On Wednesday, the Federal Trade Commission filed a lawsuit against Facebook alleging that the company had engaged in illegal anti-competitive behaviors to sustain a social media monopoly. Attorneys general from 46 states, D.C., and Guam—a coalition that conducted an investigation in conjunction with the FTC—filed a separate suit making similar antitrust claims. The FTC is partly seeking to force Facebook to sever its subsidiaries Instagram, which it acquired in 2012 for $1 billion, and WhatsApp, which it acquired in 2014 for $19 billion. The suit will likely be contested for years, and it’s far from a foregone conclusion that Facebook will actually have to break up. But if the FTC is ultimately successful, how would Facebook go about separating itself from Instagram and WhatsApp?
The task wouldn’t be simple. Instagram and WhatsApp have grown considerably since they were acquired, and have become increasingly reliant on their parent’s technical infrastructure, to the point where it can be hard to determine where they end and Facebook begins. In 2019, CEO Mark Zuckerberg reportedly started prioritizing an initiative to unify the systems that underlie Facebook’s core social network with those of Messenger, Instagram, and WhatsApp. This move would give Zuckerberg more control over the various components of his company, keep users engaged within the Facebook ecosystem, and make it more difficult to break these components apart. Facebook has since then allowed Instagram users to communicate via Messenger and created a virtual center where people can change settings and put up posts across platforms.
In the event that a court rules that Facebook does need to divest its subsidiaries, there will be many remaining questions about how to do it. These questions would likely be resolved in a hearing years down the line in which it would be up to the court to figure out how Instagram and WhatsApp can survive as profitable, independent entities that can compete against Facebook. “You can’t just cut off a company and say, ‘You’re on your own.’ They’re going to have to be given whatever they need in order to be viable,” says George Hay, a former member of the Department of Justice’s antitrust division who now teaches at Cornell Law School. “You don’t want Instagram going belly up after a year.”
The unification of Facebook’s component businesses is sure to make separation more difficult, but it’s not clear that it would be worth completely disentangling everything. “What it has sounded like so far is that tying together has been more focused on making interoperability possible between the services,” says Ross Schulman, senior counsel and policy technologist at New America’s Open Technology Institute. “Even if we say that Facebook and Instagram should be separate services, that doesn’t mean that we would want to turn off that interoperability. Interoperability is a foundational aspect of the internet, and it’s not necessarily an anti-competitive thing.” Antitrust experts have actually promoted interoperability because it allows users to more easily switch between different platforms instead of relying on a single dominant one.
One of the other issues that all the parties involved would need to consider is what’s the best way to divvy up the advertising system, which is Facebook’s economic engine. The company’s tracking of user behavior on the web provides valuable information to advertisers, who target their messages on Facebook’s platforms. “[Facebook] is using relationships with websites across the internet and with apps on our phones and a variety of sources of data,” says Charlotte Slaiman, the competition policy director at Public Knowledge. “If we were to spin off Instagram, you have to think about what pieces of that back-end advertising platform also need to be accessible to Instagram in order for them to be profitable.” WhatsApp, notably, isn’t profitable at the moment, though Facebook is trying to make it into a moneymaker with commerce partnerships.
User data is a key component for the Facebook ecosystem’s acute ability to target ads at people, and if the FTC gets its way, a court will have to decide what kind of access each company gets to that data. The process of splitting this up could be extremely difficult, according to Ari Lightman, a digital media and marketing professor at Carnegie Mellon University. “It would be unfortunate if the court said, ‘You have to divest yourself, and every single piece of data element that you collected on WhatsApp users or Instagram users now needs to be disambiguated,’ ” Lightman says. “That would be incredibly expensive for an entity to do. It’d be incredibly hard and disadvantageous for Facebook. I don’t see that as a stipulation, but you never know.” An alternative to such a wholesale split, Slaiman says, would be to strike a deal in which Facebook and its spinoffs are independent entities that have access to some of the same data.
Instagram and WhatsApp have also come to rely on Facebook’s substantial digital infrastructure, which complicates the potential separation from their acquirer. For instance, Instagram is heavily dependent on Facebook’s automated moderation systems that identify hate speech and terrorist propaganda. Instagram could eventually have to build its own moderation tools. Facebook may also be required to continue providing these resources in order to ensure that the new entities can survive on their own, which ultimately means that it would have to support spinoffs that are ultimately supposed to compete with it, perhaps by licensing certain technologies. This dynamic isn’t unprecedented, however. “You have it a little bit in the telephone business,” Hay says. “Under the Telecommunications Act of 1996, if I want to start up a local telephone company, the local incumbent has to cooperate with me.” There are a number of third-party suppliers that use Verizon’s and other major telecom companies’ infrastructures, though none has become an actual competitor to the big players in its space.
Facebook’s integration of Instagram and WhatsApp over the years means that the workforces for the three business have gradually become more intertwined. This will make deciding who goes where in a potential split more difficult, though the FTC does have experience with this sort of thing, especially from merger reviews. Slaiman notes that regulators will often produce an organizational chart and try to identify which employees are responsible for various business functions. In doing so, they can decide what parts of a team need to go to the spun-off entity, and which should stay. One complicating factor is that some employees could want to stay at Facebook, and you can’t exactly force them to stay at Instagram or WhatsApp. Hay says regulators can insist, though, that Facebook not hire them back.