By Brent Kendall, John 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,
according to people familiar with the matter.
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
In congressional testimony last month, Matt Perault, director of
public policy at Facebook, told a House antitrust subcommittee that
the company's acquisitions have fueled innovation and brought
together firms of complementary strengths.
Companies purchased by Facebook "have had more opportunity to
innovate as part of Facebook than they would have on their own --
enhancing users' experience and resulting in more choice for more
people overall, not less," Mr. Perault said in prepared
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
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
The FTC's investigation isn't the only antitrust scrutiny the
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
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.
U.S. antitrust enforcers typically challenge mergers and
acquisitions that propose to combine major head-to-head
competitors. But some critics argue the government has focused too
much on the current size of tech takeover targets and failed to
consider how they could grow.
Some critics also say the government has placed too much faith
in the idea that any dominance by today's tech giants is tenuous
because high-tech markets change rapidly.
When the FTC allowed Facebook to acquire Instagram in 2012,
there was discomfort within the commission about possible antitrust
implications, according to people familiar with the matter. But FTC
officials didn't think they could win an antitrust case in court,
the people added.
The FTC blessed the WhatsApp purchase in 2014.
Some tech acquisitions by Facebook and other firms wouldn't
necessarily have been subject to federal scrutiny at the time the
deals were reached, because they were smaller in monetary value and
didn't require government approval.
The FTC action comes as the voices calling for greater antitrust
examination have been growing.
In March, Rep. David Cicilline (D., R.I.), who heads the House
antitrust subcommittee, said in a letter to the FTC that Facebook's
Instagram and WhatsApp purchases warranted particular scrutiny.
Also, the U.K. blue ribbon panel on online competition recently
found that the largest digital companies have made extensive use of
mergers, concluding that "a minority of acquisitions are likely to
have been anticompetitive."
Write to Brent Kendall at firstname.lastname@example.org, John D.
McKinnon at email@example.com and Deepa Seetharaman at
(END) Dow Jones Newswires
August 01, 2019 15:56 ET (19:56 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.