2020 May Not End on a Good Note for Facebook and Apple

2020 has been especially harsh on big tech companies. This week, the FTC and 48 attorneys general sued Facebook for illegal monopolization and absorption of competitive companies, such as Instagram and WhatsApp. Simultaneously, Apple has now been sued by Cydia for its monopolistic behavior.

It has been a tough year for everyone. The onset of COVID-19 halted lives and businesses across the world. While the pandemic accelerated digital transformation and bolstered revenue streams for big tech companies, the lawmakers and tech regulators across the globe increased scrutiny against tech giants over alleged anti-competitive practices, monopolistic behavior, and data privacy issues. 

For decades, the five dominant tech giants — Amazon, Apple, Facebook, Microsoft, and Google — have acted as the gatekeepers of the internet, which has stifled competition and consumer choices. Lawmakers now want to regulate the tech industry and create a level playing field for tech giants as well as entrants. 

• 2020 began with a historic antitrust lawsuit against the big tech CEOs (Facebook, Amazon, Apple, and Google), followed by an antitrust complaint against Microsoft by Slack in July 2020. 
• In August 2020, Apple and Google were sued by Epic Games for their anti-competitive behaviors. 
• In September 2020, the U.S. Department of Justice (DoJ) filed a lawsuit against Google over ad tech dominance. 
• In December 2020, the FTC sued Facebook over its acquisitions, and Cydia filed a complaint against Apple over its monopolistic behavior. 

Let’s take a look at the recent charges against Facebook and Apple.

The Federal Trade Commission (FTC) and a coalition of 48 attorneys general (AG) across 46 states filed two separate lawsuits against Facebook on December 9, 2020. The lawsuit allegedOpens a new window that the social media giant has abused its dominance in the social networking industry and engaged in anti-competitive practices. It primarily focuses on Facebook’s acquisitions, including a $1 billion purchase of Instagram in 2012 and a $19 billion purchase of WhatsApp in 2014.

The complaint also sheds light on Facebook’s anti-competitive practices on third-party software developers. According to the FTC, “Facebook has made key APIs available to third-party applications only on the condition that they refrain from developing competing functionalities, and from connecting with or promoting other social networking services.” 

Also Read: Why Palantir’s IPO Reminds Us of Facebook All Over Again

The FTC seeks a permanent injunction in federal court to divest its acquisitions of Instagram and WhatsApp. Additionally, the FTC wants Facebook to seek prior notice and approval for all future mergers and acquisitions and end its anti-competitive practices for software developers. This isn’t the first time that the FTC has filed charges against Facebook. Last year, the FTC imposedOpens a new window $5 billion on Facebook for consumer privacy violations.

Ian Conner, director of the bureau of competition at the FTC, saidOpens a new window , “Facebook’s actions to entrench and maintain its monopoly deny consumers the benefits of competition. Our aim is to roll back Facebook’s anti-competitive conduct and restore competition so that innovation and free competition can thrive.”

The twin lawsuits against Facebook comes on the heels of the landmark antitrust lawsuit filed by the DoJ against Google over its dominance in the online search and ad tech business. Startups and potential competitors that have challenged big tech’s status quo have been gobbled by the behemoths, further strengthening their market position and reducing competition. This has worried lawmakers and regulators, who now want to restore competition and provide a foundation to create a level playing field for companies of all sizes. 

However, industry analysts share a different perspective on small tech company acquisitions.

Jennifer Huddleston, director of technology and innovation policy at American Action Forum, explainedOpens a new window , “Some innovators and startups may seek to create an entirely new technology or product that challenges existing giants or shifts the market entirely, others create niche products or add-ons that improve on existing services that may be better realized or able to reach a wider customer base when integrated, and so they may see an acquisition as an ideal culmination of the company’s lifecycle.”

Facebook tweeted that the lawsuits are revisionist history, and it is reviewing the complaints.

We’re reviewing the complaints & will have more to say soon. Years after the FTC cleared our acquisitions, the government now wants a do-over with no regard for the impact that precedent would have on the broader business community or the people who choose our products every day.

— Facebook Newsroom (@fbnewsroom) December 9, 2020Opens a new window

Jennifer Newstead, VP and general counsel at Facebook, saidOpens a new window , “The FTC is saying it got it wrong and wants a do-over. In addition to being revisionist history, this is simply not how the antitrust laws are supposed to work. The agency has announced that no sale will ever be final, no matter the resulting harm to consumers or the chilling effect on innovation. This lawsuit risks sowing doubt and uncertainty about the U.S. government’s own merger review process and whether acquiring businesses can actually rely on the outcomes of the legal process.”

If the court’s decision is in favor of the lawmakers and regulators, then the break up of Facebook will be similar to the divestiture of AT&T’s old Bell telephone monopoly in 1984.

Also Read: Apple Could Beat Intel Chips With Its New Mac Processors

Moving on to Apple’s news, the company was charged with a new anti-competitive lawsuit from Cydia, a jailbreaking app store founded by Jay Freeman on December 10, 2020. Cydia has accused Apple of illegal monopolization over iOS software distribution. 

Cydia was launched in 2007 as a jailbreak tool before the creation of the iOS App Store. Jailbreak is a technique in which Apple users can remove software restrictions imposed by Apple and easily download or install apps that are unauthorized by the App Store. However, Apple’s stringent guidelines prevented jailbreaking iPhones, which led to the shut down of new purchases from Cydia’s app storeOpens a new window in 2018. 

The lawsuit explainedOpens a new window , “Were it not for Apple’s anti-competitive acquisition and maintenance of an illegal monopoly over iOS app distribution, users today would actually be able to choose how and where to locate and obtain iOS apps, and developers would be able to use the iOS app distributor of their choice.”

Jay Freeman saidOpens a new window , “This lawsuit seeks to open the markets for iOS app distribution and iOS app payment processing to those who wish to compete fairly with Apple, and to recover the enormous damages Apple caused.”

Cydia becomes the latest company to file a lawsuit against Apple. In August 2020, Epic Games filed a lawsuit against Apple over a 30% commission fee on in-app purchases, followed by a countersuit by Apple against Epic Games over a contract breach. In September 2020, app developers created the Coalition for App Fairness against Apple to create a level playing field for app businesses. In response, Apple reduced its commissionsOpens a new window from 30% to 15% for developers earning less than $1 million per year.

The legal challenges against Silicon Valley’s big tech companies continue. The lawsuit against Facebook comes after more than a decade of Facebook dominating the social networking platform by consolidating competitors. And Cydia’s recent lawsuit against Apple might initiate a new era of fair competition in the tech industry. It might take years for the court to make a decision, but it is a wake-up call for big tech companies to overlook their anti-competitive practices and restrategize their methods to allow a fair, competitive playfield for all.

What are your thoughts on the latest antitrust lawsuits against big tech companies? Comment below or let us know on LinkedInOpens a new window , TwitterOpens a new window , or FacebookOpens a new window . We’d love to hear from you!