly targeting conservatives and trying to manipulate voters.

Many have been concerned about the effect of our collective obsession with social media and the amount of data  these powerful companies harvest for their own advantage.

It is likely to be the beginning of a bitter and very expensive battle, with years and millions spend on litigation.

New York State Attorney General Letitia James Credit: Kathy Willens/AP

In one of Wednesday's cases, brought by New York Attorney General Letitia James, the company is criticised in unflinching terms.

She said, "For nearly a decade, Facebook has used its dominance and monopoly power to crush smaller rivals and snuff out competition, all at the expense of everyday users."

Not a verdict likely to get many likes in Facebook's board room.

With 2.7 billion users and a company with a market value of nearly £600 billion ($800 billion), Facebook is the world’s biggest social network.

CEO Mr Zuckerberg is the world’s fifth-richest individual and the most public face of Big Tech.

Facebook did not have immediate comment on the legal action.

Facebook paid £0.75 billion ($1 billion) for Instagram, bolstering the social networking platform’s portfolio a month before its stock went public.

At the time, the photo-sharing app had about 30 million users and was not producing any revenue.

Mark Zuckerberg was grilled by a House Financial Services Committee Capitol Hill last year. Credit: AP

Mr Zuckerberg vowed both companies would be run independently, but over the years the services have become increasingly integrated.

Users are now able to link accounts and share content across the platforms. Instagram now has more than one billion users worldwide.

Facebook acquired WhatsApp, an encrypted messaging service, for £14.7 billion ($19 billion).

When Facebook bought WhatsApp, it said it “fosters an environment where independent-minded entrepreneurs can build companies, set their own direction and focus on growth while also benefiting from Facebook’s expertise, resources and scale.

"This approach is working well with Instagram, and WhatsApp will operate in this manner”.

But in the coming years, the founders of both Instagram and WhatsApp left Facebook amid disagreements with Mr Zuckerberg.

Credit: PA

Facebook has started to integrate Instagram and WhatsApp, most recently by linking the apps’ chat functions with its Messenger service.

Such integration could make it more difficult to break off the companies.

Announcing the lawsuit, Ms James alleged Facebook had a practice of opening its site to third-party app developers, then abruptly cutting off developers that it saw as a threat.

The lawsuit — which includes 46 states, Guam and the District of Columbia — accuses Facebook of anti-competitive conduct and using its market dominance to harvest consumer data and reap a fortune in advertising revenues.