At the House Antitrust Subcommittee hearings this afternoon, Facebook CEO Mark Zuckerberg was directly questioned about his company's strategy of copying competitors' apps and features, and even threatening to do so as a negotiation tactic amid M&A discussions. In his response, Zuckerberg was forced to admit the obvious: that Facebook, he said, has "certainly adapted features that others have led in."
However, he denied any characterization claiming Facebook used such tactics in an anti-competitive way -- for example, to pressure a company to sell to Facebook instead of trying to compete with it.
In one particular line of questioning between Rep. Pramila Jayapal (D-WA) and Facebook's CEO, she asked specifically about the company's billion-dollar acquisition of Instagram in 2012. The M&A deal had already been brought up repeatedly throughout the hearing as an example of Facebook buying its way into expanded market power.
Jayapal led into the questions around Instagram by first painting a picture of a company where execs agreed that copying from other apps was a viable business strategy.
She specifically referenced emails from 2012 between Zuckerberg and Facebook COO Sheryl Sandberg where the CEO had written that by moving faster, Facebook could "prevent our competitors from getting footholds." Sandberg had responded that "it is hard not to agree that it is better to do more and move faster, especially if that means you don't have competitors build products that takes some of our users." A PM had also chimed in that they would love to see Facebook being "even more aggressive and nimble" in copying competitors, Jayapal noted.
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The emails had hinted at the birth of Facebook's strategy around copying its competition, as they detailed meetings between a high-level Facebook employee and the Renren founders, as well as Robin Li from China's Baidu.
The employee had learned of the overall culture of cloning products quickly in the Chinese app market. Renren had built its own version of Pinterest and Tumblr, the emails said, as well as games, a music product and more. And Tencent QQ had then just released a messaging app similar to the walkie-talkie app Voxer in the U.S. It was pointed out that maybe it was easier to move quickly because these companies were "just copying other people," the email suggested.
Zuckerberg had forwarded the email to Sandberg, noting "you'll probably find this interesting and agree." And she did.
Under questioning, Zuckerberg declined to say how many companies Facebook had copied since the 2012 email exchange, bristling that he didn't agree with the premise of the question.
"Our job is to make sure that we build the best services for people to connect with all the people they care about. And a lot of that is done by innovating and by 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 attempting to acquire it.
"Not that I recall," Zuckerberg said.
However, it seems Facebook had threatened to use its "Facebook Camera" app against Instagram ahead of the latter's acquisition, Jayapal noted. In a chat with Instagram co-founder Kevin Systrom, Zuckerberg said Facebook was developing its own photo strategy, and how we engage now will also determine how much we're partners versus competitors down the line, she explained. In an email chain, Zuckerberg had told Systrom that "at some point, you'll need to figure out how you actually want to work with us."
The Instagram founder had also confided in an investor that he felt Zuckerberg's comments were a threat, Jayapal said, and was concerned that Facebook would go into "destroy mode" if he didn't sell Instagram.
Zuckerberg didn't deny the conversation, but disagreed again with the characterization, saying it was clear that this was a space the two companies would compete in.
Jayapal asked also if a similar tactic was used against Snapchat in its attempts to acquire the company.
"I don't remember those specific conversations," Zuckerberg responded. "But that was also an area where it was very clear that we were going to be building something," he said.
Jayapal concluded her time by stating that she did believe Facebook was a monopoly because of this and other behavior.
"I think the question again here is when the dominant platform threatens as potential rivals, that should not be a normal business practice. Facebook is a case study, in my opinion, in monopoly power because your company harvests and monetizes our data, and then your company uses that data to spy on competitors, and to copy, acquire and kill rivals," she said.