Does Meta Have a Social Media Monopoly?

0:05This week, the billionaire CEO of Meta, Mark Zuckerberg, was on the stand in federal court. He was there to testify in a federal trade commission lawsuit against his company. Meta CEO Mark Zuckerberg began his testimony in one of the most highly anticipated trials in the tech world. In a blockbuster antitrust trial to defend his social media company. Meta is accused of trying to eliminate competitors. In a trial that could break up his social media empire. The FTC is saying that Meta, formerly Facebook, is a monopoly. The case was first filed back in 2020, and it's finally gone to trial. At its heart are two acquisitions that the company made over a decade ago, of Instagram and WhatsApp.

0:53The Federal Trade Commission sued Meta for being a monopoly. And they alleged that the company preyed on small competitors and bought them, took them off the market, before they could emerge as very big competitors to them. That's our colleague Dana Mattioli, who covers tech investigations. If the FTC succeeds, there's a possibility that Meta would have to divest these companies, which would be very unusual. I mean, it could mean that they have to sell Instagram and WhatsApp. Meta says that the FTC's case ignores how people use technology today, and that the company had legitimate business reasons for buying the platforms.

1:39This case is coming at a moment when a lot of large tech companies, like Apple and Amazon, are facing antitrust lawsuits. Just today, a federal judge ruled against Google, saying that the company acted illegally to maintain its dominance. You know, there's been a bipartisan effort in recent years on antitrust. It's very strange. We have a very politically divisive climate we're in where Republicans and Democrats can't seem to agree on anything. But we have this movement on antitrust to say that these companies have gotten too big, they've abused their power, and something has to happen. And I think that that movement really does have legs, and we've seen really prominent people from both sides of the aisle support these efforts.

2:28Welcome to The Journal, our show about money, business, and power. I'm Jessica Mendoza. It's Thursday, April 17th.

2:41Coming up on the show, the FTC's case against Meta finally goes to court.

3:03I think I joined Facebook in like, I don't know, 2009 or 10. I think I started in 2006. And you know how Facebook now does these like memories of old posts? I have sometimes seen just like one line status updates from like 2012 that make me cringe very much. A lot of photo albums. Exactly.

3:31The Facebook of the 2010s was very different from the meta we know today. This was a time before vertical video dominated our screens. Back then, Facebook was all about status updates and comments, writing on someone's wall, and poking your friends. And then a new photo-sharing app that let people post filtered, artsy images hit the social media scene. Instagram was this hot, upstart, small app that was, I think it was available only for iPhones at the time. And it didn't have any advertising on it. It was really just a way for people to share photos with heavily filtered photos, I should say.

4:10And at the time, it definitely caught the attention of Mark Zuckerberg. In 2012, Facebook bought Instagram for a billion dollars. Two years later, Facebook made another acquisition. This time, it was a quickly growing messaging platform called WhatsApp, which had a big international user base. These acquisitions were part of Zuckerberg's business strategy, one that involved scooping up successful smaller companies. He had a certain philosophy around acquisitions and startups. You know, there's one 2008 email from him saying, it is better to buy than compete. So you could sort of see his viewpoint here, that when things got big enough, rather than trying to go head to head with them, he decided to buy them and bring them under the fold.

5:01The FTC approved the acquisitions of Instagram and WhatsApp at the time of their sales. And under Facebook's ownership, both platforms grew. But that smooth sailing came to a halt about five years ago, when the FTC filed the anti-monopoly case. So in 2020, the FTC files its lawsuit against Meta. And it's a time, it's actually this zeitgeisty moment, when the tide has sort of turned on big tech in the U.S. these companies were held up for years and years and years as bastions of innovation, as do no harm, as, you know, feel good companies. And things start to really change in that time period. And a lot of the big tech companies start facing scrutiny, not just from consumers, but from regulators as well.

5:49The Justice Department and the Federal Trade Commission have agreed to split oversight on Google and Amazon. The Justice Department is considering a probe of the iPhone maker. This company has Apple's world... The Trump administration's legal arm is suing Google for antitrust violations. Facebook tweeted a statement at the time, saying, quote, years after the FTC cleared our acquisitions, the government now wants a do-over, with no regard for the impact that precedent would have on the broader business community or the people who choose our products every day. Is it unusual for the FTC to change its position on an eight-year-old acquisition?

6:26Yeah, it's pretty unusual. The FTC's case came at the end of President Donald Trump's first term. It was a moment when Zuckerberg's relationship with Trump was particularly rocky. This is not a very friendly relationship. A lot of conservatives were also really, really angry at Zuckerberg for donating$400 million to different election offices around the time of COVID. They thought that that benefited Democrats. It didn't help that Trump was suspended from Facebook after the January 6th riots. And that was something that he and his people were livid about. He'd even spoken about maybe locking Zuckerberg up, like jailing him.

7:06Of course, Trump couldn't do that. And anyway, his first term was up. But the monopoly lawsuit continued under then-President Joe Biden and his FTC chair, Lena Kahn.

7:19Preparing for these trials can take years. In this case, it took the entirety of Biden's presidency. Soon it was 2024, and Trump was back on the campaign trail. Then in July, he survived a shooting at a rally in Pennsylvania. Zuckerberg sought an opportunity to turn Trump from foe to friend. After the assassination attempt over the summer in Butler, Pennsylvania, Zuckerberg called Trump and basically told him, you know, you're such a badass. something along those lines. So that was like one of the first overtures. And then once it became clear that Trump was going to be president, there was this like full court press, not just by Zuckerberg, by some of his peers as well.

8:04And what we saw was this million dollar check from Meta for the inauguration. He went to the inauguration and sat on the dais with all the other prominent CEOs, which was not something you would have seen in 2016. He settled a$25 million lawsuit with Donald Trump, which lawyers viewed as kind of a frivolous lawsuit. And then he made policy changes at Meta. You know, he relaxed content moderation. There had been a lot of concern from conservatives about the suppression of Republican voices on his platform. So we saw a lot of actions like that. There was a lot of kissing the ring that we think that Meta was hoping would go a long way.

8:53While Zuckerberg tried to win over the administration, Metta also looked at other ways to make this FTC lawsuit go away. Not only were they lobbying the White House to intervene on their behalf, but they were also trying to settle the lawsuit with the Federal Trade Commission. And we had some very exclusive details on how that went down. Please share. Yeah. So, you know, the way these things are done is typically a CEO and his general counsel and other lawyers will have meetings with the FTC ahead of a trial, and they might be able to hash out a deal. What we learned was that Meta offered a settlement of$450 million to the FTC, which is a very small amount.

9:37And the FTC said they were thinking that it should be more of like a$30 billion settlement. When you think about the number that was on offer, for a company as big as Meta, some might find it insulting. I spoke to FTC's former chair, Lena Khan, for my story, and she told me that the$450 million settlement offer was, quote unquote, delusional. And she said, you know, Mark bought his way out of competing, so I'm not surprised that he thinks he can buy his way out of law enforcement too. What came across in our reporting was that Zuckerberg felt confident that the White House would intervene on his behalf.

10:18And was he right to be confident? Did his efforts work? In the end, they didn't work. And there was a big meeting held in the Oval Office a week prior to the trial starting where aides and advisors met with Trump in the Oval Office and just said, you know, that this is an important lawsuit and it should move forward. And he got his blessing. And so, despite the fact that Trump and Zuckerberg met a lot of times since he was reelected, and even before, it seems like his advisers were telling him not to step in and stop the trial. That's correct. There are people around Trump who have told him, we've reported this, that don't believe this MAGA rebrand.

11:03Remember what he did to you.

11:09Now the trial is finally here. Each side's argument after the break.

11:25You're kind of on a time limit here with us. Can you explain to the audience why that is? Well, I came back to the bureau from the courthouse. We're on a lunch break right now in the trial in the FTC's civil lawsuit against Meadow. Our colleague Jan Wolf has been covering the trial since it started on Monday. He says the courtroom was packed, and representatives from some of the biggest tech companies, like Google, TikTok, and Snapchat, were there to watch, particularly to see the testimony of Mark Zuckerberg. What does he look like up there? Like, what is he wearing? You know, what's his sort of demeanor?

11:59I mean, Zuckerberg's wearing a suit and tie. Like, you know, he has, I think, rolled out a relatively new wardrobe in the last year or two. You know, more T-shirts, sort of more, like, I don't know, edgy fashion. He's just up there. Start-up tech bro fashion? Yeah, yeah, yeah. Gold chain and all that. Like, you know, suit and tie. Zuckerberg sat on the witness stand for more than 10 hours over the course of three days, defending his company against the FTC. And big picture here, what is the FTC trying to prove in this case against Meta? The FTC alleges that Meta violated the Sherman Antitrust Act.

12:36And there's a section of that saying that you can't establish a monopoly through unlawful conduct. And the alleged unlawful conduct here is the acquisition of two smaller startups that were threatening Meta's, formerly Facebook's business model, Instagram and WhatsApp. To help prove this idea, the prosecution dug into emails that Zuckerberg had sent to his staff. They leaned on one message in particular from before the acquisition in 2012. There's one where he and a colleague are talking about why it would be beneficial to buy Instagram. And the Zuckerberg colleague said that one reason would be to neutralize a potential competitor.

13:17And then Zuckerberg replies that that is a partial consideration here. So the FTC has said this is about as close to a smoking gun as you can get, because their whole theory of the case is that Facebook, now Meta, bought Instagram, bought WhatsApp to neutralize competition from a startup. Why was that moment important? It's rare that you get evidence that really gets to the heart of the case like this. So, you know, from the FTC's perspective, this is like pretty damaging. It's a real glimpse into the mindset at the time and really supports their theory that the Instagram purchase and the WhatsApp purchase was really about putting on the sidelines competition from rival upstarts.

13:56Zuckerberg's defense was that the company bought Instagram and WhatsApp not to neutralize them, but to improve them. His point is we bought Instagram because we thought it had really good technology. We wanted to incorporate it into our platform and we wanted to make it better. So Zuckerberg has pointed out that the Instagram founders stayed around for years afterward. And he says that's not consistent with the FTC's theory. He called it a buy versus build analysis. And he says there's nothing wrong with that in the Silicon Valley context. Sometimes you just buy a startup and a startup is happy to have that exit.

14:32Like most antitrust hearings, the FTC meta-trial is what's called a non-jury or bench trial, which means the two sides are making their cases in front of a judge rather than a jury. In this case, that judge is James Boesberg. If his name sounds familiar, it's because Boesberg has recently been in the news after he ruled against some of Trump's deportation efforts. So this Facebook antitrust case is very different than what he's used to handling. He's acknowledged that he's not like a tech savvy guy. And there was a tutorial before the trial where social media analysts like explain really basic concepts about social media to him.

15:09He's like, what is tagging of like, like, I think I know what it is. But when someone says I tagged you in this, what does that mean? So, you know, he's not like some tech expert, but you don't need to be either.

15:22Ultimately, Judge Boesberg will have to make a decision on whether or not Meta is a monopoly in the social media sphere and who Meta's competitors are. I mean, what Meta is saying is we compete with TikTok, we compete with iMessage, we compete with YouTube for people's screen time online. We are not primarily about friends and family. Yes, we have that use case. Yes, that's how we started. But we are a discovery portal. You come here to be entertained and find content, and then you can share that with your friends on all kinds of other platforms. But the FTC disagrees. The case may come down to how Meta is defined, as an entertainment app or a social networking app.

16:01How strong would you say the FTC's case is? The FTC's general point about consolidation in tech, you know, there's obviously truth to the fact that there are some dominant players that have a ton of power over how we talk online and have tremendous access to our data. But when it comes to meta, I mean, these transactions, the WhatsApp and Instagram transactions, are really old. I mean, we're talking about like almost 15 years ago now. And they were approved by the FTC and other regulators at the time. So that's, I think, rhetorically a difficult thing for the FTC to get across. So let's talk kind of timeline here.

16:48When will we get a verdict? This case has moved really slowly, which is often the case for these complex antitrust lawsuits. And I think, you know, don't expect quick resolution of it from this point unless there's a settlement, because there's still a lot to do. The trial is set to run for about eight weeks. If Meta loses the case, there's a chance that the company will have to break up. and possibly have to sell off Instagram and WhatsApp. I mean, this is an enormously important case because Meta is such an important vehicle for just communicating, and it has all this data on us. So, I mean, the stakes are really enormous, and I think the case matters a lot from that perspective.

17:33So we'll definitely be keeping a close eye on it. And with that, Jan's lunch break was over. Right on schedule. Thank you so much for your time. Get you back to the courthouse. Yeah, sure.

17:59That's all for today, Thursday, April 17th. The Journal is a co-production of Spotify and the Wall Street Journal. Additional reporting in this episode by Rebecca Ballhaus, Megan Bobrowski, Josh Dossie, and Dave Michaels. Thanks for listening. See you tomorrow.