In one of the first substantive moments at Wednesday’s major tech hearing, Facebook’s 2012 acquisition of Instagram came under fire, unearthing a few new revelations about the company’s internal thinking at the time.
Alluding to new documents provided to the committee as part of its ongoing year-long antitrust investigation, House Judiciary Committee Chairman Jerry Nadler said emails between Mark Zuckerberg and other Facebook executives at the time tell “a very disturbing story.”
Nadler went on to declare that Facebook’s acquisition of Instagram violated antitrust laws. “If this was an illegal merger at the time of the transaction, why shouldn’t Instagram now be broken off into a separate company?” Nadler asked.
In a video question and answer session on April 6, 2012 — three days before announcing the Instagram acquisition — Zuckerberg describes the threat posed by the social photo sharing app, mentioning Facebook’s own “not awesome” mobile app that users only “tolerate.”
“They’re growing well. We need to dig ourselves out of a hole. The good news is, we’ve been doing that. The bad news is that they are growing really quickly, they have a lot of momentum and it’s kind of going to be tough to dislodge them. We have a hard battle ahead of ourselves there.”
In emails obtained by the committee, Nadler quotes Zuckerberg saying “one thing about startups is you can often acquire them” — and beginning with Instagram, Facebook has certainly done that.
“I’ve always been clear that we viewed instagram as both a competitor and as a complement to our services,” Zuckerberg said Wednesday, defending the company and downplaying Nadler’s critiques.
“At the time, almost no one thought of them as a general social network,” Zuckerberg claimed.
The reality is that Instagram was already wildly popular, with more than 100,000 daily downloads in Apple’s App Store. “At 27 million registered users on iOS alone, Instagram was increasingly positioning itself as a social network in its own right — not just a photo-sharing app,” TechCrunch’s Sarah Perez wrote at the time.
Given the climate of the deal, the House Judiciary chairman threatened that unwinding the merger would be appropriate, even eight years later.
“… Facebook saw Instagram as a powerful threat that could siphon business away from Facebook so rather than compete with it, Facebook bought it,” Nadler said.
“This is exactly the same kind of anticompetitive action that the antitrust laws were designed to prevent.”
Source: Tech Crunch