Zuckerberg pushes back on accusations that Instagram acquisition was illegal

Zuckerberg pushes back on accusations that Instagram acquisition was illegal
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Facebook CEO Mark ZuckerbergMark Elliot ZuckerbergFive takeaways from Big Tech's blowout earnings NYT media columnist Ben Smith calls Facebook's self-proclaimed patriotism 'very implausible' Facebook reports 11 percent revenue growth as usage surges amid pandemic MORE on Wednesday pushed back against allegations by House Judiciary Committee Chairman Jerrold NadlerJerrold (Jerry) Lewis NadlerBy questioning Barr, Democrats unmasked their policy of betrayal Chris Wallace: Barr hearing 'an embarrassment' for Democrats: 'Just wanted to excoriate him' Apple posts blowout third quarter MORE (D-N.Y.) that the 2012 Facebook acquisition of photo-sharing platform Instagram violated antitrust laws. 

“I’ve been clear that Instagram was a competitor in the space of mobile photo sharing, there were a lot of others at the time that competed,” Zuckerberg testified during a hearing on potential antitrust violations among major tech companies hosted by a House Judiciary Committee subcommittee. 

Nadler cited copies of emails between Zuckerberg and former Facebook Chief Financial Officer David Ebersman ahead of the merger in which the two Facebook leaders discussed the deal. Facebook bought Instagram in April 2012 for $1 billion, and the Federal Trade Commission (FTC) concluded an investigation later that year that allowed the acquisition to go forward. 

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The Verge published copies of those emails as Zuckerberg testified. In one email, Zuckerberg wrote that his motivation for potentially acquiring Instagram was a “combination” between goals Ebersman had previously listed: “neutralize a potential competitor" and "integrate their products with ours in order to improve our service.”

Nadler read those emails to Zuckerberg, saying that “mergers and acquisitions that buy off potential competitive threats violate antitrust laws,” and asking Zuckerberg why Instagram was not a separate company if Facebook purchased it “neutralize” competition. 

Zuckerberg defended the FTC’s decision to allow the acquisition to proceed, saying that at the time, Instagram had “a lot of competitors” and was not dominant in the field of photo sharing.

“I think the FTC had all of these documents and reviewed this and unanimously voted at the time not to challenge the acquisition,” Zuckerberg testified. “I think with hindsight it looks probably obvious that Instagram would have reached the scale that it has today, but at the time it was far from obvious.”

Zuckerberg noted there was “no guarantee that Instagram was going to succeed” even once Facebook acquired it. 

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“The acquisition was done wildly, well largely, because not just of the founder’s talent, but because we invested heavily in building up the infrastructure and promoting it and working on security working on a lot of things around this, and I think this has been an American success story,” Zuckerberg said.

Nadler said Zuckerberg’s defense confirmed his antitrust concerns. 

“Mr. Zuckerberg, you are making my point ... Facebook saw Instagram as a threat that could potentially siphon away business from Facebook, so rather than compete with it, Facebook bought it. This is exactly the kind of anticompetitive acquisition that the antitrust laws were designed to prevent,” Nadler said. “This should never have happened in the first place, this should never have been permitted to happen, and it cannot happen again.”

Before moving on to other questions, Rep. David CicillineDavid Nicola CicillineFive takeaways from Big Tech's blowout earnings What factors will shape Big Tech regulation? Hillicon Valley: House panel grills tech CEOs during much anticipated antitrust hearing | TikTok to make code public as it pushes back against 'misinformation' | House Intel panel expands access to foreign disinformation evidence MORE (D-R.I.), the chairman of the subcommittee on antitrust, commercial, and administrative law, noted that “the failures of the FTC in 2012 of course do not alleviate the antitrust challenges that the chairman [Nadler] described.”

The FTC voted to not take action to stop the acquisition of Instagram by Facebook in 2012 after a “nonpublic” investigation.

The agency announced earlier this year that it was opening a new investigation into acquisitions by major tech companies, including Facebook, over the last decade. The Wall Street Journal and Fox Business reported earlier this month that the FTC is considering deposing Zuckerberg and Facebook Chief Operating Officer Sheryl Sandberg as part of this investigation. 

Facebook previously said in 2019 that the FTC was investigating the company for antitrust issues, with a coalition of state attorneys general announcing months later that they were investigating the company for potential "anticompetitive" practices. 

-Updated at 4 p.m.