FTC Antitrust Probe of Facebook Scrutinizes Its Acquisitions--Update
August 01 2019 - 3:27PM
Dow Jones News
By Brent Kendall, ohn D. McKinnon and Deepa Seetharaman
The Federal Trade Commission is examining Facebook Inc.'s
acquisitions as part of its antitrust investigation into the
social-media giant -- to determine if they were part of a campaign
to snap up potential rivals before they could become a threat.
The company's acquisition practices are a central component of
the FTC probe, the people said. Facebook disclosed the FTC's
antitrust investigation in its earnings announcement last week, but
provided few details.
FTC investigators are looking for evidence on whether Facebook
and founder Mark Zuckerberg purchased startup technology firms to
keep them from challenging Facebook's empire, the people said.
The FTC has begun reaching out to people who founded companies
that Facebook purchased, some of the people said.
Facebook didn't immediately respond to a request for comment. In
its announcement last week, Facebook said that the FTC was
investigating "in the areas of social networking or social media
services, digital advertising, and/or mobile or online
applications."
An FTC spokeswoman declined to comment. The investigation comes
on the heels of a separate case in which the commission fined
Facebook $5 billion for alleged privacy missteps.
The company has acquired about 90 companies over roughly the
last 15 years, according to data compiled by S&P Global.
They include photo-sharing app Instagram and messaging service
WhatsApp, which bolstered Facebook as a dominant force in social
media and messaging.
Another acquisition that could be of interest was the 2013
takeover of Onavo Mobile Ltd. Facebook used Onavo behavior-tracking
technology to identify and target fast-growing companies as
potential purchases or to scope out new product categories, The
Wall Street Journal reported in 2017. Facebook used data from Onavo
in deciding to buy WhatsApp.
Documents released by U.K. lawmakers late last year confirmed
Onavo's importance to Facebook's strategy. Eventually Facebook shut
down the controversial app.
Other big tech firms, such as Alphabet Inc.'s Google, also have
been on a buying binge; a U.K. blue-ribbon antitrust panel said in
March that the top five tech firms have made more than 400
acquisitions over the last decade.
The FTC has for months sent signals of its interest in whether
tech companies are squelching competition by systematically buying
startups that could one day challenge them.
When the commission formed a task force in February to examine
potential antitrust violations in the tech industry, Bruce Hoffman,
director of the FTC's bureau of competition, said the issue was
ripe for exploration.
"This is a completely legitimate and real theory of competitive
harm," Mr. Hoffman said in a speech last year, though he stressed
that the FTC would need "an evidentiary and economic basis" for
determining that an acquired startup really could have become a
significant competitor.
Mr. Hoffman also warned that there could be negative
consequences from cracking down on such acquisitions.
Large tech firms may be able to move startup technologies to
market more quickly, and capital markets for startups could shrink
if the opportunity to be purchased by a big tech company is
constrained, he said.
If the FTC were to find antitrust problems with any of
Facebook's past acquisitions, the commission could have a range of
potential remedies, from seeking a spinoff of certain acquisitions
to placing restrictions on Facebook's conduct with some of the
assets it has acquired. Any such effort could lead to
litigation.
The FTC's investigation isn't the only antitrust scrutiny the
company faces.
The Justice Department announced last week that it was launching
a broad review "of whether and how" online platforms have engaged
in practices that reduce competition, stifle innovation or
otherwise harm consumers. That includes social media, the
department said.
The double-barreled review by both U.S. antitrust agencies
signals the federal government is training significant antitrust
firepower on the company, which only recently reached a historic
privacy settlement with the FTC.
State attorneys general and European regulators also are looking
into competition issues around Facebook.
Write to Brent Kendall at brent.kendall@wsj.com and Deepa
Seetharaman at Deepa.Seetharaman@wsj.com
(END) Dow Jones Newswires
August 01, 2019 15:12 ET (19:12 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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