Attorney General T.J. Donovan and a bipartisan coalition of 47 other attorneys general filed a lawsuit against Facebook Inc. on Dec. 9, alleging that the company illegally stifles competition to protect its monopoly power. The lawsuit alleges that, over the last decade, the social networking giant illegally acquired competitors in a predatory manner and cut services to smaller threats, depriving users of the benefits of competition and reducing privacy protections and services along the way — all in an effort to boost its bottom line through increased advertising revenue.
“Illegal monopolies will not be tolerated,” said Attorney General Donovan. “Vermont’s consumers and small businesses deserve better.”
Since 2004, Facebook has operated as a personal social networking service that facilitates sharing content online without charging users a monetary fee, but, instead, provides these services in exchange for a user’s time, attention, and personal data. Facebook then monetizes its business by selling advertising to firms that attach immense value to the user engagement and highly targeted advertising that Facebook can deliver due to a vast trove of data it collects on users and their friends.
The lawsuit alleges that, in an effort to maintain its market dominance in social networking, Facebook employs a variety of methods to impede competing services. One common strategy has been to acquire smaller rivals and potential rivals before they could threaten Facebook’s dominance, such as Instagram and WhatsApp. In April 2012, Facebook acquired Instagram for $1 billion, despite the company having no revenue and valuing itself at only $500 million. In February 2014, Facebook acquired WhatsApp for nearly $19 billion. Another common strategy is to suffocate and quash third-party developers that Facebook invited to utilize its platform — allowing Facebook to maintain its monopoly over the social networking market and make billions from advertising.
As a consequence of Facebook’s expansive user base and the vast trove of data it collects from its users and users’ connections, Facebook is able to sell highly targeted advertising that firms greatly value.
The volume, velocity, and variety of Facebook’s user data give it an unprecedented, virtually 360-degree view of users and their contacts, interests, preferences, and activities. The more users Facebook can acquire and convince to spend time on its platforms, the more data Facebook can accumulate by surveilling the activities of its users, increasing its revenues through advertising.
The lawsuit asks the court to halt Facebook’s illegal, anticompetitive conduct and block the company from continuing this behavior in the future. Additionally, the coalition asks the court to restrain Facebook from making further acquisitions valued $10 million or more without advance notice.