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Too much power and influence? Will Facebook be forced to dismantle?

11 Dec 2020 | by: Kirsteen Mackay

Facebook (NASDAQ:FB)

Facebook antitrust lawsuits! Coming at them hard! Will Facebook (NASDAQ:FB) be forced to break up and sell off its prized assets such as WhatsApp and Instagram? Or will it bite back with a consolidated all-in-one mammoth entity that consumers can’t possibly live without? There’s no getting away from the fact this is a very serious development in the history of Facebook and maybe even the history of the world. Facebook, Google (Alphabet (NASDAQ:GOOG)), Amazon (NASDAQ:AMZN), and Apple (NASDAQ:AAPL) wield extreme power and influence, essentially changing the forces of power and even the structure of Western economies. Pressure on these titans of tech has been mounting in recent years as lawmakers and regulators increasingly call for regulation against these growing entities.

Serious accusations in response to mounting pressure

The Federal Trade Commission (FTC) and 48 states and districts have clubbed together to hit Facebook where it hurts with one massive bundle of lawsuits. The accusations are serious. They believe Facebook has taken advantage of its power to squeeze out competitors, leaving no room for healthy rivalry. They want this ongoing consumer infiltration to cease, and they want to restore balance to the tech and social landscape. Facebook is being accused of skewing consumer choice and harming their privacy. This lawsuit seeks to break Facebook up and may force it to sell Instagram and WhatsApp as separate entities.

Through the constant and far-reaching infiltration of consumers’ lives Facebook has worked its way around the world and now wields power greater than anything ever before seen.  Governments are growing increasingly concerned by this, particularly as social media has been blamed for inciting fear, hatred and political division in recent years.

Chinnapong – stock.adobe.com

Savvy acquisitions

Back in 2012, Facebook acquired Instagram for $1 billion. Two years later, it bought WhatsApp for $19 billion. Since then, both these apps have gone gangbusters. Instagram has been a major hit with individuals of all ages for presenting their lives in picture-perfect succession. Meanwhile, businesses have embraced it for the pretty way, they can showcase their wares in a meaningful and intimate connection with consumers. WhatsApp on the other hand has become the mainstream messaging app of choice for friends and families all over the globe to seamlessly keep in touch and share photos with ease. Many big-time users of these apps proudly state they don’t use Facebook, not quite realising that in fact, Facebook may still very well be using them.

So, yes, it’s clear Facebook does have a far reach and therefore a responsibility to all these netizens to have their best interests at heart.

Billions upon billions

Today Facebook is worth a mindboggling $790 billion. Its annual revenue exceeds $80 billion and its four main entities comprise; Facebook itself with 2.7 billion users, WhatsApp with 2 billion users, Messenger with 1.3 billion users, and Instagram with 1.1 billion users.

While antitrust cases are not new, attempting to unwind previous mergers is a fresh twist on an old problem. This is why Facebook’s initial defence is the very fact that the FTC previously approved these mergers with no fuss. It goes on to explain that it’s thanks to its own wide-reaching growth and capabilities that Instagram and WhatsApp have done so well. Without Facebook’s infrastructure and social advancements, they would never have reached the levels of success they’ve so far seen.

Better the devil you know

Earlier this year, Chinese social media sensation TikTok endured major backlash and threats from Donald Trump to ban it from the US. This case has not been fully ironed out yet, but it looks as if its ownership will be diluted by selling it to US tech giant Oracle and retailer Walmart.

Mark Zuckerberg, Facebook’s CEO, has used the spectacular rise of TikTok to prove a point that rivalry in the social media space is alive and well. He also uses it to illustrate that without Facebook, foreign nations such as China would be free to push their social media offerings on Western citizens. And their hold on our consumer data could potentially result in consequences a whole lot worse than Facebook holding the data cards.

natanaelginting – stock.adobe.com

Could this be a catastrophic end to Facebook’s rule?

This case against Facebook has been more than 18 months in the making. Regulators are taking matters very seriously and pushing for the most severe penalties they can demand. It’s not going to be a quick process. Cases like this take years to resolve and in the world of tech, Facebook could look very different by the time it reaches any form of conclusion.

Facebook’s not the only one in their crosshairs. Google, another data goliath with knowledge on every intimate facet of human existence, has also been served with an antitrust case. While it’s the Federal Trade Commission (FTC) that’s after Facebook, it’s the US Department of Justice (DOJ) that has their sights set on Google. Whereas Google is likely to come in for a hefty fine, Facebook could be broken apart. Both are facing a wake-up call, but the implications for Facebook could be far worse.

Moving on, moving in

But in the fast-paced world of technological advancements, these companies are unlikely to sit around waiting for a judge to serve their fate. Facebook has previously indicated it wants to create a mega-app. One that integrates messaging, payments and everything necessary for a comfortable modern life across one easy-to-access application.

Just last week it ventured into buying customer service start-up Kustomer, reportedly for over $1 billion. Kustomer gives customer support a new level of excellent service by homing in on customer interactions with a brand. All the while ensuring sales reps get a clear picture of how happy (or not) their customers are. This acquisition would help Facebook help small businesses in yet another good Samaritan move by the behemoth.

And let’s not forget it’s moving into its Libra coin cryptocurrency play, which again diversifies its product line, while neatly sewing up the disconnect of our lives into one perfectly aligned reliance on Facebook.

Let’s make no bones about it, an ongoing FTC legal case will be costly and tiresome for everyone involved. It could drastically change the landscape for future company mergers and acquisitions and will be one for the history books. But it’s also going to take a long time to conclude. While Facebook has a strong capital base and teams of lawyers to fight a long case, will its existing shareholder base stay loyal or try to bank their profits?

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This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.

  • Kirsteen Mackay does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the above article.
  • Kirsteen Mackay has not been paid to produce this piece by the company or companies mentioned above.
  • Digitonic Ltd, the owner of ValueTheMarkets.com, has not been paid for the production of this piece by the company or companies mentioned above.

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