Utah tech startups could be impacted if Facebook loses antitrust lawsuits

Posted at 8:44 AM, Dec 13, 2020
and last updated 2020-12-13 10:44:49-05

LEHI, Utah — Facebook is under pressure to reduce its size and influence as a tech company.

It's facing two lawsuits — one from the Federal Trade Commission (FTC), and the other from 48 state attorneys general, including Utah's.

Both lawsuits claim Facebook bought its competitors illegally and cut services to smaller tech companies while reducing privacy protections.

"They’re [also] alleging that these companies have gotten so big and so powerful that they’re exerting an enormous amount of influence on our daily lives," said James Czerniawski, the tech and innovation policy analyst at the Libertas Institute.

He also said the lawsuits really come down to answering the question: "Was Facebook truly acting in an anti-competitive nature when they bought Instagram or WhatsApp?"

"There’s no guarantee whatsoever that had Instagram been on its own from the time that it was acquired to today, that it would be the same kind of product that we know today," said Czerniawski.

He argues that Facebook pumped a bunch of money into making Instagram better, which is something a company wouldn't do if they were planning to get rid of it and not make it more successful.

"Facebook was made fun of for acquiring Instagram back in 2012 for a billion dollars because it had no revenue, it had a very limited user base, it was glitchy, so there were a lot of problems," said Czerniawski.

The FTC approved the sale of Instagram in 2012 and the sale of WhatsApp in 2014.

In a statement, the Utah Attorney General's Office said in part: “Facebook systematically plotted to change the competitive market of social media, and its actions are a blatant profit and power grab [...] this lawsuit seeks to restore competition to the market for social media."

Facebook fired back in a mammoth blog post of its own, which reads in part: "Important questions are being asked about ‘big tech’ and whether Facebook and its competitors are making the right decisions around things like elections, harmful content, and privacy. We have taken many steps to address those issues, and we’re far from done [...] we look forward to our day in court, when we’re confident the evidence will show that Facebook, Instagram and WhatsApp belong together, competing on the merits with great products."

Czerniawski said if either of these lawsuits rule against Facebook, it could set a bad precedent for tech startups in Utah.

"Salt Lake and Utah is home to Silicon Slopes, one of the other large tech hubs in the country, and a lot of these companies do get acquired by larger firms for significant amounts of money," said Czerniawski.

If big tech companies aren't allowed to buy up smaller tech companies out of fear that they'll become too powerful, that could mean Utah startups are left with no investors to support their potentially billion-dollar ideas.

If Facebook loses either one of the lawsuits, they would be forced to sell off Instagram and WhatsApp, but legal experts have said the lawsuits will likely take years to resolve.