Defining Competition: The Battle Over Instagram and WhatsApp

Photo by Mariia Shalabaieva on Unsplash

A legal battle between the Federal Trade Commission (FTC) and Meta Platforms, Inc. hit a D.C. courtroom last week, marking a pivotal moment in the evolving landscape of digital competition and antitrust law. While the FTC defends free and competitive markets, a win for the government has the potential to discourage big-tech from acquiring startups in the future, potentially stifling innovation and reducing venture capital returns. 

The New York Times has reported that Meta CEO Mark Zuckerberg attempted to reach a deal with President Trump to avoid trial, but those efforts appear to have failed. Central to the dispute is the FTC's assertion that Meta engaged in anti-competitive practices by acquiring Instagram and WhatsApp—in 2012 and 2014, respectively—with the intent to stifle competition and consolidate its monopoly power within the social networking market. 

The Commission alleges that Meta employed a "buy-or-bury" strategy, systematically eliminating potential rivals to secure its dominance and limit consumer choice. In contrast, Meta claims the acquisitions were a legitimate growth strategy that enhanced user experiences and fostered innovation in a highly competitive market. 

As the case unfolds, it raises important questions about market definitions, competitive dynamics, and the appropriate metrics for assessing monopoly power in an era dominated by digital platforms. 

Elements of Unfair Competition: The Sherman Act

Monopoly power is traditionally defined as the ability to control prices while excluding competition and can be established through direct proof of artificially set prices or inferred from circumstantial evidence. Under the Sherman Act, monopolization or attempted monopolization of any part of trade or commerce subjects a violator to potential criminal and pecuniary liability. 

To prove a violation, the plaintiff must show that the defendant has monopoly power in the relevant market and that the defendant willfully gained or maintained that monopoly power through anti-competitive conduct.

The first step requires the court to determine whether the firm has "monopoly power" in a given market. This involves examining the firm’s product offerings and potential competitive offerings, particularly if the firm has raised or attempted to raise prices.

If monopoly power is found, the court then considers whether it was gained through improper conduct, such as exclusionary or anti-competitive behavior. Monopoly power achieved through legitimate practices—such as offering competitive prices, introducing innovative products, or through historical accidents or external market factors—is not considered unlawful.

Finally, the court evaluates the anticompetitive effects of the firm’s conduct and its procompetitive justifications.

Monopoly Power or Narrow Market?

 At the summary judgment stage, the court found that the FTC’s indirect evidence was sufficient to proceed to trial without needing to examine the direct evidence presented. This circumstantial evidence included the existence of a relevant antitrust market, Meta’s dominant market share, and barriers to entry that protected its market power. 

As the court stated, the “heart of the dispute”—and what may ultimately determine the outcome—is whether the FTC sufficiently defined a relevant product market, in this case, personal social-networking (PSN) services. Meta's primary argument is that the FTC is defining the market too narrowly. The company claims that the exclusion of significant competitors, like TikTok and YouTube, preclude the notion that Meta holds monopoly power.

The challenge for the Commission will be to show that Meta’s core PSN service is sufficiently distinct from the many other platforms vying for consumers’ online attention, justifying a narrower antitrust market definition. 

Anti-Competitive Practices or Healthy Competition?

Beyond demonstrating monopoly power, the FTC must also show that Meta engaged in anti-competitive practices. Court precedent holds that the acquisition of actual competitors or emerging threats can constitute anticompetitive behavior when it helps maintain monopoly power. As such, the critical issue is whether Instagram and WhatsApp were considered “nascent threats” or actual competitors at the time Meta acquired them. If the FTC can establish that these platforms were emerging or actual threats to Meta, it can support a claim of unlawful monopolization.

In support of its case, the FTC cites a 2012 internal email in which Zuckerberg wrote that buying Instagram was motivated by a desire to "neutralize a potential competitor." The burden now falls on Meta to provide procompetitive justifications for its acquisitions. The company contends that any intent inferred from emails is irrelevant and maintains that its actions were driven by legitimate, procompetitive business strategies. 

Under Section 2 of the Sherman Act, which governs long-completed mergers, Meta is permitted to offer evidence of actual consumer benefits as part of its defense. As Meta lawyers stated in their pretrial brief: “[T]he FTC must prove that consumers would have had more (or better) options sooner without the acquisitions.”

Potential Divestment: A Long Road Ahead

While Meta’s arguments regarding benefits, such as lower prices and increased innovation, may serve as rebuttals to the FTC’s claims, a ruling that the acquisitions were anticompetitive could  force Meta to sell Instagram and WhatsApp. Such a divestment would significantly reshape the social media landscape. However, a separate trial would be needed to decide potential remedies. Even then, the court has previously indicated that the FTC must meet “a higher standard for imposing structural remedies like divestiture.” 

If the FTC prevails, it would mark a major turning point in tech regulation, signaling to both platforms and venture investors alike that aggressive acquisition strategies can, and do, face renewed scrutiny. Moreover, such a ruling could chill M&A activity across the industry, push startups to pursue independent growth, and embolden regulators worldwide to challenge completed mergers. As The New York Times noted, the long-standing practice of big tech companies “snapp[ing] up younger rivals” will be drastically altered should Meta be forced to divest its ownership of Instagram and WhatsApp. It may also prompt Congress to revisit antitrust statutes or enforcement thresholds to provide clearer guidance for platform acquisitions. 

More broadly, a win for the FTC could redefine how courts evaluate "nascent competition,” potentially shifting the evidentiary burden in future merger challenges toward proving long-term harms to innovation, not just price effects.

Conversely, a win for Meta would reinforce the notion that post-acquisition scrutiny—especially of long-closed deals—faces steep legal hurdles. It would preserve the current climate where consolidation remains a key business strategy and likely cement Meta’s influence over the digital social networking landscape for years to come. Such an outcome could also temper future regulatory ambitions by emphasizing judicial reluctance to unwind high-profile deals, particularly in fast-evolving markets. While it may reassure incumbent tech giants, it could also deepen concerns that antitrust enforcement remains ill-equipped to address platform dominance in a winner-take-all digital economy.

Conclusion

As the trial unfolds, the outcome of FTC v. Meta is poised to resonate far beyond the courtroom. At stake is more than just the fate of two of the most well-known tech acquisitions in history—it is the future of how competition is defined and regulated in an increasingly digital economy. 

The FTC’s ability to establish both a narrowly defined personal social networking market, and that Meta engaged in anticompetitive conduct, will help determine the boundaries of lawful corporate strategy for years to come. A victory for the Commission could embolden regulators, discourage acquisitions of emerging tech firms, and fundamentally alter how innovation is funded and scaled. On the other hand, a win for Meta would reinforce the current legal landscape, where consolidation remains not only common but arguably essential to platform-driven growth. 

Regardless of the outcome, the case is positioned to become a defining moment in the evolving debate over how antitrust enforcement should adapt to the realities of modern digital markets. In a world where code is currency and scale is power, FTC v. Meta may determine whether antitrust law can still keep pace with the platforms that shape our daily lives.

*The views expressed in this article do not represent the views of Santa Clara University.