‘Better to Buy Than Compete’: US Challenges Meta’s Market Dominance in Court

In 2012, Facebook announced a $1 billion deal to buy Instagram, and the Federal Trade Commission approved. Two years later, Facebook paid $19 billion to take over WhatsApp, and once again, antitrust regulators signed off.

But that wasn’t the end of the story for federal regulators, who observed the fallout from those corporate deals, investigated and brought a case against the Menlo-Park based social media juggernaut. Their primary argument: that Meta used those acquisitions to build and maintain a monopoly in the ad surveillance economy that the social media giant helped create.

At stake is Meta’s $1.4 trillion advertising business and the prospect of a corporate breakup the likes of which has not been seen since AT&T’s telephone monopoly was forced to split apart more than 40 years ago.

In his opening statement in court on Monday, FTC attorney Daniel Matheson said Meta used its size to crush rivals. “They decided that competition was too hard, and it would be easier to buy out their rivals rather than compete with them.”

Meta’s lawyer, Mark Hansen, countered that the quality of Meta’s apps “has improved on every objective measure,” adding that people use more of something when it becomes better. “That’s economics 101.”

Meta does not charge consumers money for its services, so there are no consumer price hikes to demonstrate what many consider direct evidence of monopoly power. However, the FTC will attempt to demonstrate that market power allowed Meta to diminish the quality of its product for consumers.

Journalist Cory Doctorow famously coined a term for this pattern, which he calls “enshittification.” In short, Doctorow argues that tech platforms start with a compellingly enjoyable service to build their consumer base and achieve scale. But over time, platforms inevitably try to maximize profits by stuffing their products with as much advertising as possible.

By that point, Doctorow explains, that both users and advertisers are locked in to continued use of the platform; advertisers, because they value the market share the company dominates; consumers, because it’s difficult to replicate their social network elsewhere and they’ve posted a lot of personal history that can’t easily be shifted elsewhere.

“Imagine Meta is a castle, and they want to maintain their kingdom, so they build this moat around their monopoly, so no one else can access their users or take them away,” said Jen Howard, who was chief of staff at the FTC under former chair Lina Khan. Before that, Howard was at the agency when the case was opened under Joe Simons, the FTC chair during the first Trump Administration.

In the transition from desktop to mobile, Facebook was caught “flat-footed,” Howard argues.

“They didn’t have the technical talent to make Facebook a popular mobile app,” Howard said. “They panicked, absolutely panicked, and they decided to buy their way to the top.”

Meta, for its part, argues the FTC’s case “ignores how the market actually works and chases a theory that doesn’t hold up in the real world.”

Jennifer Newstead, Meta’s chief legal officer, posting on Sunday, wrote that the company has invested vast technical resources into making Instagram and WhatsApp better products, and “in reality, more time is spent on TikTok and YouTube than on either Facebook or Instagram — if you only add TikTok and YouTube into the FTC’s social media market definition, Meta has <30% market share.”

There has been speculation that President Trump could be convinced to abandon the trial and force federal regulators to settle with Meta after CEO Mark Zuckerberg donated $1 million to Trump’s inaugural committee. Zuckerberg agreed to pay Trump $25 million to settle a suit Trump filed for being suspended from Facebook and Instagram in the wake of Jan. 6. Zuckerberg ended fact-checking on Facebook and Instagram and dialed back diversity, equity and inclusion programs. The CEO has also repeatedly visited Trump’s White House and the Mar-a-Lago club in recent months.

But so far, there’s no indication that Trump is responding to the lobbying. And not just for Meta, but for Google, which also faces an antitrust case launched during Trump’s first term. Next week, in the same courthouse where Meta’s case is happening, Alphabet’s Google will argue why it shouldn’t face a breakup after a judge found it illegally monopolized the online search market.

Howard calls the case a “reckoning” for Meta — and a sign the president meant what he posted when he announced Gail Slater his pick to head the Department of Justice, writing on X: “Big Tech has run wild for years, stifling competition in our most innovative sector and, as we all know, using its market power to crack down on the rights of so many Americans, as well as those of Little Tech! I was proud to fight these abuses in my First Term, and our Department of Justice’s antitrust team will continue that work.”

“We’re not going to be competitive if we allow these big, bloated bureaucratic businesses to continue to stifle the next generation of innovation,” Howard told KQED. “Certainly, it’s not going to come from here if we continue to protect them by allowing them to do this sort of moating of monopolies. China’s going to come, and come with something better.”

On that score, Howard noted, antitrust advocates on both sides of the political divide have something they can agree on.