Facebook owner Meta bought Instagram, WhatsApp instead of competing, FTC says at trial

By Jody Godoy

WASHINGTON (Reuters) -Facebook parent Meta Platforms (NASDAQ:META) bought up nascent rivals Instagram and WhatsApp after its attempts to compete had failed, an attorney for the U.S. Federal Trade Commission said at the beginning of a high-stakes trial in Washington on Monday, in an effort to unwind the deals.

FTC attorney Daniel Matheson said that the unlawful strategy "established entry barriers that for more than a decade protected Meta’s dominance."

"Consumers do not have reasonable alternatives they can turn to," he said.

The case, filed during President Donald Trump’s first term, claims Meta bought the companies a decade ago to eliminate competition among social media platforms where users connect with friends and family. At the time, Facebook struggled to adapt its service for mobile devices, the FTC says.

The FTC seeks to force Meta to restructure or sell parts of its business including Instagram and WhatsApp.

The case poses an existential threat to Meta, which by some estimates earns about half of its U.S. advertising revenue from Instagram, while testing the new Trump administration’s promises to take on Big Tech.

Meta has been making regular overtures to Trump since his election, nixing content moderation policies Republicans said amounted to censorship and donating $1 million to Trump’s inauguration. Meta CEO Mark Zuckerberg has also visited the White House multiple times in recent weeks.

FTC spokesperson Joe Simonson said "the Trump-Vance FTC could not be more ready for this trial" and that its lawyers had been working around the clock to prepare.

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Meta attorney Mark Hansen said in his opening statement at trial that the FTC ignores that people today share a lot less with friends and family on social media, and that Instagram and Facebook users spend most of their time viewing short videos via features modeled after TikTok.

"This case is a grab bag of FTC theories at war with the facts and at war with the law," he said.

ZUCKERBERG EXPECTED TO TESTIFY

Zuckerberg is expected to take the stand and face questioning about emails in which he proposed acquiring photo-sharing app Instagram as a way to neutralize a potential Facebook competitor and expressed worry that encrypted messaging service WhatsApp could grow into a social network.

Meta has argued its purchases of Instagram in 2012 and WhatsApp in 2014 have benefited users, and that Zuckerberg’s past statements are no longer relevant amid competition from ByteDance’s TikTok, Google’s YouTube and Apple (NASDAQ:AAPL)’s messaging app.

How users spend time on social media, and which services they consider interchangeable, will be core to the case. Meta will argue that an increase in traffic to Instagram and Facebook during TikTok’s brief shutdown in the United States in January shows direct competition.

The FTC claims Meta holds a monopoly on platforms used to share content with friends and family, where its main competitors in the United States are Snap’s Snapchat and MeWe, a tiny privacy-focused social media app launched in 2016. Platforms where users broadcast content to strangers based on shared interests, such as X, TikTok, YouTube and Reddit, are not interchangeable, the FTC has argued.

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U.S. District Judge James Boasberg said in a ruling in November that the FTC "faces hard questions about whether its claims can hold up in the crucible of trial."

The trial could stretch into July. If the FTC wins, it would have to prove at a second trial that measures such as forcing Meta to sell Instagram or WhatsApp would restore competition.

Losing Instagram in particular could prove catastrophic to Meta’s bottom line.

While Meta does not release app-specific revenue figures, advertising research firm Emarketer forecast in December that Instagram would generate $37.13 billion this year, a little over half of Meta’s U.S. ad revenue.

Instagram also generates more revenue per user than any other social platform, including Facebook, according to Emarketer.

WhatsApp to date has contributed only a sliver to Meta’s total revenue, but it is the company’s biggest app in terms of daily users and ramping up efforts to earn money off tools like chatbots. Zuckerberg has said such "business messaging" services are likely to drive the company’s next wave of growth.

The case is part of a crackdown on Big Tech started during Trump’s first administration.

Amazon (NASDAQ:AMZN), Apple and Alphabet (NASDAQ:GOOGL)’s Google also face antitrust lawsuits by U.S. enforcers.

Several major tech companies have moved to align with Trump since the election, such as by rolling back diversity initiatives and having executives engage directly with the White House.

While a shift from the combative tone the companies took during Trump’s first term, it has not resulted in a pullback on the antitrust cases.

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