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Facebook-Instagram Deal Warrants New Scrutiny, Colorado AG Says

David McLaughlin and Vicky Graham

(Bloomberg) -- Antitrust officials are right to look back at Facebook Inc.’s acquisition of Instagram to determine whether the deal harmed competition, Colorado’s attorney general said, adding to calls for renewed scrutiny of the takeover of the photo-sharing site.

Phil Weiser said in an interview Monday that large internet platforms like Facebook have been able to buy emerging rivals without sufficient antitrust review of the effects on competition.

“Hindsight is 20-20, but I think looking back it does look like that sort of transaction didn’t get the scrutiny it deserved,” Weiser said about the 2012 Instagram deal. “When a merger doesn’t get challenged that doesn’t mean it is immunized from any potential future challenge.”

Weiser’s comments come as state and federal officials are taking steps to investigate the biggest U.S. technology companies amid calls by Republicans and Democrats to examine whether they are thwarting competition. One of the central questions for enforcers is whether the tech giants have used takeovers of startups to eliminate future rivals in their markets.

The Federal Trade Commission has created a tech task force to examine that issue. It has opened a broad investigation into Facebook that is in part looking at whether the company harmed competition by acquiring startups, according to people familiar with the matter. The agency investigated the Instagram takeover and approved it without conditions.

FTC Chief Says He’s Willing to Break Up Big Tech Companies

Facebook Chief Executive Officer Mark Zuckerberg has argued that the size of the social network enables it to do the things that regulators want to see, such as better policing of content, which would be much harder if Instagram were a separate company. He has said he welcomes regulation, but that breaking up the company wouldn’t address concerns legislators have, including those over privacy and data-sharing.

A spokeswoman for Facebook didn’t respond to a request for comment.

Weiser, who spoke on the sidelines of a Technology Policy Institute forum in Aspen, Colorado, said undoing past deals would be an “exceptional” move by antitrust enforcers, though they are not prohibited from taking a second look at mergers that were previously approved.

Weiser, a Democrat who was a former deputy assistant attorney general in the Justice Department’s antitrust division during the Obama administration, said enforcers should be examining the power of dominant companies across the economy. He declined to comment on whether states are investigating tech giants.

A proposal by Democratic presidential candidate Elizabeth Warren to break up tech companies is too drastic, without first conducting full antitrust investigations, he said. Warren says tech platforms should be prohibited from competing with other firms that rely on their platforms so that Amazon.com, for example, shouldn’t be able to sell its own products on its marketplace. Those business models are “rife throughout our whole economy,” Weiser said.

“Where and when are you going to enforce this principle?” he said, adding Warren’s proposal could carry “a lot of negative side effects.”

To contact the reporters on this story: David McLaughlin in Washington at dmclaughlin9@bloomberg.net;Vicky Graham in Arlington at vgraham7@bloomberg.net

To contact the editors responsible for this story: Sara Forden at sforden@bloomberg.net, Joe Schneider, Steve Stroth

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