Could FTC reverse the Facebook and Instagram merger?

Could FTC reverse the Facebook and Instagram merger?

THE DIGITAL revolution that took place in the last decade or so has given rise to many tech firms around the world, and some may have grown faster than others.

But the massive growth of only a select few companies often achieved by way of merging with smaller players that could potentially be competitors is rubbing regulators the wrong way.

Also Read: Facebook FTC settlement talks could put it under 20-year oversight

Accordingly to media reports, the US Federal Trade Commission (FTC) Head Joe Simons has stated that the regulatory body is prepared to break up large tech platforms by reversing past mergers. The FTC is currently investigating if companies such as Facebook are harming competition.

Simon, who is also overseeing a broad review of the tech industry, acknowledged that breaking a company is challenging, but might be necessary to restrict dominant players and restore competition in the market.

“If you have to, you do it. It’s not ideal because it’s very messy. But if you have to, you have to,” said Simon, who is also leading a task force that is looking into the conduct of such players in the industry.

The task force could potentially decide to undo the mergers if the ongoing probe finds them to be anti-competitive.

Parties familiar with the investigations have reportedly said that FTC is also examining Facebook specifically, to find out if the company’s acquisition of start-ups was intended to curb competition.

Lawmakers and anti-trust experts have long put forth the argument that tech giants with deep pockets have used takeovers as a strategy to thwart potential competition, acquiring and subsequently neutralizing business rivals.

In the case of Facebook, the acquisition of Instagram in 2012 and WhatsApp in 2014 seem to warrant some scrutiny despite the FTC approving the purchases at the time.

Critics and industry observers have urged the commission to reverse those acquisitions, and while breaking up the company needs approval from the court, FTC’s Simon said that anti-trust official could undo these mergers.

Is the FTC breaking up Facebook and Instagram a good idea?

Facebook Founder and CEO Mark Zuckerberg stated that while he welcomes the regulation, he does not believe breaking up the company will solve the issue that concerns the lawmakers the most – data privacy.

Zuckerberg claimed that Facebook’s size allows the company to enforce high regulatory standards as well as monitor user content, which will be more challenging for Instagram and WhatsApp to do if they become separate entities.

The FTC’s review of the conduct of the tech industry also coincides with the Justice Department’s antitrust division inquiry which was announced last month due to rising concerns over the dominance of a few companies on search engines, social media, and e-commerce platforms.

Tech firms are coming under intense regulatory pressure in recent times, everywhere. Authorities in China in the last month have cracked down on several app operators in the country for collecting an excessive amount of user data.

While it is unclear how these regulations would impact companies and the industry as a whole, too much regulation is known to restrict innovation as well.

And thus, authorities have to find the right balance between protecting consumers, while also enabling innovative technologies which bring more benefit than harm to society.

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Daniel Oduma-Jato

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