Not content with stopping mergers as they happen, antitrust regulators are also turning back the clock on past deals. Last month, a DC District Court judge ruled that Meta would have to face a lawsuit from the Federal Trade Commission (FTC) regarding its acquisitions of Instagram and WhatsApp.
Despite the FTC previously clearing the acquisitions more than a decade ago, the agency has now decided it wants to unwind them. If the FTC succeeds, it will undo agreements that have largely been beneficial to platforms and consumers alike. It could also produce a chilling effect on business decision-making and cause consumers to miss out on merger-related benefits.
Central to the FTC’s argument is the idea that Meta bought Instagram and WhatsApp in an attempt to stop potential competitors from entering the market and challenging their leadership position. While this argument is not new, the FTC’s attempt to undo past mergers is. After all, Meta purchased Instagram and WhatsApp over ten years ago in 2012 and 2014 respectively.
Despite the FTC fears that Meta would purchase Instagram and WhatsApp only to shut down their services, the apps have grown massively since the acquisition, both in terms of an expanded user base and through added product features. Both of these platforms now have over one billion users and many of the newer features are built on Meta’s infrastructure and would not have been possible without Meta’s backing. This allowed for more interoperability between platforms.
Regardless, Meta is hardly unchallengeable in the market anyway. While it is true that Meta owns most of world’s largest social media platforms, its dominance is quickly being eroded by competing platforms, like X (formerly Twitter), Reddit, and TikTok, especially among young users.
Meta’s flagship platform Facebook, for example, has a declining user base among the next generation of young adults, known commonly as Gen Z. Statista data shows only 44 percent of this age group uses Facebook compared with 72 percent using TikTok and 51 percent using Discord. Instagram, however, remains popular with young users, with 69 percent reporting using the platform. The overall picture looks less like Meta destroying competition and more like that the company is trying to stay relevant in an increasingly competitive market.
Mergers, like that between Meta, Instagram, and WhatsApp, help connect people in small companies with new ideas and expertise to the resources they need to grow and further develop products and services. Undoing an already completed merger without a strong reason is counterproductive and will likely produce a chilling effect on industry that discourages future pro-competitive mergers and acquisitions. That unfortunate scenario denies consumers the benefits of pro-competitive merger activity.
Unwinding such deals after the fact not only sets a bad precedent but also subjects business decision-making to the whims of government bureaucrats that struggle to wield that kind of power effectively.
Besides, regulatory compliance is already expensive and mergers are already subject to antitrust enforcement review from the Hart-Scott-Rodino Antitrust Improvements Act, which requires companies to file pre-merger notifications for review. If a company successfully manages to navigate this long and arduous process only to be told years that they had operated illegally, that will discourage other companies from proposing similar deals in the future. That is a shame for the millions of American consumers who stand to benefit from pro-competitive mergers.
The FTC lawsuit against Meta over its completed acquisitions of Instagram and WhatsApp not only misses the mark on what is best for consumers but also undermines the regulatory certainty businesses require to innovate and survive. Undoing the merger now would do untold damage to the consumers that benefit from social media use.
Trey Price is a policy analyst with the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, visit us at www.TheAmericanConsumer.Org or follow us on X @ConsumerPal.