The U.S. vs. Facebook: Why Is the FTC Filing an Antitrust Lawsuit Now?

Effectively, officials are arguing this: Look at the forest, not the individual trees.

“Our enforcement action challenges more than just the acquisitions: We are challenging a multiyear course of conduct,” the FTC wrote in a question-and-answer document published Wednesday.

The lawsuits also come as Washington policy makers cool to Big Tech.

Facebook’s reputation has taken hit after hit following disclosures of privacy violations, reports of false or harmful content spreading on its services, discontent about its approach to political material and warnings about social media’s impact on everything from childhood development to popular discourse.

While those factors don’t form the legal basis for Wednesday’s lawsuits, they have created a climate that makes government action against the company more palatable across the political spectrum.

In addition to antitrust scrutiny, large tech companies are lobbying against other threats, including legislative proposals to increase their legal liability for user-generated content.

Lawmakers in both parties praised Wednesday’s lawsuits.

“Facebook has broken the law. It must be broken up,” said Rep. David Cicilline (D., R.I.), chairman of the House Antitrust Subcommittee.

Sen. Mike Lee (R., Utah), who heads a Senate subcommittee focused on antitrust, said, “I am glad to see that our antitrust enforcers are finally taking the threats posed by Big Tech seriously.”

“At the same time,” Mr. Lee added, “the FTC previously cleared both the Instagram and WhatsApp acquisitions, and I hesitate to congratulate it now for trying to clean up its own mess.”

The FTC probed and then unanimously approved the $1 billion Instagram acquisition in 2012. The $19 billion WhatsApp acquisition two years later got less scrutiny: The agency “did not initiate a full-phase investigation,” according to a recent report by Democratic staff on the House Antitrust Subcommittee.

Facebook Chief Executive Mark Zuckerberg pointed out as much when he testified before the subcommittee in July. Pressed on messages he wrote to colleagues around the time of the Instagram deal, some of which were cited in Wednesday’s lawsuits, he said, “I think the FTC had all of these documents and reviewed this.”

“Now the agency has announced that no sale will ever be final, no matter the resulting harm to consumers or the chilling effect on innovation,” said Jennifer Newstead, Facebook’s vice president and general counsel, in a blog post Wednesday. The company is taking steps to address broader concerns about Big Tech, she said, “but none of these issues are antitrust concerns, and the FTC’s case would do nothing to address them.”

As a legal matter, the FTC says it is empowered to reconsider the deals.

After the 5-0 vote not to challenge the Instagram deal, the commission sent the companies brief letters that said in part, “This action is not to be construed as a determination that a violation may not have occurred…The commission reserves the right to take such further action as the public interest may require.”

In its lawsuit Wednesday, the FTC mostly cited documents dated before the deals closed, including messages in which Facebook executives described fears that the fast-growing Instagram and WhatsApp could displace Facebook if they decided to expand beyond their main services.

“It is better to buy than compete,” Mr. Zuckerberg wrote in a 2008 email, according to the FTC lawsuit.

Some evidence came after governments looked at the deals. In November 2012, Instagram co-founder Kevin Systrom, who at the time was working for Facebook, questioned another executive about a decision to limit the promotion of Instagram for fear of hurting Facebook’s main platform, according to the FTC suit.

“I am not sure growing Instagram blindly through promotions without understanding the impact on FB’s engagement makes sense,” another Facebook executive wrote back.

The FTC argued that the exchange shows Facebook took action to limit Instagram’s impact on the main Facebook platform, “confirming that Instagram is a significant threat to Facebook’s personal social networking monopoly.”

The states’ lawsuit details other acquisitions of potential competitors, including a 2009 deal to buy the app FriendFeed, which, like Facebook, aggregated content shared by users’ connections.

The lawsuits also allege Facebook’s monopolistic behavior went beyond acquisitions, citing its rules for how third-party apps could—or couldn’t—interact with the Facebook platform and its users. These actions “have served to hinder, suppress, and deter the emergence of promising competitive threats,” the FTC said.

“Companies are allowed to choose their business partners,” Facebook’s Ms. Newstead responded.

Write to Ryan Tracy at [email protected]