FTC Sues Facebook Claiming Monopoly – What it Could Mean for Oculus

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The United States Federal Trade Commission today announced it has filed a lawsuit with the Washington, D.C. US District Court alleging anticompetitive practices that constitute an illegal monopoly on “personal social networking.” The Commission is seeking a remedy which includes spinning out Instagram and WhatsApp. Oculus, the company’s XR organization, is not directly mentioned in the suit, but it’s clear that the case’s outcome would have wide ranging repercussions for all of Facebook’s business segments.

Following an investigation backed by the attorneys general of 48 US states & territories, the FTC today announced that it filed a formal lawsuit against Facebook for alleged anticompetitive practices. The complete filing can be read here.

The Commission’s lawsuit centers specifically around “personal social networking” and two major pillars: anticompetitive acquisitions and anticompetitive platform conduct.

The former pillar focuses on the company’s purchase of photo sharing site Instagram ($1 billion) and messaging app WhatsApp ($19 billion) in 2012 and 2014 respectively. The Commission alleges that Facebook sought to buy-out its competitors rather than compete with them directly. While Oculus, Facebook’s XR organization, is not named in the suit, it represents another of the company’s high-profile acquisitions—having been bought in 2014 for $2 billion.

The latter pillar alleges Facebook offered access to its APIs—pathways for other software and websites to interface with Facebook—on the condition that they wouldn’t be used in competitive products or services. The FTC cites Vine as one example, claiming that Facebook revoked access to an API that would allow Vine users to find their Facebook friends on the app.

Both pillars represent anticompetitive practices aimed at snuffing out competition and maintaining a monopoly position over personal social networking, the FTC claims.

The FTC will have to prove the Facebook engaged in the anticompetitive behavior alleged in the lawsuit. If it succeeds, the Commission is seeking a “permanent injunction in federal court that could, among other things: require divestitures of assets, including Instagram and WhatsApp; prohibit Facebook from imposing anticompetitive conditions on software developers; and require Facebook to seek prior notice and approval for future mergers and acquisitions.”

While Oculus nor any other aspect of Facebook’s XR operations are mentioned directly in the suit, there’s clear overlap between the company’s alleged anticompetitive practices and its strategy in the XR space.

While Oculus itself clearly wouldn’t have represented a competitive threat to Facebook (as it was a wholly new business segment for the company), its ‘walled garden’ approach to a VR app store, conditional use of APIs with regard to competitive social VR apps, and recently imposed Facebook account requirement for Oculus headsets may all come under scrutiny.

Were the court to side with the FTC—even if Oculus itself was untouched by the legal outcome—it would surely impact the future course of the organization which would need to tread carefully to avoid similar accusations of anticompetitive practices.

Facebook’s acquisition of Oculus was already the subject of a major 2017 lawsuit in which ZeniMax—parent company of Oculus CTO’s former employer, id Software—alleged that Oculus had built its business on proprietary technology developed under its employ. After the court sided with some of ZeniMax’s claims, to the tune of $500 million, the case was appealed and eventually settled in 2018 for an undisclosed sum.

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