Tech Giants to face the heat: Latest threats and lawsuits

• The U.S Federal Trade Commission has formally filed an antitrust lawsuit against the technology
giant Facebook accusing it of abusing its monopoly powers in social networking by engaging in
illegal and anti-competitive tactics to stifle competition.

• Facebook is being sued for the acquisition of photo-sharing app Instagram for $715 million in
2012, and the $22 billion deal for messaging service WhatsApp in 2014. The twin lawsuits
represent the most significant political and legal threats to the company in its history.

• Reports say that the purchases ultimately helped Facebook remove potential rivals from the
digital marketplace, allowing the tech giant to enrich itself on advertising dollars at the cost of
users, who as a result have fewer social networking options at their disposal.

• Reports also faulted Facebook for the way in which the company manages its vast trove of user
data and the policies that govern when and how third-party app developers and other companies
can access it. Such tactics allowed Facebook to stamp out potential rivals before they could
become too popular.

• The company’s shares which soared by more than 35% in 2020, fell down to as much as 4% on
Wednesday, and to 2% by the end of the day.

• Antitrust regulators have explicitly asked the Court to consider forcing Facebook to sell off
Instagram and WhatsApp to remedy their competition concerns.

• The company was looking to foray into the e-commerce space through WhatsApp and Instagram
and giving them up would mean the path would become a lot harder.

• The company’s recent revenue growth has primarily been through Instagram as the number of
Facebook users had hit a saturation level. Around $20 billion (roughly 29% of ad sales) was
generated by Instagram in 2019.

• While Facebook is still the largest social networking site in the world, Instagram and WhatsApp
give the company a much larger footprint than it would have as a standalone service. Losing it
would dramatically cut down the customer base and subsequently, its revenue.

• WhatsApp and Instagram too rely on their parent company’s revenues to incorporate use of latest
technologies in their apps to provide better user experience and privacy.

• The road to recovery, if the company is forced to give up both the apps will be very difficult and
will take a long time.

• The European Union (EU) is all set to come up with a new Digital Markets Act this week. This
will require ‘very large’ tech companies like Facebook, Google and Amazon to take greater
responsibility for policing the internet or face a fine of up to 6 percent of their annual turnover.
• The size of the fines will depend on the severity of the violations, how long they have been
taking place and whether they recur.

• The regulators have classified ‘very large’ platforms as those with more than 45 million users
(roughly equal to 10 percent of EU’s population). These platforms are believed to have
disproportionate influence over the internet users of the EU.

• Such platforms will be prohibited from giving preferential treatment to their own products and
services, along with other practices. They won’t be allowed to use data from competitors that sell
on their marketplace or use data about rivals obtained through advertising activities.

• According to the draft of the new law, these platforms, most of which are based in the US, will
have to appoint “one or more” compliance officers to make sure they abide by the new Digital
Services Act rules.

• Some of the other rules under the Act include ensuring greater advertisement transparency and
also letting customers know the main parameters used to determine why they are being targeted
for that particular advertisement.

• The tech giants will have to do more to tackle illegal content such as hate speech and child sexual
abuse material, misuse of their platforms that impinges on fundamental rights, and intentional
manipulation of platforms, such as using bots to influence elections and public health.

• The draft rules could take a year or more to come into force as they have to take into account
feedback from EU countries and the European Parliament, both of whom are expected to face
intense lobbying.

Reference: https://www.bloomberg.com/news/articles/2020-12-10/facebook-breakup-would-
demolish-zuckerberg-s-social-media-empire?srnd=premium-asia

https://www.washingtonpost.com/technology/2020/12/09/facebook-antitrust-lawsuit/

https://www.ft.com/content/72371610-4820-44c0-a955-4a19e430d343

https://www.bloombergquint.com/onweb/tech-giants-gird-for-business-threats-under-strict-new-
eu-laws

https://gadgets.ndtv.com/internet/news/big-tech-fine-6-percent-eu-content-rules-digital-services-
act-google-facebook-2337622