A little while ago, Facebook settled with the FTC over lax privacy regulations, earning itself a $5 billion fine, which was essentially a slap on the wrist. But it appears that that investigation was only the start of Facebook’s trouble with the federal government. According to the New York Times, in the course of that investigation, the FTC discovered “internal Facebook documents that prompted concerns around how the company was acquiring rivals.”
In other words, Facebook’s acquisitions might have been motivated less by acquiring employees or innovative tech and more by an impulse to squash a competitor by bringing it under the Facebook umbrella. This type of thinking is widely regarded as one of the main reasons Zuckerberg acted quickly to pick up Instagram and WhatsApp, seemingly overpaying for them before they grew big enough to challenge Facebook independently. Its acquisition of VPN service Onavo was specifically to monitor user web traffic and identify competitors early.
Now, as the Justice Department ramps up investigations of almost every major tech company — Facebook, Google, Apple, and Amazon are all under the magnifying glass — Facebook is apparently shoring up its defenses. Engineers and developers at the company are integrating all three of its main products so that they’re interoperable, which is a move that would make splitting the trio apart a much more cumbersome process. The company is also slapping Facebook branding prominently onto Instagram and WhatsApp (“Instagram From Facebook”) so that everyone seems like one company instead of three. All those people who angrily quit Facebook after Cambridge Analytica and went to Instagram are in for a rude awakening.
The Times also reports that Facebook is very wary of the optics of any move it makes. According to the paper, late last year Facebook was in talks to acquire Houseparty, a video-chat app popular among younger users that Facebook desperately needs. The deal was scuttled, though, after Facebook realized the acquisition might seem like the company was once again buying a competitor to snuff it out. Who knows if Houseparty would have continued to exist as it does now; maybe it was just an acquihire for tech and talent.
Houseparty might not have actually been a prominent Facebook competitor. Since these talks reportedly occurred, it was acquired by Epic Games, the maker of Fortnite, so it’s safe to assume Houseparty was looking for an exit. There’s still reason for Facebook to be cautious here: Two years before these acquisition discussions happened, Facebook very blatantly cloned Houseparty functionality into Messenger. To an outside observer, it might look as if Facebook had seen something useful, copied it wholesale, and, when that didn’t attract users, made an effort to defend its dominant position by purchasing a competitor. That’s the sort of business maneuver that antitrust investigators would certainly be interested in.
The abandoned Houseparty deal is a faint signal that, already, questions about competition in the technology industry affect how companies do business. It has the effect of what tech-policy expert Tim Wu calls the “policeman at the elbow.” Facebook knows it is under serious scrutiny and, in some ways, is acting more cautiously as a consequence. The result is that Facebook may no longer be able to just spend its way to dominance.
