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WELP, Wednesday was intense. The US government and more than 40 states sued Facebook for illegally destroying competitors and calling on the company to reverse the Instagram and WhatsApp acquisitions.
This is going to be a loud and long legal mess as my colleagues Cecilia Kang and Mike Isaac wrote in their article. Let me try to help us understand what is happening by asking five questions:
1) What's the argument from the government and Facebook?
There's a legal reason Instagram and WhatsApp are at the center of state and federal lawsuits. Trying to reduce competition by buying from competitors is an explicit violation of American antitrust laws. This is exactly what government attorneys say, Facebook has and will continue to do it.
The difficult thing, however, is that the government gave Facebook permission to buy Instagram and WhatsApp in 2012 and 2014. Facebook argues that it is unfair for government officials to try a revision now, and that Facebook has made Instagram and WhatsApp better than you could have been alone.
Mike and Cecilia also wrote about why it will be difficult for the government to prove this case.
2) How do the lawsuits affect people who use Facebook?
Such lawsuits can take years to resolve. Your experiences with Facebook, Instagram, WhatsApp or Messenger will not suddenly be different tomorrow.
The more immediate ramifications of this legal battle could be subtle changes to these social apps as Facebook keeps an eye on its legal proceedings.
Facebook is already working to make messaging functions in multiple apps more seamlessly merge behind the scenes, which could make separation difficult. It is also possible that Facebook withholds new acquisitions or changes functions in development so as not to violate the company's legal arguments. I doubt it, however.
(Read what my DealBook colleagues think about the Facebook battle and help them – and me! – solve a riddle in the federal government's lawsuit. DealBook also has an overview of a virtual panel that experts have convened to discuss discuss the future of big tech.)
3) Relatives: Will This Hold Facebook Back?
An unknown to all tech superstars – whether they get sued or not – is whether the recent extra attention to everything they do will change them forever.
In an interview last year, Bill Gates said that his company's Windows – and not Google's Android – could have been the world's most popular smartphone system if Microsoft hadn't been "distracted" from the government's 1998 antitrust proceedings. Gates reflected a shared view of corporate executives of the time that the lawsuits made Microsoft more cautious and, as a result, the company missed the opportunity to break new ground.
Gates dealt with a revisionist story, but it is possible that Google, Facebook, Amazon, Apple, or even Microsoft could change their behavior again because they are bogged down in legal proceedings or are concerned about looking like bullies.
Apple likely wouldn't have cut some of the commissions it charges app developers if its business partners hadn't said the company had an unfair monopoly. Companies that fear unwanted control can also change things we like about their products and services.
4) Why is this happening now?
Some government officials had tough words for Facebook on Wednesday. However, they ignored two important points: they are only suing Facebook after years of not restricting their power and because there is now a political will to do so.
The Federal Trade Commission is the same government agency that was denounced last year for pulling a manageable fine from Facebook and calling for changes to the company's privacy policies with uncertain benefits for those of us who use the company's apps. The same agency approved the Instagram and WhatsApp acquisitions.
Economy & Economy
Dec. 11, 2020, 6:16 p.m. ET
And the FC, Congress, and other government agencies have done little to rewrite the rules of the Internet to protect American privacy, limit corporate power, or determine how online freedom of expression is consistent with security for all can be brought. Perhaps hard-to-win lawsuits against Google and Facebook would not have been necessary if the government had acted sooner.
What is changing now is that elected officials and other members of the government are united in their frustration with America's tech superpowers and are more willing to call for sweeping changes.
5) what happens next?
Lawyers. So many lawyers.
One thing that annoys me about both Google and Facebook antitrust lawsuits is that people who want to change these companies, the Internet, and the American economy sometimes see the lawsuits as general solutions.
But antitrust cases, even if successful, will not necessarily address all of the various and sometimes inconsistent grievances that many people have with these two companies, or big tech as a whole.
That doesn't mean these lawsuits won't change anything. You could! I certainly have concerns about unrestrained and unbridled giant tech companies, and I'm glad that government officials seem willing to change their minds about how to take on this challenge. The status quo is not working.
No matter what happens to the Facebook case, there is no going back to more carefree times for the tech giants. In world capitals, in courtrooms, and in public, we struggle with what it means for a handful of wealthy tech companies to affect our lives, our choices, our economies, and our spirits.
Feelings about the tech superpowers have changed forever, and it's inevitably going to have an impact on businesses and us.
Before we go …
I cannot express how abnormal this is: On its first day as a public company, the unprofitable grocery company DoorDash soared and the company is now worth more than Chipotle, KFC, Pizza Hut and Taco Bell combined, my DealBook colleagues wrote. After the Airbnb IPO, the share price is likely to falter, wrote Bloomberg News. I will remind you that there is still a pandemic that has deepened the US economy and hurt many businesses and people.
Anti-government organization in Cuba via WhatsApp and Facebook: The relatively widespread availability of Internet access on Cubans' cell phones has resulted in people posting videos of police encounters and other examples of citizens openly confronting their government, my colleagues reported. The existence of such protests in Cuba is rare, said my colleagues, but cannot lead to permanent change.
Wow, people wear headphones in the shower? Lauren Dragan from Wirecutter told me months ago and I didn't believe it. However, the Wall Street Journal writes about people who ruin their Apple AirPods headphones by intentionally or unintentionally wearing them while bathing. Two people interviewed by The Journal said they protected their AirPods with a shower cap.
May you have this parrot's delight at the vet. (Thanks to my colleague Astead Herndon for sharing.)
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