Meta's antitrust trial heats up: Here's what we learned in week one

In week one of the Federal Trade Commission’s blockbuster monopoly trial against Meta (META-1.69%), CEO Mark Zuckerberg spent around 10 hours on the stand as the agency questioned him about revealing emails from another era.

This trial is only just getting started. Throughout it, the FTC will argue that Facebook engaged in a “buy or bury” ploy to eliminate its rivals and gain monopoly power in the social media market. Meanwhile, Meta will make the case that it is responsible for its acquisitions’ runaway successes — and that even after buying Instagram (in 2012) and WhatsApp (in 2014), Meta still faces formidable competition from the likes of TikTok and YouTube (GOOGL+1.23%).

At stake is Zuckerberg’s $1.27 trillion social media empire; if the FTC gets its way, Meta will be forced to give up Instagram and WhatsApp, eliminating “up to half of its ad business,” Jasmine Enberg, vice president and principal analyst at eMarketer, told Quartz earlier this week.

The research firm expects Instagram alone to represent 50.5% of Meta’s U.S. ad revenue this year. Instagram and WhatsApp are both critical to Meta’s continued growth as legacy social app Facebook loses momentum with young people.

Read on for a look at some of the key takeaways from the trial’s first week, including Zuckerberg’s old emails and the price Meta reportedly tried to pay to avoid the trial altogether.

Is Meta a monopoly today?

“The FTC kicked off the case with the biggest witness on its list. Only one other witness, the FTC’s economics expert Scott Hemphill, is slated to spend anywhere near as long on the stand as Mr. Zuckerberg,” Holland & Hart antitrust attorney Paul Swanson said in an email to Quartz. “Yet while the FTC confronted Mr. Zuckerberg with cringeworthy emails about Facebook’s schemes to beat back competition in the 2010s, none of that hit the key question: Is Meta currently maintaining a monopoly by virtue of the Instagram and WhatsApp acquisitions?”

According to Swanson, the agency didn’t get the “critical testimony it needs to show that Meta dominates a narrow market that excludes other social media platforms like TikTok and LinkedIn (MSFT+0.24%).” Swanson added, “Mr. Zuckerberg deftly described a market in which Meta’s power is checked by competition from those companies.”

In one example, Zuckerberg argued on the stand that Meta’s “growth slowed down dramatically” due to the rise of TikTok. In another comment, he said he thinks “people spend more time on YouTube than on Facebook and Instagram combined, certainly more than either one independently.”

Zuckerberg saw this coming in 2018

The FTC brought in old emails sent by the Meta CEO, and in one message Zuckerberg floated the idea of spinning off Instagram.

He wrote at the time, “As calls to break up the big tech companies grow, there is a non-trivial chance that we will be forced to spin out Instagram and perhaps WhatsApp in the next 5-10 years anyway.” Zuckerberg added, “While most companies resist break-ups, the corporate history is that most companies actually perform better after they’ve been split up.” These comments contrast Meta’s extensive efforts to keep its “family of apps” together under one proverbial roof.

Meta viewed WhatsApp and Instagram as threats

The FTC brought in other Zuckerberg emails as evidence, including a 2011 message that called Instagram a “large and viable competitor to us on mobile photos” and a 2012 message that critiqued the teams led by Facebook’s chief tech officer at the time, Mike Schroepfer. “Messenger isn’t beating WhatsApp, Instagram was growing so much faster than us that we had to buy them for $1 billion,” Zuckerberg said. “That’s not exactly killing it,” he added, per a CNN (WBD+0.75%) report.

The following year, Facebook’s current chief operating officer, Javier Olivan, shared concerns with Zuckerberg about WhatsApp’s growth. Messages presented in court, according to The Hill, show that Olivan told Zuckerberg that he’d “been thinking hard about this for the past couple of sleepless nights since I am really worried … these guys are the real deal,” he said. Zuckerberg was reportedly worried at the time that WhatsApp could offer features similar to Facebook and “start winning in the U.S. and other markets.”

Rebecca Allensworth, an antitrust law expert and Vanderbilt’s associate dean for research, told Quartz on Thursday: “So far, the government has done a good job using Zuckerberg’s own words against him, and he has done a good job deflecting them to the degree possible.”

“But there is only so much Zuckerberg can do now to walk back on what he said then,” Allensworth added. “These are the worst facts of the case from Meta’s perspective, and the government laid some important blows.”

Meta’s moat

Sheryl Sandberg, Meta’s former chief operating officer, also took the stand this week. There, the FTC confronted Sandberg about a message she sent in 2011, when Google debuted its now-defunct Facebook clone. Remarking on Google+, she reportedly told staffers that “the most important thing to acknowledge is that for the first time we have real competition and consumers have real choice.” About a year later, Sandberg said she “would block Google” from advertising its rival on Facebook, according to court evidence published by Bloomberg.

Sandberg argued that these messages weren’t about putting its rivals at a disadvantage. “I said that to rally the troops,” she countered.

Zuckerberg’s “crazy idea” to make Facebook relevant

Lots of interesting bits surfaced this week. In 2022, for example, Zuckerberg floated purging users’ friend lists as a “potentially crazy idea” to breathe some life into Facebook, according to evidence presented in the trial. Zuckerberg reasoned at the time that “wiping everyone’s graphs and having them start again” could reinvigorate engagement on the service, but it never came to pass.

Meta reportedly tried to fork over $1 billion to settle

In a call to the FTC’s chair Andrew Ferguson, Zuckerberg tried to convince the agency to settle its antitrust case for $450 million — and later $1 billion, according to a report from the Wall Street Journal. The FTC, meanwhile, was looking for a settlement worth 30 times as much, per the Journal.

Look out for expert testimony

Going forward, “the big thing I’m looking for is some expert testimony on what is the right way to think about the market here and Meta’s alleged monopoly power,” Allensworth said.

“So far, on that front, we only have testimony by executives at Meta and potential other competitor (like YouTube) about their perceptions of whether Meta faces meaningful competition from social media companies that are not ‘personal,’ like TikTok and YouTube.”

Allensworth added, “Judges tend to put a lot of stock in expert opinion in antitrust cases, especially when it comes to market definition and monopoly power.”