Australia's competition regulator will closely scrutinise a pivotal lawsuit launched by the United States government against Facebook that could force the social media giant to sell photo sharing app Instagram and messaging service WhatsApp.
The US Federal Trade Commission and 48 of the 50 state governments in the country this week launched the legal action against Facebook on the basis it broke 'antitrust' or competition laws. The FTC said in a statement that it would request an injunction that could require the wildly popular Instagram and WhatsApp apps to be divested and for the acquisitions of them by Facebook to be deemed illegal.
Facebook CEO Mark Zuckerberg.Credit:AP
The landmark case in the US comes just days after the Australian government tabled legislation in Federal Parliament for a new media bargaining code designed to force Facebook and Google to pay news publishers.
The bargaining code was based on a 12 month review by the Australian Competition and Consumer Commission, which said the US case will have implications around the world. "The outcome of this case will have significant implications worldwide, on many fronts," a spokesperson for the competition regulator said. "The ACCC continues to engage in discussions with competition authorities around the world on a range of issues relating to digital platforms including acquisitions by large digital platforms of start-ups that, while small, may evolve into significant competitors."
New York Attorney-General Letitia James said Facebook had taken advantage of users and made billions of dollars from personal data."We are taking action to stand up for the millions of consumers and many small businesses that have been harmed by Facebook's illegal behaviour," Ms James said.
Facebook paid $US1 billion for Instagram in 2011 when the photo-sharing app had about 30 million users. In 2014 it acquired WhatsApp for $US19 billion. Both platforms are now among the most used social media apps in the world.
The lawsuits against Facebook represent the biggest attempt by the US to break a major company apart in decades. Jennifer Newstead, Facebook's vice-president and general counsel described the lawsuits as "revisionist history".
"Antitrust laws exist to protect consumers and promote innovation, not to punish successful businesses," Ms Newstead said.
"The most important fact in this case, which the Commission does not mention in its 53-page complaint, is that it cleared these acquisitions years ago. The government now wants a do-over, sending a chilling warning to American business that no sale is ever final. We are going to vigorously defend people’s ability to continue making that choice."
Google was sued by the Justice Department in October for abusing its dominance in online search and advertising. Locally, Facebook's dominance is under close scrutiny.
The ACCC's bargaining code aims to force Google and Facebook to strike commercial deals with news outlets for use of their content, and redress an imbalance of barganinning power between the tech giants and traditional media organisations.
Under the proposed laws, if Google and Facebook cannot reach commercial agreements with news businesses within three months, the parties must enter a "final offer" arbitration process, with a panel given the power to pick one of the parties' respective offers, or find a more reasonable offer.
The process will take into account a range of factors including the value news outlets give to Google and Facebook and the imbalance of bargaining power that currently exists between tech platforms and media companies. The proposed laws also contain non-discrimination provisions to stop the tech giants taking retaliatory action against news organisations that participate in the code by removing or punishing content.
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