FTC’s Antitrust Case Against Meta’s Acquisitions of Instagram and WhatsApp

Investments
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I=8
Court allows FTC claims that Meta bought Instagram and WhatsApp so as to eliminate competition to proceed

  • A U.S. judge has ruled that Meta must face trial over FTC’s lawsuit that claims Meta bought Instagram and WhatsApp so as to eliminate competition in the social media sector.

  • The judge allowed FTC to keep a claim that states Meta overpaid for Instagram and WhatsApp in order to eliminate nascent competition but quashed the claim that said Meta restricted third-party app developers’ access to the platform unless they didn’t build apps that compete with those of Meta.

  • The trial will not allow Meta to argue that the acquisition of WhatsApp enable it to defend against competition from Apple and Alphabet.

  • The lawsuit which was initiated during Trump’s first-term is seeking to break-up Meta Platforms.

    “We are confident that the evidence at trial will show that the acquisitions of Instagram and WhatsApp have been good for competition and consumers,” a Meta spokesperson said.

  • Meta had asked the court in August to dismiss the case arguing there was lack of evidence over the FTC’s claims.

https://www.reuters.com/legal/meta-will-face-antitrust-trial-over-instagram-whatsapp-acquisitions-2024-11-13/

Assessment

The acquisition of Instagram and WhatsApp has has been a major point of contention between Meta and the FTC. Although the dismissal of Meta’s summary judgment motion is a win for the FTC, the reduction in claims further lowers the chance of a divestiture. @Magaly, you worked on the consequences of Trump’s re-election on big tech. Do you foresee him pressuring the FTC to intensify or to ease its scrutiny of companies like Meta?

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Based on my earlier research with Moritz, we concluded that recent actions by Zuckerberg have shifted Trump’s stance more favorably toward him, potentially reducing personal friction and thus some political risks for Meta
It appears that Trump’s issues with Zuckerberg have been more personal than policy-driven.

In my research in the Wiki, I also concluded that breaking up Meta remains very unlikely. Antitrust cases targeting such massive companies are extremely challenging for the FTC to pursue successfully, given the agency’s limited resources compared to these corporate giants.
FTC actions seem to aim more at demonstrating the need for future regulation. Even in the Microsoft case of the 2000s, where the DOJ created a very strong case, the ultimate consequences for Microsoft were limited despite the company “losing” the case.

And also according to experts any substantial change to existing laws will be difficult to achieve and will be a very slow process, as these laws are deeply embedded in the current legal system, and embraced by the courts.
According to experts, ramping up enforcement is much harder than ramping down.

And it seems Trump is after less regulation actually, instead of more, and Lina Khan is uncertain to continue. Tough JD Vance has been praising her.

Asked about the Google case in October, Trump warned that breaking up companies can be “a very dangerous thing” because the United States did not want to lose out to China on having “great” tech companies.

Kovacic, the former FTC chair, said that many of the FTC’s efforts to craft rules under Khan are “highly reversible” and that the agency under Trump will probably hew to a “narrower conception of what the FTC role ought to be.”

I also think Trump’s concern currently is more around free speech and the perceived censorship by these big platforms, which is why he’s interested in changing Section 230. However, due to past efforts, by Trump himself, and commentary is also very unlikely to remove or change section 230. All previous reform proposals have stalled or failed, though more Republican control could slightly raise the risk of action against Section 230.

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Goalwise I would put it slightly differently.

I think that Trumps desire is to strengthen his influence over the media landscape and social media and wants to achieve that platforms are either neutral and censor less misinformation (which are more frequently right-wing) or even favor right wing content in its algorithms.
(I think the second will most likely not be achieved)

Zuckerberg signaling neutrality should help a bit to bring Meta out of the line of fire as Trump wants to „reward“ people & companies he perceives as more „loyal“ and punish people who are not. (I think it’s a strategy and not personal - even though attacks are personal)
That said i believe it remains a likely scenario (probability 50%+) that Trump wants to pursue applying pressure to increase his negotiation position and power to achieve above goals but if Meta adopts a policy of censoring less I think there is no reason to harm it significantly from Trumps perspective.

All of this is speculative of course and the
more important and fundamental element of our research has been to understand the legal structure of the country and competencies of different branches of government involved and I agree with Magalys descriptions and assessments.

@Magaly How certain are you that republicans could not and will not apply increased pressure and change laws (not only section 230) now that they control senate and house?

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I agree that the most important thing is the legal aspect. If the laws are in favor of big tech and Trump applies pressure on FTC to go after them, those lawsuits could drag on in the courts, potentially until the next administration comes into force.

I also think that Trump wants to have more power over these companies. His appointee for attorney-general position, Matt Gaetz who had voted for a TikTok ban once called for the break-up of big tech.

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I did not researched section 230 in detail as I did with the antitrust topic, because we stopped the research when I was about to get to it. So my confidence in that is not high.
Currently that assessment comes only from what happened on the past, but Trump promised more action, and I don’t doubt he will try.

And I do think that having the control increases the risks, so more research on that topic would be needed if you want to be more certain, because is completely different trying to change antitrust laws than this other, not in the process to do it, but because antitrust is a much bigger topic imo.

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What’s your take on importance? Maybe given that we have now a situation in which republicans won house and senate we should have another look or monitor developments in this direction (incl. antitrust) closely?

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I think we should definitely monitor all actions closely, and then gradually start building the research on the wiki to be prepared, I don’t think this time is something that has to be rush currently since there is some time until law change proposals start, and market not currently focused on that.

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FTC’s Andrew Ferguson’s comments indicate they are confident to win the case against Meta’s acquisition of WhatsApp and Instagram, however, odds seems not to be in their favor

  • In an interview with Bloomberg, Federal Trade Commission Chairman Andrew Ferguson said they are gearing up for a trial to break up Meta Platforms, that has been scheduled for next month.

    “We’ve got some of the FTC’s best lawyers on it and we’re getting ready to go,” Ferguson said (min 0:16-2.01).

  • He said he’s aiming to create certainty, which was lacking in the Biden administration, adding that if they think there are problems, they will go to court, but if they don’t think there are problems, they will get out of the way (min 2:56 and min 5:30).

  • Ferguson said they don’t want to create conditions in the US that suppress innovation like Europe does, but pointed out that monopoly stifles innovation (min 4.01).

  • He added that they have enough resources to litigate the cases (min 8:19)

    “We don’t have resource constraints. I’ve said from day one, we’ve got the resources to litigate these cases”. he said. That remains true. Our budget is less than half a billion dollars. We’ve only got around 1300 employees and we deliver a lot of value for the American people."

  • Last week, a FTC lawyer asked the court to delay Amazon trial over “dire resource” situation. However, he later claimed that he was wrong, that the FTC does not have resource constraints.

  • In his ruling, allowing the course to go to trial, Judge James Boasberg said that it was hard to tell if the FTC’s claims will hold up.

    “The Commission faces hard questions about whether its claims can hold up in the crucible of trial. Indeed, its positions at times strain this country’s creaking antitrust precedents to their limits,” the judge said.

  • Joseph V. Coniglio, the director of antitrust and innovation, notes that Judge Boasberg’s opinion “gives many indications as to why the FTC’s case is likely doomed”.

  • In October 2024, President Trump expressed skepticism over the potential breakup of Google.

    “If you do that, are you going to destroy the company? What you can do without breaking it up is make sure it’s more fair,” he said.

Assessment
Ferguson’s comments suggest that he’s confident that they will win the case against Meta. However, considering that Meta can appeal the case and even take it up to the Supreme Court and reports of resource constraints, the process will be a hurdle for them. Judge Boasberg’s comments also indicate that the odds aren’t fully in FTC’s favor. Even if they have good arguments, Zuckerberg’s new found relationship with Trump and Trump’s opinions on breakup of Big Tech are likely to help prevent the breakup of Meta Platforms. FTC going hard on Big Tech will also contradict Trump’s comments against EU regulations on US tech companies. In my opinion, Trump could stifle the cases against Big tech through DOGE cuts.

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How good are relationships between Trump and Meta currently? How certain are you that Trump wouldn’t want to break up (or at least heavily pressure) Meta?

Given that the stakes are so high if our assessment here is wrong (a breakup would be devastating and completely change the investment thesis) I think it is good to invest additional time to double check, see if there are new informations or assessments out and run a couple of deep research searches on it.
(In case we see too many worrisome developments I would consider reducing Meta - esp. in the current situation with other risks and a relatively high valuation)

Double checking is in general a good approach if we face highly consequential risk even if our current assessment says the risk is low to do everything we can to not make a mistake on a crucial front like this. (@Magaly also tagging you for reference on this general principle)

The trail starts in mid April and I think we should have double checked everything so we can be highly confident with ideally 2 weeks buffer before it.

The changes Meta made to how WhatsApp is looking in setting & showcase its other products made me a bit worried as this looks clearly like a defensive move that Meta might have wanted to avoid otherwise. (It never wanted to associate WhatsApp openly with Facebook in the past given that Facebook had a bad reputation on consumer data protection)

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I don’t think the UI change is related to the FTC. The FTC’s case against Meta focuses more on stifling competition than on product transparency. Instead, I believe the UI change is a response to the EU’s Digital Markets Act (DMA), which gives users greater rights over service choice, data ownership, and streamlined access.

I would say the Trump–Meta relationship is stronger than it was six months ago. In January 2025, Trump praised Meta Platforms for ending fact-checking. Similarly, Zuckerberg is now a regular guest at the White House. He has visited the White House three times this year, allegedly to discuss how Meta can help Trump’s administration to boost United State’s technological competitiveness. Meta has also vowed to enlist the help of the White House if it feels threatened by the EU. It appears the White House is listening to Meta; in February, Trump announced that he won’t allow “one-sided, anti-competitive policies and practices of foreign governments” to compromise American companies, especially technology companies.

There were expectations that Andrew Ferguson, the FTC’s chair, will be less strict on Big Tech compared to his predecessor, Lina Khan. However, it’s now less clear which direction he will take. Despite maintaining that he will go after Big Tech (min 1:01), the FTC recently removed over 300 blogs that were critical of Amazon, Microsoft and AI companies.

Regardless of Ferguson’s stated intent, the buck currently stops with Trump. In February, president Trump signed an executive order bringing independent agencies such as the FTC under the control of the White House. Last month, Trump fired two Democratic FTC commissioners, Alvaro Bedoya and Rebecca Slaughter. The two commissioners have voted with the Commission to pursue cases against companies such as Amazon. The firing has been seen as a way of protecting Big Tech. Ferguson defended the firing. Similarly, Ferguson said today that he would obey “lawful” orders from Trump such as those asking him to drop the antitrust case against Meta but said he can’t imagine it happening.

Mark Mahaney of Evercore said he doesn’t believe there is any great monopoly evidence when it comes to Meta. He added that the regulatory outcome is likely to be less severe now than it was 5 months ago (min 9:40-min 12:58).

Citing experts, Financial Times notes that unwinding deals (i.e. breaking up Meta) is generally complex, especially if they closed more than a decade ago.

There are now reports that Mark Zuckerberg is lobbying Trump and White House officials to agree on a settlement over the FTC case.

Therefore, with Trump asserting direct control over independent agencies and removing dissenting commissioners, the company’s close relationship with the Trump administration, and Fergusson’s desire to avoid lengthy cases, Meta’s path toward a favorable or negotiated resolution seems increasingly likely.

GPT 4.0 Deep Research analysis on the topic

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The FTC case against Meta started yesterday.
@Aron any signs or insights that are relevant yet? Given the importance of it we obviously need to follow it extremely closely to get clues about a likely judgement and developments.

I also think being up to date on the conflict between Trump and the judge in this case Boasberg is going to be very important. (See politico article and links in it)

https://www.politico.com/news/2025/04/13/meta-zuckerberg-ftc-washington-court-00288044

Assessment
I believe Meta will likely win the case but think we need to follow it very closely anyway. Trump remains a wildcard to me. He could likely stay neutral or try to help Meta to strengthen relations and sending a signal that companies that get close to him get rewarded.
In case the FTC has a strong case though and Meta would get nervous he could also wait to extract further concessions or more influence over the platform (?). This is probably not likely given the FTC case is not strong and I did not research further how Trump could increase his influence over the platform but I think it’s something that Trump would like and could therefore be in the realm of possibilities.

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I think the possibility of Trump forcing a settlement is now low. During Mark Zuckerberg’s visit to the White House, Mike Davis, a member of the Oval Office group and who has been a strong critic of Mark Zuckerberg, was present. Davis later wrote in X: “Mission accomplished," suggesting that he was successful in preventing a settlement. I also don’t see further areas where Trump can extract concessions from Meta Platforms. Zuckerberg has gotten rid of third-party fact-checkers, DEI initiatives and is working towards reducing political censorship. In my opinion, Trump might allow the trial to take its course and then get involved during the remedies stage, so as to appease everyone involved.

I agree with your assessment that the FTC’s case appears weak. The FTC argues that Meta acquired Instagram and WhatsApp so as to stifle competition. Yesterday, the FTC’s lawyer presented emails in which Zuckerberg said Instagram and WhatsApp was growing much faster than Facebook that they had to buy them. The FTC lawyer calls this evidence a “smoking gun”. However, legal experts argue that intent isn’t illegal, that what matters is the market’s health now. Similarly, in his November ruling, Boasberg pointed out that his decision might ultimately hinge on how to define Meta’s market and whether the acquisition of Instagram and WhatsApp has meaningfully benefitted consumers, even if they were motivated by the desire to stifle would-be rivals.

The FTC defines Meta’s market as “personal social networking” and excludes TikTok and YouTube but includes Snapchat and MeWe. If Meta convinces the judge that the FTC’s definition isn’t right, the case falls a part. In their defence yesterday, Meta indicated that when TikTok was briefly offline in January, Facebook’s usage rose 20% while Instagram’s usage increased 17%. Meta’s lawyer also said that 50% of all engagement in Facebook and Instagram involves videos, which put them squarely in competition with TikTok. The sentiment that FTC’s definition of Meta’s market is weak has been supported by a number of experts (William Kovacic-former FTC chairman (min 11:17), Moselle Thompson- former FTC commissioner (min 2:28),George Alan Hay-former chief economist for the DOJ Antitrust Division (min 0:00)).

The FTC says the acquisition of Instagram and WhatsApp has led to the degradation in their quality- for example, worse privacy protections or more ads than would exist under competition. However, legal experts believe that proving this is also inherently harder than showing a monopoly raised prices. The FTC will also have to prove how Instagram and WhatsApp might have turnout if they had not been acquired by Meta, which is also hard.

Overall, we are in early trial phase and what was presented yesterday doesn’t change the general opinion that the FTC’s case against Meta is weak.

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I=7
Meta’s latest offer to settle the FTC antitrust case was $1 billion, much less than the $18 billion that the FTC demanded

  • According to the Wall Street Journal, Meta offered $450 million to settle the FTC antitrust case in late March, far less than the $30 billion demanded by the FTC.
  • As the trial approached, Meta raised its offer to $1 billion, but Ferguson wasn’t willing to settle for anything less than $18 billion and a consent decree.
  • According to the people familiar with the matter, Trump at various points appeared open to striking a deal with Meta. However, he eventually decided to listen to the FTC.

Assessment
The fact that Meta offered a small fee to settle the case signals how weak they believe the case to be. Similarly, the FTC’s willingness to consider a settlement lowers the likelihood that Instagram and WhatsApp will be divested. In my view, if either side feels it is losing ground during the trial, it may seek to negotiate a settlement.

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Do we have any initial insights from the trial itself?

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The evidence presented so far by the FTC are those showing Meta saw Instagram as a threat and evidence of “intent” to stifle growth of Instagram and that of competitors. For instance, in 2018, Meta discussed stifling the growth of Instagram since it was growing faster than Facebook, which was more engaging and profitable. Zuckerberg also considered spinning it off in 2018 because he foresaw being forced to do so in a monopolistic trial. Zuckerberg also considered stifling competition from Wechat, Kakao, Line and the defunct Google+ by blocking their ads (page 30).

Email evidence

“I wouldn’t allow Google+ but the rest are probably fine,” Zuckerberg wrote in 2011. “I would block Google,” Sandberg responded.

“I think we block WeChat, Kakao, and Line ads. Those companies are trying to build social networks and replace us. The revenue is immaterial to us compared with the risk,” Zuckerberg wrote in 2013.

“In the time it has taken us to get ou[r] act together on this lnstagram has become a large and viable competitor to us on mobile photos” Zuckerberg wrote in 2011.

“Instagram could meaningfully” and threatening to us," Zuckerberg wrote in 2012

“I’m beginning to wonder whether spinning Instagram out is the only structure that will accomplish a number of important goals 1) focus each team on building the best app to reduce the strategy tax. 2) immediately stop artificially growing Instagram, in a way that undermines the Facebook network. 3) retain Kevin [Systrom, co-founder of Instagram] to make sure Instagram can do its best work," Zuckerberg wrote in 2018.

“As calls to break up the big tech companies grow, there is a non-trivial chance that we will be forced to spin out Instagram and perhaps WhatsApp in the next 5-10 years anyway,” Zuckerberg wrote in 2018.

According to Rebecca Allensworth, a law professor at Vanderbilt University, the email evidence presented by FTC is strong since it indicate that the acquisitions were designed to suppress competition (min 2:20). In a 2020 publication, she mentioned that these evidence are similar to those used in the 2001 antitrust case against Microsoft. Harry First, a professor at NYU Law School, agrees with her assessment that the email evidence is a “smoking gun” (min 11:14). Kenneth Dintzer, partner at Crowell & Moring, said such documents are exactly what the government needed. Such email evidence were also used in the FTC antitrust case against Whole Foods acquisition of Wild Cats, where the D.C Circuit noted that “evidence of anticompetitive intent cannot be disregarded” when evaluating a merger’s effect.

The FTC also presented emails from more than 10 years ago indicating that Facebook mainly connects friends and family (page 49). In his defence, Zuckerberg said market has substantially changed and that around 20% of content on Facebook and 10% on Instagram is now generated by users’ friends as opposed to accounts they follow. Former Chief Operating Officer Sheryl Sandberg said when she left the company, Facebook’s users were “probably not” using the service to connect with friends and family. However, according to Bloomberg, she quickly changed her answer when was presented a 2022 email where she said, “I think it’s the majority of what people do.”

In my opinion, Meta’s failure to clearly define their core customers so far is a flop in its defense since the definition of Meta’s market will be an important factor in judge Boersberg’s decision. The FTC’s case against Whole Food’s centered on the definition of its market as well. FTC defined Whole Food’s market as “premium natural and organic supermarkets” (PNOS) while Whole Foods claimed that it operated in the broader market of all supermarkets and grocery stores. The D.C. Circuit ruling was based on the fact that PNOS shoppers are Whole Foods’ “core” customers.

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Cool, good that you are finding those old materials and the current presentation of arguments by the FTC.
Does this change anything in your assessment?
Any first further/new indications what the judge is thinking and how he could rule.

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I am seeing widely watched whistleblower reports more recently e.g.

Does the timing of the testimony of Wynn-Williams has anything to do with the current case? Are there potential consequences for Meta?

I also see older whistleblowers commenting on the FTC case.

Just sharing here in case you are not aware. I did not watch all the videos or dig deeper into it.

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Yes, it does. These findings slightly reduce my confidence in the idea that the FTC’s antitrust case against Meta is weak. I’ll be looking for evidence from Meta that explicitly supports its defense- that its core users are no longer primarily friends and family- and other evidence countering the claim that service quality has declined across its platforms. I’m also interested to see how the FTC quantifies how Instagram or Facebook might have grown if they hadn’t been acquired by Meta, as well as whether it can prove that Meta has actively prevented the emergence of other players in the ‘personal social networking’ market.

So far, Judge Boasberg has been engaged and has maintained a neutral demeanor. There is nothing definitive to suggest that he’s leaning toward either side in the case. However, he asked Zuckerberg: ‘‘How much does it matter if your friends are on a particular platform if you can send content out of that platform? Why does it matter if your friends are there?’’ Zuckerberg responded that it matters less now. This line of questioning may suggest that the judge is not fully convinced that Meta’s current power still relies on locking users in via their social graphs- an idea central to the FTC’s claim that users are forced to tolerate declining quality because they cannot easily leave the platform.

Based on the evidence presented so far and the past precedents described above, I’d currently place my confidence in Meta winning the case at around 55-60%.

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Wow thanks. That’s a major shift in confidence isn’t it? How high was your confidence before? How do you estimate the likelihood of a settlement or the FTC winning?
Are you referring only to the current court hearings or do you take appeals into account?
To summarize: Which arguments brought your confidence down and by how much?

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I would put my earlier confidence that Meta will win the case at around 70-75%. So far, I think the worst-case scenario if the FTC wins this case is a settlement (Settlement probability: 80-85%). My arguements for a settlement include:

  • Instagram is deeply integrated into Meta Platforms. As such, a divestiture will likely affect millions of small businesses. That’s an “economic harm” that the courts may not be willing to undertake. A breakup will also be technically complex.
  • Divestitures of such magnitude are extremely rare in the US. Both the 2001 Microsoft trial and 2007 Whole Foods trial ended up with a settlement. In my opinion, the Microsoft antitrust case was stronger than the Meta’s case.
  • FTC already asked for $18 billion for a settlement. The $18 billion headwind is much less compared to the impact of a divestiture. Therefore, Zuckerberg may ultimately choose to settle instead of divesting the apps.
  • The FTC was the one that approved the acquisition of Instagram and WhatsApp. While it’s legal for them to go after past acquisitions they approved, legal scholars share the opinion that this will be considered by court. This argument was used yesterday by U.S. District Judge Leonie Brinkema when ruling against DOJ’s claims that Google’s acquisition of DoubleClick in 2008 and Admeld in 2011, were anticompetitive (page 88). I will find out whether this Google case share similarities with the Meta case.
  • In my opinion, while Trump hasn’t come through for Meta in the trial phase despite the new-found friendship, he will likely push for a settlement since that will appease both sides- Meta will avoid the divestiture while the FTC will achieve meaningful behavioral concessions.

The main argument that lowered my confidence (maybe by 10%) in Meta winning the case is the fact that the “special” market definition that’s being used by the FTC has been accepted before by the court. In my opinion, Meta has also not given enough prove showing that “core business” of its platforms is not to connect friends and family. Sandberg also acknowledged in her 2022 email that connecting friends and family is the main thing they do.

The other thing that lowered my confidence is the vast amount of emails shared by Meta executives. Initially, it was claimed by legal scholars that “intent is not the same as harm”. However, court has accepted evidence of intent in the past to prove consumers harm e.g. in the case of Whole Foods acquisition of Wild Cats in 2007. In my opinion, if the FTC proves that Google+ failed because of Meta’s monopolistic practices, the probability of Meta winning the case reduces.

I also think that Meta will have a hard time proving that it did not siffle Instagram’s growth. Evidence presented indicates that Zuckerberg weighed not promoting Instagram’s usage because it was less profitable and media reports mentioned that he actually did so. According to the Verge, Kevin Systrom and Mike Krieger, co-founders of Instagram left Meta in 2018 because of Zuckerberg’s decision to limit the growth of Instagram.

Whole Foods had won its case against the FTC in the trial but lost it during an appeal.

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