Selfies Left Behind; A Competition Law Perspective on the Economic Consequences of Instagram's Shutdown

Key Insights into Instagram's Market Power

The Meta Group, which includes Instagram, also owns various platforms such as Facebook and WhatsApp. Due to these digital platforms, the undertaking in question is considered to have significant market power both in Turkey and in other countries.[2] One of the interesting findings on this issue is addressed in the decision of the German Federal Cartel Office (Bundeskartellamt) that the Meta group is an undertaking of paramount significance for Intermarket competition. Under Article 19(a) of the German Federal Competition Act, the Bundeskartellamt may designate undertakings with high market power as undertakings of paramount importance for Intermarket competition.[3] This starts a period of intensified scrutiny for such undertakings. 

One of the first decisions in this regard was the decision on Meta, which also includes Instagram[4]. One of the most interesting findings in the decision is the assessment of how user data was turned into an important money stream.

The stream above is from 2022, the year the decision was taken, but it reveals the business model of the Meta Group. With around 3.5 billion people in the world being Meta users, the data flowing and therefore the market power it has becomes even more evident. Because of this incredible user data, Meta also gains significant power in terms of advertising on social media. It finances all its costs with the revenue it generates from the above flow. In 2021, the revenue it generated in this way is around 40 billion dollars.[5] The Meta group wants to create a Metaverse, that is, a 3D virtual world, and for this purpose it has acquired a 3D glasses manufacturer called “Oculus”. 

It is common for large technology companies, or more accurately, companies that own digital platforms, to want to use their data in other areas over time, to enter new business areas, and to offer new products and services. But for example, Instagram, even in the above decision, is separately described as a rapidly growing service. Therefore when it comes to Meta, Instagram seems to be the “pearl in the crown”. The Bundeskartellamt even lists Instagram as one of the most powerful Meta services outside of Facebook.[6] This means that the entire social media space for end users is covered by Meta services. Meta also serves those who want to sell their products using this space. So the “pearl in the crown”, namely Instagram, is actually a great marketplace for selling products. Given the difficulty of users switching platforms (Lock-in effect), there are millions, billions of people who can market products through Instagram. 

It is said that the daily cost of the Instagram access block is approximately 1.9 billion TRY.[7] In other words, it is not a Selfie we take or a Story we post, but billions of Turkish liras. The problem becomes even more interesting in this sense. Considering that approximately 10 percent of the e-commerce volume in Turkiye revolves around Instagram[8], if Instagram was subjected to an access blocking penalty due to its own actions or unlawful activities, 10 percent of the e-commerce volume in Turkiye may have been closed on the days it was shut down. In other words, millions of sellers, users, producers and, above all, the state, which has suffered tax losses, can also claim compensation. While it is clear how big the consequences of the lawsuits could be, it becomes critically important for Instagram to pay more attention to local legislation in the countries where it operates. 

Instagram may block some posts if they are deemed “harmful” according to its own rules. It is understood that a similar process is taking place in Turkiye regarding Instagram.[9] In the simplest terms, the issue has economic consequences, because the post you block may actually be an economic activity, an e-commerce activity. Which posts Instagram considers to be “harmful” according to what and according to whom, can be quite controversial. For example, if it finds the posts of a competing platform or a brand “harmful”, this may turn into a violation of competition. Instagram, a company of such magnitude that it's difficult to abandon and that could be in a dominant situation, should be more careful and act by competition rules to avoid such situations in the future. Otherwise, competition law concerns may arise along with millions of compensation lawsuits. 

The short-lived Instagram shutdown increased the density on other social platforms, and without stories, concert tickets and some products may have sold more slowly or remained unavailable. Most influencers sat at home for a while and lost revenue. Advertising budgets could not be utilized and taxes decreased. All this suggests that Instagram may have gone far beyond being merely a sharing site. It's not just messages, videos and pictures that come from Instagram, what’s flowing there is an avalanche of e-commerce, which is money. As every selfie and every story contribute to a vast economy, it has become essential to consider this reality when shaping the rules.