Is Meta's social empire facing a breakup? The final ruling on the FTC antitrust case awaits a final decision

According to Zhitong Finance APP, after seven weeks of courtroom battles, the antitrust lawsuit between Meta (META.US) and the Federal Trade Commission (FTC) has finally entered the decision-making stage. The outcome of this trial, which concerns the fate of the tech giant, will entirely depend on Federal Judge James Boasberg's determination of a key issue: Does Meta constitute an illegal monopoly in the social media market? Does its market dominance stem from its acquisitions of Instagram and WhatsApp a decade ago?

The FTC accuses Meta (formerly Facebook) of consolidating its monopoly position in the "personal social networking services" segment by acquiring these two potential competitors in 2012 and 2014. If Boasberg supports the FTC's claims and finds that the company illegally monopolized this market, Meta may be forced to divest Instagram, WhatsApp, or both businesses simultaneously.

This process may still take years to complete. If Meta wins outright, the FTC is expected to appeal quickly. However, Boasberg's ruling will only address whether the company acted illegally. If he supports the FTC, it will trigger another trial regarding "how to remedy the damages caused by Meta's actions."

It is currently unclear when Boasberg will make a ruling, but it may be announced by the end of this year.

A Meta spokesperson stated that the FTC's accusations are unfounded and indicated that the trial reveals the competitiveness of the tech industry.

The FTC did not immediately respond to requests for comments at the end of the trial. However, its spokesperson had previously stated that Meta's defense "mainly relies on self-serving executives and paid experts."

Complete Divestiture of Assets

The FTC insists that only a complete sale of the two assets can resolve the issue. However, Boasberg has the authority to devise his own solutions: he may determine that only one of the acquisitions was illegal and only require the sale of the relevant service; he may also propose other solutions that the FTC has not yet considered.

In recent weeks, FTC lawyers have questioned several Meta executives, including CEO Mark Zuckerberg, in Washington, focusing on the company's acquisition activities and its dominant position in the social networking industry. The FTC argues that Meta monopolized a narrowly defined segment known as "personal social networking services," which focuses on sharing interactions among friends and family.

In response, Meta argues that today's social ecosystem extends far beyond traditional friend and family interactions, with competition in areas such as short videos, e-commerce, and private messaging having fundamentally changed.

Although some new information was disclosed during the trial—including the fact that Zuckerberg had proposed divesting Instagram to avoid potential regulation—the trial's outcome may hinge on more nuanced and complex disputes surrounding the definition of the competitive market.

Narrow Market Definition

Rebecca Allensworth, a law professor and antitrust expert at Vanderbilt University, stated that the FTC's narrow definition of the market has always been a weak point in its accusations. She said, "They will try to assert a very small market, as close as possible to Facebook's business scope." However, Allensworth added that the FTC has cleverly weakened this weakness. "They stated that Facebook has something that other social media platforms do not, which is direct connections with friends and family, making it a different type of product rather than a substitute for competitors," Allensworth said, noting that the surge in usage of Meta Platforms during the holidays indicates that people are using its products to connect with loved ones.

Meta's lawyers argued that since the establishment of Facebook and the acquisitions of Instagram and WhatsApp, the company's products have significantly evolved, encompassing features that expand the range of competitors. Although the FTC listed Snap's (SNAP.US) Snapchat as a competitor, it did not include products like TikTok, YouTube, or Apple's (AAPL.US) iMessage.

Justin Teresi, an antitrust analyst at Bloomberg Intelligence, believes that this evolution has naturally reshaped the competitive landscape in favor of Meta.

The Decline of Socializing with Friends and Family

Teresi stated that sharing with friends and family "is no longer the primary core use of Meta's products," mentioning that there has been an increase in recommended content from outside users' social circles on Meta Platforms. The FTC has demonstrated that the sharing function with friends and family still exists but has failed to adequately prove that this remains the main reason people use Meta's products. "They have become victims of the passage of time," he added.

Representatives from several other tech companies, including Reddit (RDDT.US), X, TikTok, and Pinterest (PINS.US), appeared during the trial to explain how their products compete for user time and attention with Meta, thereby vying for advertising revenue. Teresi stated that while competition does exist, its benefit to Meta may not be as expected.

He said, "If you think the relevant market is competing for advertising revenue, then you can include anything in it. You could include television, or even print media if you wish; this concept actually has no boundaries."

It is currently unclear what Boasberg's inclination is. Teresi believes Meta has a 60% chance of winning, and there is always the possibility of a settlement while both parties await the judge's ruling. Although Allensworth believes the FTC has made strong allegations, she is also uncertain whether this is enough to support breaking up Meta.

She stated, "All antitrust cases are difficult to win. I really think there could be two possible outcomes."