At the hearings of the House’s Subcommittee on Antitrust on Facebook this afternoon CEO Mark Zuckerberg was asked directly about his company’s strategy to copy competitors’ apps and features, and even threatened to do so as a negotiating tactic in M&A discussions. In his reply, Zuckerberg was forced to admit the obvious: Facebook “certainly adapted the functions that others had introduced”.
However, he denied any characterization claiming that Facebook had used such tactics in an anti-competitive manner – for example, to pressure a company to sell to Facebook instead of trying to compete with Facebook.
In a particular survey between Rep. Pramila Jayapal (D-WA) and the CEO of Facebook, she specifically asked about the billion-dollar takeover of Instagram by the company in 201
Jayapal led to questions about Instagram by first painting a picture of a company where executives agreed that copying other apps is a viable business strategy.
She specifically referred to emails from 2012 between Zuckerberg and Facebook’s Sheryl Sandberg, COO, in which the CEO had written that moving faster could “prevent our competitors from gaining a foothold”. Sandberg replied, “It is hard not to agree that it is better to do more and move faster, especially when it means that no competitors are building products that some of our users need.” A prime minister had also agreed that he would love Facebook to be “even more aggressive and agile when copying competitors,” Jayapal noted.
The emails highlighted the birth of Facebook’s copying strategy, as it included detailed meetings between a high-profile Facebook employee and the Renren founders, as well as Robin Li from Baidu of China.
The employee quickly learned about the general culture of product cloning in the Chinese app market. Renren had developed his own version of Pinterest and Tumblr, it says in the 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 U.S. It was pointed out that it may be easier to act quickly because these companies “only copy other people”, the email said.
Zuckerberg had forwarded the email to Sandberg and found that “you will probably find this interesting and agree”. And she did.
When questioned, Zuckerberg refused to say how many companies Facebook had copied since the email exchange in 2012 and was reluctant to agree with the premise of the question.
“Our job is to make sure that we build the best services for people to connect with everyone who is important to them. And much of it happens through innovation and building new things … ”he started before being cut off.
Jayapal then asked if Facebook had ever threatened to clone another company’s product while trying to purchase it.
“Not that I remember,” said Zuckerberg.
According to Jayapal, however, Facebook had threatened to use its “Facebook Camera” app against Instagram before the latter was taken over. In a chat with Instagram’s co-founder, Kevin Systrom, Zuckerberg said Facebook was developing its own photo strategy, and how we’re getting involved will also determine how much we partner with competitors, she said. In an email chain, Zuckerberg Systrom said: “At some point you have to find out how you actually want to work with us.”
The Instagram founder also confided to an investor that he saw Zuckerberg’s comments as a threat, Jayapal said, fearing that if he didn’t sell Instagram, Facebook would go into “destruction mode”.
Zuckerberg did not deny the conversation, but again disagreed with the characterization and said it was clear that this was an area in which the two companies would compete with each other.
Jayapal also asked if a similar tactic against Snapchat was used to acquire the company.
“I don’t remember those specific conversations,” Zuckerberg replied. “But that was also an area where it was very clear that we would build something,” he said.
Jayapal ended her time stating that Facebook was a monopoly because of this and other behaviors.
“I think the question here is also when the dominant platform threatens as potential competitors, which should not be normal business practice. Facebook is, in my opinion, a case study with monopoly power, as your company harvests and monetizes our data, and your company then uses that data to spy on competitors and copy rivals to acquire and kill, ”she said.