META

As European partners, or now rather trade rivals, of the United States continue to weigh the prospects of taxing social media and cloud businesses with American roots, the U.S. regulators do not forget their old intentions of frightening their own tech giants as well. Even before banning China's TikTok, the Federal Trade Commission (FTC) in Washington as an anti-monopoly supervisory authority was seeking to unwind Meta Platform’s acquisitions of prized assets like Instagram in 2012 and WhatsApp in 2014. These very attractive pieces have become the subjects of investigations, using some letters by Facebook's father Mark Zuckerberg as hard evidence.

An FTC official shared a 2012 letter in which Mark Zuckerberg allegedly said Facebook (which later became Meta) could buy Instagram to neutralize a competitor. Instagram was growing in value very fast at that moment, so that Facebook had to buy Instagram for $1 billion, which is not quite the same as eliminating them. This was supposedly the point of Zuckerberg's message to his teammates. One more letter said Facebook Messenger would beat WhatsApp if the latter would be acquired. This week, Zuckerberg was called to testify, which lasted more than one hour, and he had to answer questions related to these letters.

The key moment from his testimony was probably that even a breakup for Instagram was considered, as Zuckerberg floated the idea of spinning off Instagram amid mounting pressure on big techs from antitrust regulators in 2018. This should prove how seriously Meta took challenges of precisely the type of claims it now faces. "I wonder if we should consider the extreme step of spinning Instagram out as a separate company," he said in a document shown at trial. "While most companies resist break ups, the corporate history is that most companies actually perform better after they’ve been split up". When seeking to explain phrases in which he worried that Instagram was a competitive threat, Zuckerberg said the app’s camera was simply better than camera features Meta had developed. "We were doing a build vs. buy analysis" while being in the process of building a camera app, Zuckerberg explained, adding that he "thought that Instagram was better at that, so I thought it was better to buy them". He also argued that motivations do not matter because Facebook, and now Meta, does not have a monopoly.

The FTC attempts to convince the court that Zuckerberg rules Meta by adhering to a better-buy-than-compete strategy, and the scheme to expand the business empire, according to the agency, runs counter to antitrust laws. Facebook also tried to absorb another potential rival, which was Snapchat, for $6 billion, but the deal did not take place, and Zuckerberg warned that one should prepare for leaks of this information and all the negative background that may arise. The FTC needs to prove that Meta would not have achieved its current dominant position in the social media market if it had not bought Instagram and WhatsApp.

The FTC claims Meta monopolizes the market for social networks where users share with friends and family, but Meta is defending by arguments that the whole social media landscape has changed vastly ever since the FTC initially brought the case 5 years ago. Zuckerberg testified that now around 20% of content on Facebook and 10% on Instagram is generated by users’ friends as opposed to accounts they follow based on interests. "People just kept on engaging with more and more stuff that wasn’t what their friends were doing," he said. Increasing the amount of advertising in order to manipulate the service in a way that benefits the company rather than users was another FTC allegation, whereas increased competition could lead to better outcomes for users, such as the need to show fewer ads. Zuckerberg defended ads by saying that Meta’s system is designed to "show more ad content to people who like seeing ad content", so that Meta has even contemplated introducing a feed consisting entirely of ads. "I think we have discussed it at different points but I don’t think we have done it," he said.

The short video app TikTok has been the "highest competitive threat for Instagram and Facebook", he added, even though the FTC has not included TikTok or YouTube in its market vision where it says Meta has a monopoly, arguing that TikTok or YouTube are broadcast platforms rather than networks for connecting with friends and family. Yet, Meta’s share of the market drops below 30%, Meta shared, if TikTok and YouTube are properly considered and calculated.

Meta share price just wasted most of the growth it revealed during a powerful rebound on April 7-9, from below $485 to almost $585 per unit. The stock is trading only an inch above the most remarkable round figure of $500 on the back of investigation. However, we feel it as not just a very good, but rather a brilliant dip buying opportunity. We believe that Meta will be worth much more than $600 when the ocean wave of the next big bullish bounce rolls ashore on Wall Street.

The case is more likely to remain a formality, a legacy of the former Democratic administration, which saw it as a lever for pressure to get Meta's loyalty in the Covid era and before the election in 2020 and 2024. But the urgency momentum has been lost, and it seems that the Trump team is not interested in splitting Meta. Instead, it needs to bring together the giants of national business during trade disputes with other countries. The court had already warned the agency that it would have to make significant efforts to justify its vision of the market, especially since the social networks included in the Meta empire are mostly free, and Meta also has true competitors like X, formerly Twitter, owned by Google YouTube, a wholly owned subsidiary of Microsoft LinkedIn or the same TikTok by China's ByteDance. Have the judges suddenly seen the light? Again, business transactions concluded so long ago are rarely cancelled by court even in minor cases. Beside that, verbal concerns about competition sound natural, and it's hard to imagine actual evidence of anti-competitive consequences.