This week, the Federal Trade Commission (FTC)’s trial against Meta began. The agency looks hostilely at the tech giant’s acquisitions of Instagram and WhatsApp, in 2012 and 2014, respectively. In the government’s telling, these purchases allowed Meta illegally to monopolize its market. Regulators will seek a judgment compelling Meta to relinquish the two platforms.
Unfortunately for the government, the FTC’s case has little mooring to sound law or economics. The government declined — correctly — to challenge either merger when the transactions occurred in the 2010s; yet as cultural-political incentives developed in the years following, politicians of both parties became tantalized by the prospect of warring with Big Tech (albeit the parties did so for different reasons). Antitrust — which is, in its proper conception, a narrow economic tool — has become a weapon of political and cultural strife.
Consider the instructive history of Instagram. When Meta acquired it, regulators did not act because Instagram was small, and the deal did not appear to present the sorts of problems against which antitrust regulators act. “At the time, basically no one worried about it from an antitrust perspective and many pundits lambasted the purchase as a poor business decision,” scholars from the International Center for Law & Economics report. “It is only in retrospect that people have started to see it as the merger that got away.”
Indeed, while Instagram would likely have gained users absent its acquisition by Meta, the resources, innovation, and technical improvements the new parent company provided propelled the smaller platform to become one of the premier social media sites of modern times. In 2012, Instagram has a small user base; today, its count of monthly active users has surpassed two billion. Far from anticompetitive, this growth gave consumers a top-notch product and fostered new competition as rivals raced to keep abreast of a newly formidable challenger. This should be celebrated, not scorned.
To portray Meta’s position as monopolistic, the FTC has contorted market definitions to overstate its market share. According to the government, Meta’s Facebook and Instagram compete only with Snapchat and MeWe, holding up to roughly 85 percent of the market share between them. However, accounting for competition from just TikTok and YouTube — and excluding the competition from its other rivals, such as X, Reddit, and Pinterest — Meta’s share shrinks to less than 30 percent. In addition to common sense — not to mention the obvious similarity of products such as Instagram’s Reels, YouTube’s Shorts, and TikTok video offerings — data confirms the notion that Meta’s platforms compete with a broader array of competitors than the FTC avers. For example, when TikTok became temporarily unavailable earlier this year, the use of Facebook and Instagram spiked.
Besides the particulars of the FTC’s case, Meta’s targeting raises larger questions that Americans — government officials and private citizens — should consider thoroughly. The American legal system — and the English legal tradition that birthed it — maintains a strong distaste for anything smacking of double jeopardy. The government’s initial review of Meta’s purchases of Instagram and WhatsApp yielded the conclusion that neither deal warranted the state’s interference. Only later, amidst more turbulent cultural waters, did the ship of state swing around and turn its guns on Meta.
The FTC’s attempt to dismember Meta’s parts through divestiture should provoke further discomfort. The attempt to confiscate large portions of a business’s assets — for the sole crime of that business’s wild success in serving its customers — a decade or more after their acquisition amounts to a confiscation of property, antithetical to a system predicated on robust property rights. From this precedent comes no limiting principle to bar enforcers from going back two decades, or three, or more, to reverse sound regulatory determinations and reopen cases better left closed. No regulatory decision could be considered settled with finality, and uncertainty would plague any company engaged in mergers and acquisitions — any company large enough to garner regulators’ attention, that is.
Indeed, the logic of the FTC’s case threatens any company fulfills a market demand too well. This week, Meta faces the charge that it has succeeded too thoroughly in marketing useful and entertaining communications services; consumers enjoy its products too much, and too many choose to use them in preference to those of competitors. This assumption that “Big is Bad” — that market dominance constitutes per se evidence of anticompetitive conduct — cannot be cabined within the realm of mergers and acquisitions. Instead, as recent experience has shown, the advocates of “Big is Bad” wish to cripple the business operations of many of America’s best companies, a particularly dangerous impulse given its myopic obsession with the tech industry.
“Big is Bad” was the battle cry of the Biden administration’s antitrust agenda, which characterized itself by the extension of enforcement deep into new portions of the economy. The Trump administration should reject such backdoor central planning and fulfill its mandate to leave the disastrous Biden age in the dustbin of history, where it belongs.
David B. McGarry is the research director at the Taxpayers Protection Alliance.