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House Democrats on Wednesday told Facebook CEO Mark Zuckerberg that he may have to spin off Instagram to comply with antitrust laws. The Federal Trade Commission allowed Facebook to acquire Instagram in 2012, but House Judiciary Committee Chairman Jerrold Nadler (D-NY) said it wasn’t a closed case. “Mr. Zuckerberg, mergers and acquisitions that buy off …
House Democrats on Wednesday told Facebook CEO Mark Zuckerberg that he may have to spin off Instagram to comply with antitrust laws.
The Federal Trade Commission allowed Facebook to acquire Instagram in 2012, but House Judiciary Committee Chairman Jerrold Nadler (D-NY) said it wasn’t a closed case.
“Mr. Zuckerberg, mergers and acquisitions that buy off potential competitive threats violate the antitrust laws,” Nadler said. “In your own words, you purchased Instagram to neutralize a competitive threat. If this was an illegal merger at the time of the transaction, why shouldn’t Instagram now be broken off into a separate company?”
Nadler cited Zuckerberg’s remarks that the photo platform was a competitor, though the CEO insisted he only viewed Instagram as a photo-sharing competitor at the time, not as a potential rival for social networking.
“At the time, almost no one thought of them as a general social network,” Zuckerberg said.
But according to Nadler, “the documents you provided tell a very disturbing story. And that story is that Facebook saw Instagram as a powerful threat that could siphon business away from Facebook.”
Nadler said, “you told your CFO that though nascent, Instagram could be very disruptive to us. And in the weeks leading up to the deal, you described Instagram as a threat, saying that ‘Instagram can meaningfully hurt us without becoming a huge business’.”
The merger “should never have been permitted to happen, and it cannot happen again,” Nadler said.
Rep. David Cicilline (D-RI) agreed with Nadler, adding, “The failures of the FTC in 2012 of course do not alleviate the antitrust challenges that [Nadler] described.”
Zuckerberg said the criticism was unfairly premised on the present-day success of Instagram.
“It was not a guarantee that Instagram was going to succeed. The acquisition has done wildly well, largely because not just of the founders’ talent, but because we invested heavily in building up the infrastructure and promoting it,” he said.
