Meta Platforms, the company behind Facebook, Instagram, and WhatsApp, recently launched its Threads app, which quickly gained 100 million new users in less than five days. This achievement surpassed the record set by ChatGPT as the fastest-growing online platform ever. However, Meta has faced scrutiny over its market power and acquisition practices, with ongoing cases against the company by the US FTC and the UK’s CMA.
Meta has a history of aggressively acquiring promising competitors and integrating them into its platforms before they become threats to its market dominance. Even Mark Zuckerberg, the CEO of Meta, attempted to buy Twitter twice over a decade ago. The FTC alleges that Meta acquired Instagram and WhatsApp as part of an illegal strategy to strengthen its market power. The company also faced opposition in its acquisition of Within, as well as prohibitions from the CMA in its acquisition of Giphy and restrictions from the German competition authority in integrating Oculus.
In addition to competition law concerns, Meta has been involved in various controversies, including the Cambridge Analytica scandal and accusations of failing to protect underage users and combat hate speech. These issues raise questions about Meta’s commitment to using its market power for the common good.
However, from a healthy market competition perspective, the development of Threads can be seen as positive news. Creating new and improved products that meet consumer demand should be encouraged. Twitter, on the other hand, seems to be in chaos with its recent changes in policies, throttling user access, and losing advertisers.
Since Threads was developed internally by Meta and not acquired, it is not subject to merger control rules. The entry of new players into the social media market is challenging, as it requires a critical mass of users to switch simultaneously. Threads benefits from Instagram’s large existing user base of over 2 billion users.
If competition rules cannot stop Meta from launching Threads, what other regulatory options are available? There has been some reluctance, particularly in the US, to use competition law to regulate big tech’s day-to-day activities. However, recent abuse of dominance decisions against Google by the European Commission have changed this mindset. These decisions resulted in significant fines and changes to Google’s products. President Biden has also appointed critics of big tech to leadership roles in US antitrust authorities.
Meta is now facing abuse of dominance investigations by the European Commission and the CMA regarding its data usage policies for Facebook Marketplace. These investigations involve allegations of self-preferencing and tying, claiming that Meta favors its own services over competitors. Given that Threads requires an Instagram account, similar concerns may arise in the future.
The EU’s Digital Markets Act (DMA) could be a powerful tool to regulate Threads. It focuses on large digital platforms with gatekeeper status. One of the most impactful obligations under the DMA is the prohibition of combining personal data across different services without user consent. Meta’s concerns about compliance with the DMA rules have led to the postponement of Threads’ launch in the EU.
The launch of Threads highlights the complex nature of competition in digital markets. While it may further strengthen Meta’s power in social networking, its success was facilitated by the company’s existing market position. The regulation of big tech poses advantages and risks, as evidenced by Meta’s delayed launch in the EU. The UK is also introducing a digital markets bill tailored to specific firms’ business models and market problems, and Meta will likely face scrutiny under this regime.
In conclusion, the launch of Threads by Meta brings both excitement and concerns about the company’s market power. The ongoing regulatory investigations and potential regulatory options highlight the complexities of regulating big tech in the digital age.
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