Facebook's shares were struggling Friday in the aftermath of a Wall Street Journal report that found the Federal Trade Commission is looking into whether the social media giant acquired other companies in an effort to reduce competition.
"What the Wall Street Journal is talking about — if it's true — is the government thinking about coming in to force Facebook ($FB) to divest certain companies that it's already acquired. [It's] a pretty difficult case to make if you're the FTC," said Joel Mitnick, an antitrust partner at Cadwalader, told Cheddar Friday.
While the federal agency told Cheddar on Friday that it would not comment on the Journal's article, the piece has again spurred anxiety over Facebook's growing antitrust woes.
Last week, the company revealed in its quarterly earnings report that it had learned in June that it was under investigation by the FTC for data privacy concerns. That same day, that agency also handed the company the largest fine ever issued over consumer privacy.
Facebook has made scores of acquisitions since its founding — about 90 in the last fifteen years, according to S&P Global data cited by the Journal. Many of the companies acquired were relatively small businesses whose technology Facebook has integrated into its services, such as the Israeli firm Face.com, which boosted the facial recognition abilities on the social media platform's photo service.
But the buys attracting the most antitrust attention: Instagram, the photo-sharing social media platform, and WhatsApp, the global messaging service.
Forcing the company to divest could be easier than breaking it up entirely, though both antitrust actions would be "difficult," Mitnick said.
"If the government is really looking for Facebook to be forced to divest, say, Instagram and WhatsApp, they have a much more traditional legal case. They have to prove what the relevant antitrust market is, meaning, what does Facebook compete in," explained Mitnick. "The question is: does Facebook really compete with Instagram, or is Instagram much closer to Snapchat? And how does that affect competition?"
"You need almost a new theory of the extent of social media as a new market to evaluate that merger," he added.
"The United States antitrust authorities have been very reluctant to get involved in restructuring high-tech markets because the innovation changes who is on top and who is not," according to Mitnick. "But, at the same token, we do have this rapid expansion of social media platforms and there is a real question of whether the current antitrust tools and the understanding of the government has been sufficient to keep pace with that."
Facebook did not immediately respond to Cheddar's request for comment.