Zuckerberg faces questions over Instagram acquisition

Mark Zuckerberg

US lawmakers have been investigating Facebook’s acquisition of Instagram back in 2012

The Congress antitrust committee has grilled CEOs of the leading tech companies including Facebook’s Mark Zuckerberg, who faced questions over Facebook’s acquisition of Instagram back in April 2012.

US lawmakers have been investigating the merger, and managed to obtain a curious email Zuckerberg sent to an unnamed senior engineer the day Facebook agreed to buy Instagram.

Well played, the associate said.

Thanks. One reason people underestimate the importance of watching Google is that we can likely always just buy any competitive startups, but it’ll be a while before we can buy Google, Zuckerberg wrote in response.

During today’s hearing, US Rep. Joe Neguse brought up the email as evidence the company has been buying companies as a way to eliminate the competition. Although Zuckerberg didn’t recall writing the email, he said, it sounds like a joke.

Well, I don’t take it as a joke, Neguse replied. As I review the email, it was in regards to having just closed the Instagram sale.

The Colorado lawmaker also cited Facebook’s reported attempts to buy other startups such as Snapchat, saying this “clearly demonstrates in my view that email was not in jest.”

It strikes me that over the course of the last several years Facebook has used its market power to either purchase or replicate the competition, Neguse added.

Zuckerberg didn’t have the chance to respond. But back in 2012, Google had a market cap of $250 billion, which has since ballooned to a trillion dollars. So it’s hard to imagine Facebook having the capital to buy Google. At the same time, US regulators would almost certainly deny a merger on antitrust grounds.

Instead, Zuckerberg’s email from 2012 may reflect his salty attitude toward Google, which had recently released its own social network, Google+, to compete with Facebook.

The House Judiciary’s antitrust subcommittee has publicized the other internal emails it obtained from Facebook during its investigation. According to US lawmakers, the documents show the social network considered Instagram a serious threat to Facebook.

For instance, back in April 2012, Zuckerberg sent a separate email to a Facebook employee where he said: Yeah, I remember your internal post about how Instagram was our threat and not Google+. You were basically right. One thing about startups though is you can often acquire them. I think this is a good outcome for everyone.

Days earlier, Zuckerberg sent another email to staff that said: Instagram can hurt us meaningfully without becoming a huge business though.

At the hearing, Rep. Pramila Jayapal also accused Zuckerberg of using its market dominance to pressure Instagram into selling itself to Facebook. She cited an internal chat from Instagram co-founder Kevin Systrom in Feb. 2012, which shows he was concerned Facebook would try to destroy his app if he refused to agree to an acquisition.

Zuckerberg also sent an email to Systrom, which mentions that Facebook was working on its own competing product to Instagram if the deal fell through.

Of course, at the same time we’re developing our own photos strategy, so how we engage now will also determine how much we’re partners vs. competitors down the line, Zuckerberg wrote back in March 2012.

During the hearing, Zuckerberg addressed the emails and denied he was trying to threaten Instagram with the creation of the copycat product.

I think it was clear this was a space where we were going to compete in, one way or another, he said.

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