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Facebook Hit With Antitrust Lawsuits

The Federal Trade Commission and 46 states sued Facebook Inc. on Wednesday, accusing the social-media giant of buying and freezing out small startups to choke competition. The federal case seeks to unwind social-media giant’s Instagram, WhatsApp acquisitions; other claims target company’s tactics against competitors

The FTC’s sweeping antitrust case seeks to force Facebook to unwind its acquisitions of WhatsApp and Instagram, two of its landmark deals. The states filed a separate and similar lawsuit, alleging a lack of competition has harmed consumers, including by weakening privacy protections.

The lawsuits come weeks after the Justice Department brought a case alleging Google was illegally maintaining a monopoly in its search business. Collectively, the cases reflect U.S. concern about the power of dominant online platforms.

“Facebook’s actions to entrench and maintain its monopoly deny consumers the benefits of competition,” said Ian Conner, director of the FTC’s Bureau of Competition. “Our aim is to roll back Facebook’s anticompetitive conduct and restore competition so that innovation and free competition can thrive.”

The Attorney General outlined a sweeping antitrust suit against Facebook by the Federal Trade Commission and a bipartisan group of 46 state attorneys general, targeting the company’s tactics against competitors.

New York Attorney General Letitia James, a Democrat, asserted that Facebook “has used its dominance and monopoly power to crush smaller rivals and snuff out competition, all at the expense of everyday users,” and made “billions by converting personal data into a cash cow.”

So what is Antitrust?

In the United States, antitrust law is a collection of federal and state government laws that regulate the conduct and organization of business corporations and are generally intended to promote competition for the benefit of consumers. The main statutes are the Sherman Act of 1890, the Clayton Act of 1914 and the Federal Trade Commission Act of 1914. These Acts serve three major functions. First, Section 1 of the Sherman Act prohibits price-fixing and the operation of cartels, and prohibits other collusive practices that unreasonably restrain trade. Second, Section 7 of the Clayton Act restricts the mergers and acquisitions of organizations that would likely substantially lessen competition. Third, Section 2 of the Sherman Act prohibits the abuse of monopoly power.

Federal antitrust laws provide for both civil and criminal enforcement of antitrust laws. The Federal Trade Commission, the Antitrust Division of the U.S. Department of Justice, and private parties who are sufficiently affected may all bring civil actions in the courts to enforce the antitrust laws. However, criminal antitrust enforcement is done only by the Justice Department. U.S. states also have antitrust statutes that govern commerce occurring solely within their state borders.

One of the better-known trusts was the Standard Oil CompanyJohn D. Rockefeller in the 1870s and 1880s had used economic threats against competitors and secret rebate deals with railroads to build what was called a monopoly in the oil business, though some minor competitors remained in business. In 1911 the Supreme Court agreed that in recent years (1900–1904) Standard had violated the Sherman Act (see Standard Oil Co. of New Jersey v. United States). It broke the monopoly into three dozen separate companies that competed with one another, including Standard Oil of New Jersey (later known as Exxon and now ExxonMobil), Standard Oil of Indiana (Amoco), Standard Oil Company of New York (Mobil, again, later merged with Exxon to form ExxonMobil), of California (Chevron), Cleveland-based SOHIO – the parent of the trust, and so on. In approving the breakup the Supreme Court added the “rule of reason”: not all big companies, and not all monopolies, are evil; and the courts (not the executive branch) are to make that decision. To be harmful, a trust had to somehow damage the economic environment of its competitors.

Conclusion

The antitrust laws are supposed to promote and protect competition, or, if you will, competitive processes in distinct “lines of commerce” or “relevant markets.” This alone is their proper purpose. They are not intended to punish big companies merely on account of their size or because of their commercial success. Most importantly, the antitrust laws have never been anti-market or anti-business in their underlying conception or in their implementation. On the contrary, the antitrust laws are intended to promote market economics and healthy competition in every market, while checking the abuses that sometimes arise in different markets.

We need antitrust laws to redress the fundamental contradiction of marketplace economics: Competition, which yields the best products and greatest prosperity, tends to lead to efforts at monopolization and to trading abuses that can be checked only by stifling regulation or well-conceived antitrust intervention. Yes, the antitrust laws are horrible, ruinous abominations that arise from an inextricable contradiction that they do not resolve, and they involve us all in wasteful litigation and suffering. But as Winston Churchill might have said, the antitrust laws have the benefit of being better than the alternatives.

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