In the afternoon at the hearings of the subcommittee of the Antitrust Chamber, Facebook CEO Mark Zuckerberg was directly questioned about his company's strategy of copying competing apps and features, and even threatened to do so as a negotiating tactic during M&A discussions. In his response, Zuckerberg was forced to admit the obvious: that Facebook, he said, "has definitely adapted the features that others have brought".
However, he denied any characterization claiming that Facebook had used those tactics in an anti-competitive way, for example to put pressure on a company to sell to Facebook instead of trying to compete with it.
In a particular line of questioning between Rep. Pramila Jayapal (D-WA) and the CEO of Facebook, he asked in particular about the acquisition by the company of billions of dollars of Instagram in 2012. The merger and acquisition agreement he had already been repeatedly raised during the hearing as an example of Facebook making its way into expanded market power.
Jayapal led to questions on Instagram first painting the image of a company where executives agreed that copying from other apps was a viable business strategy.
He specifically referred to the 2012 emails between Zuckerberg and Facebook COO Sheryl Sandberg, in which the CEO had written that by moving faster, Facebook could "prevent our competitors from gaining support points". Sandberg replied that "it's hard not to agree that it's better to do more and move faster, especially if it means that you don't have competitors building products that take some of our users." A prime minister also insisted that they would like to see Facebook "even more aggressive and agile" in copying competitors, Jayapal noted.
The emails had suggested the birth of Facebook's strategy to copy its competition, while detailing the meetings between a high-level Facebook employee and the founders of Renren and Robin Li of the Chinese Baidu.
The employee quickly learned about the general culture of product cloning in the Chinese app market. Renren had created his own version of Pinterest and Tumblr, said emails, as well as games, a music product and more. And Tencent QQ had just released a messaging app similar to the Voxer walkie-talkie app in the United States. It was pointed out that perhaps it was easier to move quickly because these companies "were just copying other people," suggested the email.
Zuckerberg had forwarded the email to Sandberg, noting "you will probably find it interesting and agree." And she did it.
Under interrogation, Zuckerberg declined to say how many companies Facebook had copied from the 2012 email exchange, claiming he disagreed with the premise of the question.
"Our job is to make sure we create the best services so that people can connect with all the people they care about. And much of this is done by innovating and building new things ... "he began, before being cut off.
Jayapal then asked if Facebook had ever threatened to clone a product from another company while trying to acquire it.
"Not that I remember," said Zuckerberg.
However, Facebook appears to have threatened to use its "Facebook Camera" app against Instagram prior to Instagram's acquisition, Jayapal noted. In a chat with Instagram co-founder Kevin Systrom, Zuckerberg said that Facebook is developing its own photographic strategy and that the way we engage now will also determine how much we partner with competitors along the line, he explained. In an email chain, Zuckerberg had told Systrom that "at some point, you will have to understand how you really want to work with us."
The Instagram founder had also confided to an investor that Zuckerberg's comments were a threat, Jayapal said, and he was worried that Facebook would go into "destructive mode" if he didn't sell Instagram.
Zuckerberg did not deny the conversation, but did not again agree with the characterization, saying it was clear that this was a space in which the two companies would compete.
Jayapal also asked if such a tactic had been used against Snapchat in his attempts to acquire the company.
"I don't remember those specific conversations," replied Zuckerberg. "But that was also an area where it was very clear that we would build something," he said.
Jayapal ended his time by stating that he believed Facebook was a monopoly because of this and other behaviors.
"I think the question again here is when the dominant platform threatens as potential rivals, which shouldn't be a normal commercial practice. Facebook is, in my opinion, a monopoly power case study because your company collects and monetizes our data, and then your company uses that data to spy on competitors and to copy acquired and killed competitors, "he said.
