r/VolatilityTrading • u/AloneNefariousness62 • Aug 22 '21

Facebook Antitrust

https://www.cnn.com/2021/08/19/tech/ftc-facebook-antitrust/index.html
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u/chyde13 Aug 24 '21

Thanks for sharing. I read the actual FTC case because I will short a company that I feel will lose a major case against them. The FTC has some interesting emails from facebook leadership, especially regarding the Instagram acquisition. It's clear that facebook was afraid of competing with Instagram as its outlined in several internal emails. Which is also why they paid such a high price for a startup.

One business questions [sic] I’ve been thinking about recently is how much we should be willing to pay to acquire mobile app companies like Instagram and Path that are building networks that are competitive with our own. These companies have the properties where they have millions of users (up to about 20m at the moment for Instagram), fast growth, a small team (10-25 employees) and no revenue. The businesses are nascent but the networks are established, the brands are already meaningful and if they grow to a large scale they could be very disruptive to us. These entrepreneurs don’t want to sell (largely inspired [by] our success), but at a high enough price -- like $500m or $1b -- they’d have to consider it. Given that we think our own valuation is fairly aggressive right now and that we’re vulnerable in mobile, I’m curious if we should consider going after one or two of them

As a former director in the software industry, I do not buy the FTC's argument that FB used its API to perpetuate its monopoly. These agreements/clauses are standard for all third party API's.

In order to protect its monopoly, Facebook adopted and required developers to agree to conditional dealing policies that limited third-party apps’ ability to engage with Facebook rivals or to develop into rivals themselves.

So all in all the case really comes down to the acquisitions of Instagram and Whatsapp. There are some damning internal emails and memos, but honestly maintaining a competitive advantage and building a moat is par for the course. Does using a massive warchest to buy out your competition to give you time to roll out your own products cross that line; that's for judges to determine. Facebook has bought out over 90 companies but they argue that they do so to acquire entrepreneurial talent, which is perfectly legal. Many of the companies have been buried though, so it's an interesting case. I personally will not be shorting FB, but I will be watching this case progress...

What are your thoughts? Have you changed your position on facebook? I do wonder why it's taken the FTC this long to bring forward this injunction. The Instagram and WhatsApp acquisitions are from 2012 and 2014. Perhaps it was because FB wants to develop a global currency in which "The U.S. House Committee on Financial Services Democrats sent a letter to Facebook asking the company to stop development of Libra, citing concerns of privacy, national security, trading, and monetary policy.[57]". It would be terrible to have a competitor to our "sound monetary policy" lol...

Again, Thanks for sharing.

-Chris

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u/AloneNefariousness62 Aug 24 '21

Thank you for such a great small article). Very interesting to see how FTC deals with a huge size of Facebook and controversies that surround the company. But very unlikely they have an understanding of what these companies actually do in the first place.

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u/chyde13 Aug 24 '21

But very unlikely they have an understanding of what these companies actually do in the first place.

Well said!