FTC vs Meta: Key moments from Week 1 of antitrust trial with Mark Zuckerberg, Sheryl Sandberg | Technology News

The FTC has alleged that Meta acquired potential rival platforms like Instagram and WhatsApp in order to establish its allegedly illegal “social network monopoly”. Meta has a lot at stake here as it could be forced to sell off Instagram and WhatsApp, if it loses.

Here are the key takeaways from Week 1 of FTC vs Meta.

Opening arguments

In his opening statement to the court, FTC attorney Daniel Matheson argued that Facebook had recognised Instagram and WhatsApp as significant competition prior to buying the platforms in 2012 and 2014, respectively.

The FTC further said it will present evidence such as emails from Zuckerberg as well as other Facebook co-founders and investors, in order to prove that the company bought Instagram and WhatsApp to eliminate any competition in the social media market. The antitrust watchdog also claimed to have evidence showing that the two platforms would have allegedly grown even without Facebook’s help.

Meanwhile, Meta’s attorney Mark Hansen said that the FTC’s case against the tech giant relied on made-up theories about how the social media market works as well as the law surrounding it. He further pointed out that the US government had intentionally excluded TikTok from its definition of a social media market in which Meta allegedly held a monopoly.

Hansen also dismissed the FTC’s argument that users actually pay for access to the social media platform by consuming ads.

FTC’s first witness: Mark Zuckerberg

Worried that its “family of apps” structure could hurt the company, Zuckerberg seriously considered spinning off Instagram in 2018. “As calls to break up the big tech companies grow, there is a non-trivial chance that we will be forced to spin out Instagram and perhaps WhatsApp in the next 5-10 years anyway,” he said in an email addressed to company executives, which was produced by the FTC in court.

“Most companies actually perform better after they’ve been split up,” Zuckerberg added.

Perhaps more damaging, however, was that Zuckerberg knew Instagram and WhatsApp threatened Facebook’s dominance prior to acquiring the two platforms for $1 billion and $19 billion, respectively.

“In the time it has taken us to get our act together on this, Instagram has become a large and viable competitor to us on mobile photos, which will increasingly be the future of photos,” Zuckerberg wrote in an email at the time, as presented by the FTC.

In another email, he wrote, “[Facebook] Messenger isn’t beating WhatsApp, Instagram was growing so much faster than us that we had to buy them for $1 billion. That’s not exactly killing it.”

But in court, Zuckerberg claimed that Meta made both platforms better for users by acquiring them. He also said that after his first meeting with WhatsApp co-founder Jan Koum, he thought it was “extremely unlikely” that WhatsApp would build features to compete with Messenger.

Emails produced by the FTC in court also showed that Zuckerberg had considered buying up Snapchat for $6 billion back in 2013.

FTC’s second witness: Sheryl Sandberg

Sheryl Sandberg, the former chief operating officer (COO) of Meta, also testified in the landmark antitrust case. Countering the FTC’s accusations that the company illegally stifled rivals, Sandberg said Meta faced strong competition in the social media market.

She said that TikTok had emerged as a serious contender to Instagram by 2020, and that company executives worried the app’s popularity would eat into Meta’s advertising revenues.

This spurred the creation of Reels, according to Sandberg. Developing the short-form video feature took over $500 million and the hiring of more than 1,000 additional employees as well as paying licensing fees and other items, as per a 2020 document.

Sandberg also argued that Meta had nurtured Instagram into the star app it is today. “The only reason to buy a company is if it becomes “more valuable to an acquirer than on its own,”” she said.

FTC’s third witness: WhatsApp investor Sequoia

In a 2012 document, WhatsApp investor and global VC firm Sequoia flagged Facebook as a significant threat to the instant messaging app while downplaying the competitive risk posed by Apple’s iMessage. “Facebook is the most significant threat given their user base, exceptional user engagement and willingness to support all the major mobile platforms,” it read.

Another internal memo by Sequoia in 2013 suggests that several companies besides Facebook were interested in acquiring WhatsApp. “Multiple companies with a combined market cap in excess of $750B have reached out to WhatsApp at various points in time including Facebook, Microsoft, Yahoo, Google, Twitter, Tencent and NHN. Strategic interest is likely due to the company’s unique positioning as a large, global, independent and growing mobile-only asset,” the document read.

The testimony of Jim Goetz, a partner at Sequoia, also revealed that Zuckerberg was concerned that Chinese tech giant Tencent would snatch up WhatsApp. This was based on WhatsApp founder Jan Koum’s 2012 email addressed to Goetz.

FTC’s next witness: Google’s Aaron Filner

Aaron Filner, a senior director of product management at YouTube, was called as the plaintiff’s next witness to demonstrate that YouTube is part of a market different from that of Meta’s apps and that it is not a direct competitor to Meta.

In its questioning of Filner, the FTC produced a document on YouTube’s experiment with adding social features such as in-app messaging. “We learned that taking a page from social apps and bluntly asking for contact access in the YouTube app would likely lead to user backlash and rejection. Users who probably hadn’t batted an eyelash about providing their contacts to Snapchat didn’t see YouTube as a relevant app to share contacts with,” the document read.